European industry commissioner demands action from VW

By REUTERS | 20 January 2016

BRUSSELS/BERLIN: Germany's justice minister and Europe's industry boss increased the pressure on Volkswagen to compensate European consumers as well as US drivers for its diesel emissions scandal, potentially adding to a hefty bill.

Volkswagen has been mired in scandal since September when it admitted it had cheated US tests by using software known as "defeat devices" to mask nitrogen oxide emissions.

In the United States, Volkswagen Group of America has promised goodwill compensation worth US$1,000 each to tens of thousands of vehicle owners.

But in Europe, VW officials have said they will repair vehicles to remove illegal software, but have no plans to pay consumers compensation, arguing they have suffered no loss.

Europe's Industry Commissioner Elzbieta Bienkowska, who has had a series of meetings with VW and will meet Chief Executive Matthias Mueller in Brussels on Thursday, wrote to him on Jan 15 with a list of demands.

High on the list is that the estimated 8.5 million European owners of VW cars fitted with defeat devices, out of 11 million worldwide, should be compensated.

"I would like to ask you to reconsider your stance regarding compensation and reflect on the ways to offer compensation also to the European consumers," Bienkowsksa says in the letter seen by Reuters.

The EU executive can apply only moral and political pressure in a very different legal framework from the United States.

"The issue of compensation goes beyond the difference in the legal set-up between the US and the EU and plays a fundamental role in viewing VW as a responsible and trustworthy company," Bienkowska writes.

Germany's Justice Minister Heiko Maas is also unhappy with the disparity in the way customers are being treated.

"Minister Maas has already said a few weeks ago that he considers an unequal treatment of US and German, European customers unacceptable," a ministry spokesman said during a regular news conference on Wednesday in Berlin.

Volkswagen has made a provision of 6.7 billion euros (US$7.3 billion) globally for the repair process.

Apart from the repair bill, VW has the prospect of massive fines and litigation.

In the United States, VW faces fines of up to US$46 billion for allegedly violating environmental laws.

Germany has long worked to protect its car industry, weakening European Union legislation that could damage its profits and EU sources say it is expected to continue negotiating to minimize the damage.

It has won backing from other member states as governments fear job losses if they hurt a sector that provides jobs for 12 million people and accounts for 4 percent of the European Union's gross domestic product, according to Commission data.

Slowly, however, political and public pressure is growing. Lawyers have begun private litigation against Volkswagen, while the European Parliament has set up a committee of inquiry into why EU regulations failed to prevent Volkswagen's use of illegal software.

Bienkowska's letter also asked for precise detail on the number of vehicles affected by illegal software and technical details on "corrective measures".

The European Union regulatory regime is likely to remain different from that of the United States, where the Environmental Protection Agency has enforcement powers.

But the European Commission is seeking to wrest some of the responsibility for policing the car industry from member states, through legislative proposals on national car approval bodies to be published next week.

Separate proposals to be published later this year would require carmakers to give full details of the emission performance of their cars, including nitrogen oxide levels as well as carbon dioxide, making it easy for consumers to challenge them for excessive pollution.