Volkswagen faces $90 billion US Justice Department emissions lawsuit

The US Justice Department has sued Volkswagen (VW) for up to $90 billion (€84bn) for allegedly violating environmental laws.

Although such US lawsuits are typically settled at a fraction of the theoretical maximum penalty, analysts said the size of the claim meant VW could face a much larger bill than previously anticipated.

“The announcement serves as a reminder/reality check of VW’s still unresolved emissions issues,” Goldman Sachs analysts wrote in a note, maintaining their ‘sell’ recommendation on the stock.

VW shares fell as much as 6% to a six-week low in early trading, the biggest drop on Germany’s blue-chip DAX index.

The suit reflects the growing number of allegations against VW since the company admitted in September to installing devices to cheat emissions tests in several 2.0 litre diesel vehicle models.

VW could face fines of as much as $37,500 (€35,000) per vehicle for each of four violations of the law, based on the complaint, which says illegal devices to impair emission control systems were installed in nearly 600,000 vehicles in the United States.

Analysts believe any fine will be below the theoretical maximum.

US authorities sued Toyota for up to $58 billion for environmental violations around the turn of the century, but agreed a settlement that cost the Japanese carmaker about $34 million.

Equinet analyst Holger Schmidt cut his rating on VW shares to ‘reduce’ from ‘neutral’. “We continue to believe that no one is able to make anything else than a wild guess on potential fines,” he said.

During December, VW’s shares had been recovering as the carmaker announced incrementally positive news such as simple fixes for about 8.5 million affected cars in Europe.

The stock is now 22% below pre-scandal levels, with analysts particularly concerned about the impact on VW in the US, where the firm has struggled to grow.

The lawsuit, filed on behalf of the US Environmental Protection Agency (EPA), accuses VW of four counts of violating the US Clean Air Act, including tampering with the emissions control system and failing to report violations.

“The United States will pursue all appropriate remedies against Volkswagen to redress the violations of our nation’s clean air laws,” said Assistant Attorney General John Cruden, head of the Justice Department’s environment and natural resources division.

The lawsuit is being filed in the Eastern District of Michigan and then transferred to northern California, where class-action lawsuits against VW are pending.

The Justice Department has also been investigating criminal fraud allegations against VW for misleading US consumers and regulators. Criminal charges would require a higher burden of proof.


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