Tax Case Volkswagen Facing Wave of Lawsuits

A new wave of legal threats may be rolling toward Volkswagen. The U.S. Justice Department reportedly wants to recoup millions in tax rebates to VW buyers of "environmentally friendly'' cars. A unit of German insurer Allianz may join a class action suit against VW.
Volkswagen CEO Matthias Müller addresses his employees.

A new wave of legal threats may be rolling toward Volkswagen in its diesel-emissions scandal.

The U.S. Department of Justice may pursue Europe's largest automaker for millions of dollars in tax rebates paid to VW owners who thought they were buying environmentally friendly vehicles, the Wall Street Journal reported, citing U.S. sources.

Meanwhile, a unit of German insurer Allianz said it too may join one of the hundreds of class action lawsuits being brought against Volkswagen. A spokesman for the fund management unit, AGI, said the German company may seek to recoup damages if it determines VW's management failed to inform investors in a timely fashion of the scandal and its effect on earnings.

Investigators in Germany and the United States are trying to determine whether top VW managers ordered the software manipulation that falsified diesel emissions on up to 11 million cars, and separately, whether they informed shareholders in a timely fashion of the costs of the deception.

Internal VW documents given to Handelsblatt suggest that VW's top managers, including then-Chief Executive Martin Winterkorn and the current supervisory board chairman, Hans Dieter Pötsch, had been apprised of the problem weeks before VW informed the public.

 

-who knew what when VW volkswagen diesel gate emissions timeline

 

Volkswagen has repeatedly denied that top managers, including Mr. Pötsch, who was VW's chief financial officer at the time, Mr. Winterkorn and his successor, former Porsche boss Matthias Müller, knew of or ordered the software manipulation that has led to the biggest crisis in the 78-year history of Volkswagen.

But as investigations in Germany and the United States progress, VW workers are becoming increasingly concerned that what the company has blamed on a few rogue mid-level engineers may turn out to be a much more organized, and costly deception.

At a meeting of 20,000 VW workers at its main factory in Wolfsburg on Tuesday, the automaker's powerful union representatives were unnerved by reports that German prosecutors in nearby Braunschweig had expanded their list of suspects in the Dieselgate exception from an initial group of six to 17 VW employees.

Although that group still doesn't include VW's top managers, many rank-and-file employees are getting nervous the scandal may begin to threaten their own livelihood at one of Germany's biggest private-sector employers.

The meeting in VW's massive Hall 11, a cavernous brick building used as a meeting place since the end of World War II, was packed and many VW employees lined up outside to listen to speeches from managers, union representatives and shareholders.

 

Quelle: dpa
The VW works council chairman, Bernd Osterloh, left, thanked CEO Matthias Müller, right, for his efforts on behalf of Volkswagen since he took over as the scandal broke last September. The two appeared before 20,000 VW workers on Tuesday in a packed production hall in Wolfsburg.
(Source: dpa)

 

The massive gathering was organized after a meeting of Volkswagen's powerful group works council, the employee representatives that sit on Volkswagen's policy-setting supervisory board meeting. VW's powerful labor leader, Bernd Osterloh, posed for photographs with Mr. Müller, the chief executive, Mr. Pötsch, the supervisory board chairman, and Stephan Weil, the state premier of Lower Saxony, which owns a 20-percent stake in the automaker.

For the first time since the Dieselgate scandal broke last September, Volkswagen allowed journalists in to witness a portion of the workers' meeting.

While much of the event was orchestrated to show solidarity between management and unions, the increasing tensions over the potential consequences of the scandal -- and its effect on employement at Volkswagen -- were played out in public.

Works Council President Mr. Osterloh, the ostensible host of the meeting, praised Mr. Müller for what he is doing for Volkswagen "at this difficult time." But then he was openly critical of Herbert Diess, the chief executive of the Volkswagen passenger cars brand, saying his communication with employees needed improvement.

"You see a lot of important projects, but we are not happy with the implementation," Mr. Osterloh said. He was reportedly even sharper in his criticism of Mr. Diess, a former BMW executive who joined Volkswagen last July just months before the scandal broke, in the private portion of the gathering.

 

 

The divisions within Volkswagen are becoming clear. On the one side is Mr.  Müller, who is trying appease nervous employees. At the gathering he announced a "recognition bonus" program for workers for exceptional performance in the previous year.

But his good news for VW workers was short on specifics. On the other side is Mr. Diess, who was poached from BMW to boost the slim profit margins in the VW-brand business, a mass market business that is being encroached on by Toyota and other lower-cost rivals.

The family is aware of its responsibility for the 600,000 employees. We are not a financial investor. Instead, we think in terms of generations. Wolfgang Porsche, Porsche family representative

Later, when journalists were no longer in the room, Mr. Diess pointedly spoke about the future. He said that the company needed to invest heavily: in new electric vehicles, in battery production, in software development, in new mobility concept and in driverless cars. "All of this is essential to guaranteeing the future of the Volkswagen brand," Mr. Diess said.

Wolfgang Porsche, the Porsche family's top representative, is currently an obstacle to Mr. Diess's plans. He did not attend the meeting in Wolfsburg, but when contacted by Handelsblatt, he not only voiced his support for Mr. Pötsch and Mr. Müller, but also expressly stood behind Mr.  Diess. Mr. Diess bears the burden of having to remake the core brand and increase the profit margin, Mr. Porsche told Handelsblatt, adding: "VW needs to become more streamlined in some areas." No decisions had been made yet, he explained, "but it must be possible to think about constructive solutions."

Mr. Porsche ruled out the possibility of selling shares. "The family is aware of its responsibility for the 600,000 employees," he said. "We are not a financial investor. Instead, we think in terms of generations."

Mr. Osterloh is mainly interested in further implementation of the efficiency program. It contains about 4,000 suggested improvements by employees. Some 450 have been implemented already, saving €63 million ($69 million) in costs, according to company sources.

 

Deliveries by Volkswagen-01 VW

 

Still, no matter how many suggestions VW receives, the cost savings are small compared to the costs the company potentially faces. Potential fines and compensation payments are estimated to be in the mid two-digit billions.

"There will be dramatic social consequences if Volkswagen's ability to survive in the future is seriously jeopardized by a fine for an unprecedented amount," Mr. Osterloh said, voicing more self-criticism than many in the company had expressed in a long time. "The employees have a deep understanding of the indignation of U.S. authorities."

Shortly before Christmas, Mr.  Müller compared the relationship between the German automaker and U.S. authorities to that of an elderly couple that sometimes quarrels. His remarks were not particularly well received in the United States.

Volkswagen is already likely to run into problems in the more immediate future. It is clear that employees are closing ranks with the state of Lower Saxony. Mr. Osterloh, called the premier of Lower Saxony, Stephan Weil, by his first name when he invited him to the podium. In return, Mr. Weil said in his speech that "neither the strong employee participation at Volkswagen nor the strong position of the state of Lower Saxony has anything whatsoever to do with Dieselgate."

Both the state of Lower Saxony and the works council have the ability to block reforms at Volkswagen.  Mr. Porsche made it clear that " to get things done nonetheless, we need to talk to each other, especially in the supervisory board."

 

Christian Schnell covers the auto industry in Germany. Martin Murphy is an editor with Handelsblatt and specializes in the automotive, defence and steel industries.com. To contact the authors: [email protected] and  [email protected]