Bumpy road ahead

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Published: January 11, 2016 12:22:58 AM

Volkswagen faces paying a staggering amount if it loses the US lawsuit over defeat devices

The US is taking car-maker Volkswagen to court for fitting its vehicles with devices that helped it dodge the country’s emission norms. Though the company had apologised for the ‘defeat devices’—apart from the sales and valuation ramifications of the blow to its reputation, it also faces the prospect of having to buy back nearly 115,000 cars in the US alone—the lawsuit filed by the American department of justice could see the car-maker paying up at least $45 billion, as per The Financial Times, for selling at least 600,000 diesel vehicles fitted with the cheat-apparatus and violating the US Clean Air Act. For perspective, the two largest fines-and-compensation amounts paid by banks for mis-selling mortgages in the lead-up to 2008 financial crisis are $80 billion (Bank of America) and $20 billion (JP Morgan).

But , for Volkswagen, troubles could be far from over even if it does end up paying the amount in the lawsuit. There are chances that the company could face criminal charges in the US as well as in Europe, where millions of such cars have been sold and it is already facing investigation into an emissions scandal. The car-maker, along with other auto majors, already faces a strained future—unless they rapidly innovate in the clean-fuel-engine space—with the world having broadly agreed on undertaking aggressive emission cuts. How Volkswagen’s fate will shape up in the context of the changing realities will perhaps be clear with the outcome of this scandal.

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