BY Richard Summerfield
German car manufacturer Volkswagen AG was taken to court on Monday as investors sought $10.6bn in compensation as a result of the 2015 ‘dieselgate’ scandal.
A small group of shareholders representing 1670 claims against Volkswagen and around 4000 other investors commenced legal proceedings at the Braunschweigh higher regional court in Northern Germany, just over 20 miles from Volkswagen’s Wolfsburg headquarters.
“VW should have told the market that they cheated and generated risk worth billions,” said Andreas Tilp, a lawyer for the investors. “We believe that VW should have told the market no later than June 2008 that they could not make the technology that they needed in the US.”
The scandal became public after the American Environmental Protection Agency (EPA) issued a public notice of violation in September 2015. The subsequent EPA investigation precipitated a collapse in the company’s stock price with shares in Volkswagen falling 40 percent over two days in September 2015, wiping billions off the company’s market value. As a result, in October 2015 the first group of shareholders filed suit against the company. They were later joined by institutional investors including BlackRock Inc., the California Public Employees’ Retirement System and Allianz Global Investors.
Volkswagen has admitted systematic emissions cheating, but denies wrongdoing in matters of regulatory disclosure, saying that the suit is unfounded. The company insists that a group of engineers acted without authorisation when fitting the ‘defeat devices’ which allowed Volkswagen’s vehicles to cut harmful emissions during regulatory testing, and says the information it had before the American authorities intervened was not significant enough to warrant warning capital markets.
“This case is mainly about whether Volkswagen complied with its disclosure obligations to shareholders and the capital markets,” Volkswagen’s lawyer Markus Pfueller told the court. “We are convinced that this is the case.” Mr Pfueller noted that the company was “confident” that it had “complied with its disclosure obligations toward shareholders and the capital markets”.
Factoring in previous settlements reached by Volkswagen, the company could ultimately pay around $35bn for its transgression, including payouts to US customers, states and regulators and a €1bn settlement with German prosecutors.
Judge Christian Jaede said the period from early 2014 onward was significant as this was when the company learned that US tests showed its diesel cars emitted far more toxic nitrogen oxide on the road than under laboratory conditions. A decision in the case is not expected until 2019.