How Much Can the U.S. Fine Volkswagen Without Killing It?
The Justice Department is reportedly weighing how big a criminal penalty to levy over Dieselgate.
Thought the worst of the Dieselgate scandal was past? Not quite. The U.S. government is reportedly currently trying to figure out just how large of a criminal fine it can slap on Volkswagen without putting the carmaker out of business, a new report claims.
According to Automotive News, two sources close to the investigation claim the Justice Department is working with the automaker in an attempt to reach a settlement before January, when either Donald Trump or Hillary Clinton will sweep into the Oval Office and install new people in the top jobs.
Volkswagen’s chief financial officer has stated his aim is to keep the company’s liquid assets at a minimum of around €20 billion (roughly $22.5 billion). As of the end of the second quarter of this year, the company had €28.8 billion sloshing around. But that doesn’t mean the U.S. government will simply plug “€8.8 billion in USD” into Google and send Volkswagen a bill for that amount. The Justice Department can work with companies to ease the burden by developing long payment plans, offering graduated payments, and providing credit for fines paid out to other countries and organizations, former federal prosecutor William Stellmach told AN.
“The department doesn’t pick a number in a complete vacuum,” Stellmach said.
“But wait,” you might be saying if you’re the kind of person who frequently talks to his or her computer, “I thought VW already agreed to pay out $15 billion in America?” Yes, it did—but that money was the result of a civil suit against the carmaker. The Justice Department, on the other hand, is weighing a criminal fine against the company.
The U.S. government wouldn’t need to strip VW of all its liquid assets in order to kill the company. A steep enough fine could cause credit agencies to cut the carmaker’s rating, which would make it harder for the company’s finance division to offer reasonable rates on loans. Currently, Standard & Poor’s rates VW at “BBB,” three levels higher than “junk” status.
Still, AN estimates that even after dealing with the $15-plus billion in U.S. civil penalties and whatever monetary damages Germany chooses to slap on VW, the carmaker will still have at least $20 billion it can use to without slipping into the danger zone with the credit agencies.