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VW Bankruptcy Potential ‘Is Very Real’

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Steve Birr Vice Reporter
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Volkswagen may dodge criminal charges for violating environmental laws, but the financial penalties they face could bankrupt the company, reports The Wall Street Journal.

The largest automaker in the world is facing billions in potential fines in the wake of the emissions scandal, which revealed that VW had been using a “defeat device” to cheat NOx emission standards during production. The scandal has since spread across the auto-industry, casting doubt on the environmental efficacy of diesel engines, and leading the governments of Germany and France to conduct spot checks on diesel vehicles across their countries.

According to The Wall Street Journal report, “Car companies, with the aid of industry-friendly lawmakers, won a carve-out from criminal penalties in the 1970 Clean Air Act,” which will likely help them avoid criminal charges.

While there are reports that the Justice Department has considered criminal penalties, they face jurisdictional problems, as criminal liability that applies to other polluters doesn’t extend to automakers in the Clean Air Act.

Still, Senate Democrat Richard Blumenthal has said he will be, “introducing legislation to close the loophole.”

Former Rep. John Dingell, a Democrat from Michigan who assisted in passing the Clean Air Act in 1970, told The Wall Street Journal in an interview Tuesday that they focused the law on civil penalties because they are quicker and easier to enforce. Dingell added that regardless of potential criminal charges, “the cost to Volkswagen is going to be unbelievable. The risk of them going out of business is very real.”

Earlier this week, German newspapers reported on the origins of the VW scandal, pointing to company efforts to cut costs while still meeting U.S. emission standards. Automotive News reports that in 2005 VW executives found that, “the only way to make the engine meet U.S. emission standards was to employ in the engine system an AdBlue urea solution used on larger diesel models such as the Passat and Touareg.”

This option would have added cost to the consumer price on the vehicle, which the company saw as too high, leading to the employment of the “defeat device.”

The VW news comes as new reports show that diesel emission problems are widespread in the auto-industry. Reuters reports that a new study from Transport & Environment (T&E) found that, “New European cars are spewing out on average 40 percent more carbon dioxide than laboratory tests show.”

This study also found that 9 out of 10 new diesel cars violate emission standards in some way when road tested.

The Guardian reported Wednesday that a new study from Adac, a European monitoring organization, road tested 79 different cars and found that just a quarter of them met the emission standards used to test vehicles during production.

Disgraced former CEO of VW Martin Winterkorn is currently under investigation by German prosecutors, as the company awaits penalties of up to $18 billion from the European Union and the Environmental Protection Agency. Reuters reports that, “Volkswagen said on Thursday it would take longer than expected to investigate its rigging of vehicle emission tests, raising the prospect of months of uncertainty as it grapples with the biggest business crisis in its 78-year history.”

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