Overview of the Volkswagen AG (“VW”) “Dieselgate” Scandal
The VW “Diesel Scandal” became world news in September 2015, upon revelations that Volkswagen, for years, had installed so called “Cheat Devices” in hundreds of thousands of cars to circumvent environmental testing and regulations in the United States, and that VW would certainly face significant fines from the U.S. Environmental Protection Agency (EPA).
On September 18, 2015, Volkswagen CEO Martin Winterkorn made his first announcement to the public regarding the Company being investigated by the EPA for installing emission engine management “cheat devices” in their diesel cars.
On Monday, September 21, 2015, after VW admitted to fitting its U.S. diesel vehicles with the defeat device, VW shares plunged as much as 23% to 125.40 on the Frankfurt stock exchange, a loss of over 15 billion in market capitalization.
On September 22, 2015, Winterkorn made an admission of guilt in a highly publicized public video apology stating, “I apologize sincerely to our customers and the regulatory agencies and the public for the misbehavior.”
These further statements by Winterkorn and VW resulted in an additional stock drop of almost 20%, bringing its market value drop in two days to about 23 billion. The stock closed at 132.20, its lowest level in more than three years, down almost 50% from its 250.00 high on March 16, 2015.
Just one day later VWs CEO Martin Winterkorn resigned over this scandal.
Since Winterkorn’s first announcement, VW has paid U.S. authorities $25 billion in fines, penalties and civil damages, including a $4.3 billion fine from the U.S. EPA and is subject to a number of consumer litigations, settlements and expensive buy-back and remedial programs, all together totaling more than $30 billion, thus far.