- CEO, brand chief to visit as company faces U.S. civil lawsuit
- Corrects to say penalties in U.S. suit could reach $46 billion
Volkswagen AG’s top executives will visit the U.S. in coming days as tensions rise with the U.S. government, which is seeking multi-billion dollar penalties amid a lack of progress on fixing vehicles rigged to cheat emissions tests.
The visits by Chief Executive Officer Matthias Mueller and Herbert Diess, head of the VW brand, are the first since the scandal broke in September. Diess will speak at the Consumer Electronics Show in Las Vegas this week and appear at the North American International Auto Show in Detroit starting Sunday. Mueller is set to meet politicians and possibly other officials next week, though his schedule hasn’t been published.
"The U.S. is playing a key role as VW faces the biggest financial threat there, and the risks elsewhere declined substantially," said Juergen Pieper, a Frankfurt-based analyst for Bankhaus Metzler. "It’s important that VW hit the right tone."
The visits come after the U.S. Justice Department sued Volkswagen Monday for installing illegal devices meant to defeat emissions tests. Based on a formula outlined in the complaint for four violations of the Clean Air Act for each of the 580,000 cars affected, the penalties in theory could reach $46 billion, according to Bloomberg Intelligence analyst Kevin Tynan.
The penalties sought are expected to be far less, but would still be in the billions of dollars, according to Justice Department officials. The Environmental Protection Agency said talks on how to deal with vehicles sold with defeat devices haven’t produced an acceptable path forward.
The shares fell 4.3 percent to 120.95 euros at 11:09 a.m. in Frankfurt. Volkswagen has lost more than 10 billion euros ($10.8 billion) in market value since Sept. 18, when the EPA first said the company admitted to cheating.
The U.S. situation contrasts with the progress Volkswagen has made in Europe in addressing the scandal. The company won German regulators’ approval last month for low-cost fixes for 8.5 million engines equipped with emissions-manipulating software, the majority of the 11 million sold worldwide. Repairs are due to start this month.
Still, the most important question for the company is how soon it can announce a solution in the U.S., Arndt Ellinghorst, a London-based analyst for Evercore ISI, wrote in a note. Ellinghorst, who has a “buy” recommendation on the stock, argued that Volkswagen should mollify both dealers and customers by buying back the affected vehicles.
“The more VW spends on fixing its U.S. problems, the lower its legal charges will be at the end,” the analyst wrote.