‘We’ve totally screwed up”. Those were the words of Volkswagen America boss Michael Horn as it emerged that the firm had knowingly fitted around 11 million cars worldwide with software designed to manipulate emissions tests. The software allowed Volkswagen to cheat emissions tests and to create the illusion that their diesel-fuelled vehicles were more environmentally friendly than in fact they were.
Now that the dust has begun to settle on what is no doubt a highly embarrassing and damaging episode for Volkswagen, it is a good time to consider where the VW consumers are left.
Supported by a large advertising campaign, Volkswagen sold millions of vehicles worldwide under the illusion that the consumer was purchasing a “greener” car. Consumers will feel rightly cheated by this news and will no doubt seek to be compensated. But what for?
At the moment it is unclear what impact the scandal will have on the everyday consumer in the UK. There is potential for there to be a nationwide recall of the affected vehicles, although recalls are usually only enforced where there is an immediate risk to the safety of the consumers.
Should a recall take place, then VW potentially faces footing the bill for the inconvenience and disruption that a recall will cause, along with the cost of actually fixing the issue. Whether there is a recall or not, it is expected drivers will take their cars into the garage to have the software removed. It would be unjust if the consumer were left with the cost that will no doubt be incurred at the instance of Volkswagen.
There are concerns regarding the effect that this will have on the resale value of the affected cars, along with a potential increase in the cost of the taxing the cars. With the vehicles not being as eco-friendly as claimed, it would be surprising if the tax was not increased. Unfortunately, consumers will have to wait and see how that situation plays out.
Finally, and perhaps most concerning for the consumer, is the fact that many of them will have been misled into buying a car based on information which Volkswagen knew not to be true. In many cases, there will have been a premium paid to purchase the vehicle, and in some cases in excess of £2,000, with the cars being sold on the basis that the benefits the low-emission vehicle would offset the higher cost against a cheaper, less eco-friendly alternative – or so Volkswagen had everyone believe. It would be remiss to say that the whole value of the car could be claimed from VW, however there is potential for the premiums paid for the “greener” car to be reclaimed.
There is also potential for shareholders to seek recourse against the company for the loss of share value following the scandal. The share price of Volkswagen has fallen by 30 per cent since the news broke in September, wiping close to €29 billion off the company’s value.
The company has acted improperly towards its shareholders by withholding information it knew would have an adverse affect on the share price. This loss will be hard to stomach, especially when the company knew about the “defeat device” since 2011, and yet decided to not share this information with shareholders.
Finally, the effect that this has had on franchisees and business owners, many of whom will have projected next year’s figures based on Volkswagen sales, should be considered. For franchisees, there is the possibility that in order to comply with the terms of their franchise, they will have had to spend considerable sums upgrading their showroom, or advertising the eco-friendly cars, which may now not sell. Whilst perhaps a more remote and tenuous head of claim, it should not be forgotten when dealing with the fall out.
It has been reported that Volkswagen has mobilised a legal team in preparation for what many perceive will be a raft of legal claims from consumers, franchisees and shareholders. The position in the UK is that there could be up to 1.2 million VW vehicles fitted with the software that finds itself at the centre of this scandal. With that figure in mind, the potential number of claims that Volkswagen could find themselves facing is vast. It is no surprise then to hear a figure in the region of £4.8 billion is rumoured to have been set aside to deal with the clean-up. What this will cost Volkswagen reputationally remains to be seen.
• Patrick Fulton is a solicitor in the litigation department at Balfour+Manson www.balfour-manson.co.uk