Pressure mounts for European compensation following massive VW-US settlement

October 27, 2016

Calls are growing for European compensation after the staggering, record-breaking $14.7 billion (€13.5 billion) settlement approved in the US on Tuesday between Volkswagen (VW) and over half a million US customers and the federal government over the emissions scandal.

European commissioner for justice policy Vera Jourova has urged consumer groups to organise lawsuits on allegations that Volkswagen deceived consumers by promoting their cars as environmentally friendly.

The EU has little leverage in the consumer law domain, which so far has allowed Volkswagen to avoid major financial penalties from the scandal in Europe.

The US settlement includes an aggressive timeline to initiate the buyback of affected cars from November, which will cost up to $10 billion (9 billion). It is also required to invest $2 billion over the next 10 years to support increased use of zero-emission vehicles, in addition to $2.7 billion to mitigate the effects of the excess emissions from the cars equipped with the emissions-cheating devices currently on the road.

EU authorities are escalating the pressure on Volkswagen to give European customers a fairer deal, saying the company’s recall programme does not go far enough, and that it should recall some of the cars affected.

Jourova said in a letter the company should give ‘special attention’ to Volkswagen customers who want to sell their cars, but are unlikely to find a buyer until the recall is complete and the vehicles brought in line with EU environmental regulations. Similar attention should be given to those seeking regulatory approval, for example if they want to register the car in another EU country.

She also urged Volkwagen to guarantee that the technical fix rolling out for affected cars will not damage the vehicle’s performance, and that doing so would break EU consumer laws.

The letter shows the commission’s frustration that Volkswagen has prioritised customers in the US, despite most of the cars in the cheating scandal having been sold in Europe.

US owners of affected 2.0 litre cars are being offered a choice between a technical fix or a buyback based on prices in September 2015 — just before the scandal broke. However, regulators have yet to approve the planned modification, which must comply with environmental standards without sacrificing performance. In addition to the buyback or the fix, affected owners are being offered between $5,100 and $10,000 (€4,600-9,100) in cash compensation for the cheating, depending on the price of their vehicle.

While US consumers will get about $20,000 in total per car, European Volkswagen customers get at most a software update a short piece of plastic tubing.

The startling disparity in treatment is the result of European laws that protect corporations from class-action lawsuits brought against them by unhappy consumers, as is commonplace in the US.

Volkswagen is staunchly rejecting claims for compensation in Europe, where the eight million affected cars dwarf the 600,000 affected customers in the US.

Volkswagen chief executive office Matthias Müller has said that a similar compensation scheme in Europe would be ‘overwhelming’.

Lawyers in Berlin, Paris and elsewhere in Europe have teamed up with a group of online legal start-ups who want to change this status quo, and are recruiting clients en masse to try to get around the usual restrictions on consumer lawsuits. If they are successful, the cost to Volkswagen will dwarf the company’s $15 billion settlement in the United States.

The wide disparity between the packages offered to American car owners compared to European customers over the Volkswagen emissions scandal continues to anger EU campaigners, including the European Industry Commissioner Elzbieta Bienkowsk.

Volkswagen admitted in September 2015 that 11 million group vehicles worldwide had engine management software manipulated to cheat official tests for harmful NOx emissions. Of these, 8.5 million are in Europe, with 1.2 million vehicles affected in the UK.

The scandal pushed Volkswagen into the red for the first time in more than 20 years last year when it booked a loss of €1.6 billion. Volkswagen previously set aside €16.2 billion ($18 billion) to cover fines related to the emissions scandal in the US.

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