How VW Paid $25 Billion for Dieselgate — And Got Off Easy

Volkswagen paid huge government penalties in the U.S., but virtually nothing in Europe. Two things now seem clear: Some very senior officials knew of the wrongdoing — and they’re not likely to face meaningful prison time.

On Dec. 6, former Volkswagen engineer Oliver Schmidt was led into a federal courtroom in Detroit in handcuffs and leg irons. He was wearing a blood-red jumpsuit, his head shaved, as it always is, and his deep-set eyes seemed to ask, “how did I get here?” As Schmidt’s wife tried to suppress tears in a second-row pew, U.S. District Judge Sean Cox sentenced him to what, had it been imposed in Schmidt’s native Germany, would rank among the harshest white collar sentences ever meted out: seven years in prison.

Schmidt was being punished for his role in VW’s “Dieselgate” scandal, one of the most audacious corporate frauds in history. Yet his sentence brought no catharsis, least of all to Cox, who at times seemed pained while imposing it. Sometimes, he told Schmidt apologetically, his job requires him to imprison “good people just making very, very bad decisions.”

Schmidt was a henchman, everyone understood, and his sentence, a stand-in. The judge was addressing a set of people in Germany who are beyond the reach of U.S. prosecutors because Germany does not ordinarily extradite its nationals beyond European Union frontiers. Above all, the Detroit courtroom was haunted by the shadow of an individual who was absent: Martin Winterkorn, who was VW’s CEO during almost all of the fraud. His name was uttered only twice, yet his aura loomed over the entire hearing. read more »

Tab for U.S. Automotive Recalls in 2016: $22.1 Billion

The cost of fixing defective parts is growing for manufacturers and suppliers, research finds.

A manufacturers and suppliers paid out nearly $11.8 billion in claims and tallied $10.3 billion in warranty accruals for U.S. recalls in 2016, with the $22.1 billion total estimated to be 26 percent higher than the prior year.

The count of vehicles recalled in the U.S. in 2016 climbed 4.5 percent to 53.1 million from 50.8 million in 2015, making 2016 the highest year ever, according to the findings by global consulting firm AlixPartners.

Nearly half of the recalled vehicles involve defective airbag inflators from the now-bankrupt Takata or faulty ignition switches produced by General Motors, which together accounted for 23 million recalled vehicles in 2016, according to the study. read more »