Dieselgate litigation The Man in the Driving Seat

Michael Hausfeld, a prominent U.S. litigator, wants VW to compensate European customers for the damage caused by the emissions scandal in the same way it is paying out U.S. claims. A new letter to VW boss Matthias Müller sets out his intentions.
Litigator Michael Hausfeld (center) has made a name for himself by successfully suing big corporations.

Michael Hausfeld is well known in German business circles. In 1999, the U.S. lawyer secured $5 billion in compensation from German companies for people enslaved as forced laborers in Nazi Germany.

Today, automaker Volkswagen, inundated with lawsuits over its diesel emissions scandal, will get a letter from Mr. Hausfeld’s new Berlin office. The star attorney, already leading class action suits against VW in the U.S., wants to secure billions of euros in compensation for customers and investors in Europe as well. He has already won a number of clients in Europe.

In his letter, which Handelsblatt has obtained, Mr. Hausfeld demands a meeting with VW chief executive Matthias Müller in the coming two weeks. If VW isn’t prepared to hold talks, Mr. Hausfeld will likely launch a class-action suit in Germany.

“There is absolutely no justification for European customers to be discriminated against,” said Mr. Hausfeld.

Enclosed with the letter, which was addressed to Mr. Müller personally, are studies on the manipulation of diesel engines and on the financial consequences that it caused in Europe, which Mr. Hausfeld estimates to amount to several billion euros.

Especially at a time when stakeholders all over the world are getting together to improve air quality, excessive emissions are unacceptable. Michael Hausfeld, Litigator

It’s a further setback for VW as it tries to get to grips with the financial costs of the scandal, which involved the firm using software in its diesel cars to manipulate emissions.

There was more bad news on Wednesday. Figures released by the European Automobile Manufacturers Association showed that the firm's market share in Europe continues to fall. In February, Volkswagen Group, which includes VW, Audi, Porsche, Skoda and other brands, had a market share of 24 percent of new car registrations compared with 25.4 percent in the same month last year. In the first two months of 2016 market share dropped to 24.2 percent from 25.5 percent in the same period last year.

Dieselgate isn't just damaging the brand. Since the scandal broke in September, shareholders, car owners and justice authorities have been inundating VW with ever more lawsuits and investigations.

On Monday, institutional investors demanded €3.3 billion ($3.6 billion) in a German lawsuit filed against VW, claiming the company did not inform shareholders of the affair in a timely manner. That lawsuit comes on top of more than 600 cases filed in the United States and Europe.

VW has repeatedly stated that it sees no reason to compensate its customers. But the management is increasingly worried about the mounting legal risks. It had been bracing for lawsuits. “But it’s worrying now that they’re on the table,” said one company source.

Last week VW employee council chief Bernd Osterloh warned of “dramatic social consequences” for workers if fines and compensation payouts overwhelm the automaker.

Mr. Hausfeld commissioned the two studies he sent to Mr. Müller. The first deals with the technical details of the so-called “defeat device” software built into 11 million cars to understate nitrogen oxide emissions during tests.

The second, prepared by a consultancy, estimates the financial impact of the scandal on car owners, investors and competitors. After all, VW’s slogan “Clean Diesel” has been proven to be a fallacy and could have given it an unjustified edge over its competitors.

The environmental damage caused to the general population is estimated in a range of €58 million to €158 million. In addition, because the repaired cars will likely have higher fuel consumption, the aggregate cost of running them will increase to up to €196 million per year, the study said. Their performance will also likely be weaker — leading to economic damage of €529 million.

In total, VW will have to brace for additional damage claims of several billion euros.

The lawsuits just keep rolling in. The regional court of Braunschweig, in the state of Lower Saxony, which is home to VW’s headquarters in Wolfsburg, is dealing with some 70 claims from shareholders demanding compensation for the decline in VW’s share price since the scandal came to light.

Increasing numbers of VW customers in Europe are suing their dealers for the decline in the value of their cars. The dealers are liable within the two-year warranty. Owners of older cars can sue VW itself.

A first case is due to be decided shortly. The regional court in the western city of Bochum is expected to reject a case brought by the buyer of a VW Tiguan sport utility vehicle. But the plaintiff may appeal against the ruling.

In the Netherlands, some 85,000 VW owners from all over Europe have registered with a foundation represented by law firm Baum Reiter & Collegen. Its aim is to reach a settlement with the company which Dutch courts can confirm as binding. But VW has been playing for time.

VW boss Matthias Müller is coming under increasing pressure from legal claims.


Meanwhile, public prosecutors in Braunschweig, who are trying to determine if senior executives ordered the trickery, have expanded their investigation from five to 17 suspects at VW including several senior engineers.

“So far they don’t include former or current management board members,” said Klaus Ziehe, spokesman for the prosecutors’ office.

Added to that is the class-action suit in the U.S. where thousands of car owners’ suits were consolidated. This is on top of further cases brought by U.S. states as well as the lawsuit brought by the Department of Justice and the Environmental Protection Agency that could cost several billion dollars.

“Especially at a time when stakeholders all over the world are getting together to improve air quality, excessive emissions are unacceptable,” Mr. Hausfeld told Handelsblatt.

He said he would fight to make sure VW owners in the U.S. and Europe got equal treatment. If he succeeds, his compensation model could serve as a blueprint for other countries affected, for example in Asia.

VW owners in the U.S have already received cash and dealer credits. Customers in Germany aren’t getting anything. VW said that was because diesel cars in the U.S. were subject to stricter emissions rules which means it will take longer to find a solution there.

Mr. Hausfeld disagrees. “I think it should be possible to treat everyone affected the same way,” he said.

The clock is ticking for VW. U.S. judge Charles Breyer in San Francisco has set a March 24 deadline for the company to state whether it has found an emissions fix that is acceptable to U.S. regulators for 600,000 diesel vehicles.

Informed sources said there probably won’t be a solution by that date. VW declined to comment on the progress of talks with U.S. authorities. A spokesman said only that the talks were constructive.

The lawsuits are hanging over VW like the Sword of Damocles. Analysts estimate that Dieselgate will cost the company some €30 billion. Sources at VW said the company could cope with those costs without having to sell assets.

Fending off the lawsuits is the unenviable task of Manfred Döss, VW’s new head of legal affairs. He’s got a good reputation in legal circles and is experienced in dealing with the U.S. justice system — a huge asset for VW.

Mr. Döss joined luxury carmaker Porsche in 2013 to help battle lawsuits brought by hedge funds seeking damages over Porsche’s botched attempt to take over Volkswagen in 2008.

He’s known as a pragmatist who keeps his cool and doesn’t avoid conflict. He successfully defended all six compensation lawsuits brought so far in the Porsche case. That earned him respect among the Porsche and Piëch families who control VW.

Sources said he’s had some success coordinating VW’s defense strategy and has ensured that talks with U.S. authorities are proceeding in a more orderly fashion. The next few months will likely test his skills to the limit.


Astrid Dörner is part of Handelsblatt's team of correspondents covering finance and U.S. corporations in New York. Martin Murphy is an editor with Handelsblatt specializing in the automotive, defence and steel industries. Volker Votsmeier is an editor with Handelsblatt's investigative reporting team. To contact the authors: [email protected], [email protected], [email protected]