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What would happen if all the affected consumers demanded the full purchase price returned to them and returned their used cars? It seems clear that they would w

What would happen if all the affected consumers demanded the full purchase price returned to them and returned their used cars? It seems clear that they would win, because they were fraudulent sales. But that would bankrupt VW, right?

thrownaway2424 11y ago
I don't think it's clear that they would win. The cars will be reprogrammed to meet EPA rules, and then they will have less power and use more fuel. The will be worth X on the resale market. Two weeks ago they were worth Y, where X < Y. The damages owners might be entitled to are probably Y-X, not Y.
- jonknee 11y ago
  They should clearly win because they were sold a fraudulent product. If I sold you a gold watch that didn't turn out to be gold I don't just owe you the difference, I owe you back all the money and I go to jail. The good news for VW is that the cars aren't worthless, so they can buy them back and sell them. For people who want to keep their car there will probably also be a cash offer.
  - thrownaway2424 11y ago
    Yeah, but it's going to be a mess. The person who sold you the car, at the VW dealership, unknowingly misrepresented the product to you. As a consumer under US law you are entitled to certain remedies (such as: the retailer has to take the product back). Then the dealer, who is not, under US law, a "consumer" and is also not identical to Volkswagen itself, has to seek relief from VW for providing it with the bogus merchandise in the first place. But in practice you're not going to be able to walk into the VW dealer and demand your money back, you'd have to take them to court, and there will probably be strong arguments on their side that the case is preempted by some other, much larger suit.
    - jonknee 11y ago
      It will definitely be a mess. There are already class action suits in progress and I'm sure many more on the way. There is some precedent for buybacks and they typically take depreciation into account, though this is a whole other level of scandal so the rules may be different. Fiat Chrysler recently announced a buyback as part of a consent decree with the NHTSA: http://www.nbcnews.com/business/autos/fiat-chrysler-buy-back-recalls-heres-what-you-need-know-n401046 http://www.nbcnews.com/business/autos/fiat-chrysler-buy-back... > As to how much money an owner might receive under the buy-back program, the consent order stated that FCA must "refund the purchase price paid by the first purchaser of the vehicle for purposes other than resale, less a reasonable allowance for depreciation, and not including the cost of modifications made to the vehicle after the first retail sale." To sweeten the deal, a 10 percent premium will be factored into the initial purchase price. Not a bad deal actually and this was defect based, not fraud based. I think VW would be incredibly lucky to have such a settlement.
- tantalor 11y ago
  If the warranty/purchase agreement indemnifies the manufacturer against lost value, then they won't pay anything. Did you read the whole contract?
  - thrownaway2424 11y ago
    The law (in the USA, and many of its states, at least) prescribes what can and cannot be disclaimed in a warranty.
  - papercrane 11y ago
    Depends on the consumer protection laws of Germany, but I doubt that bit of the contract would hold up in court.
- cptskippy 11y ago
  I'm not sure there is a way to fix the cars without a hardware retrofit if that is even a viable option. Someone on reddit (https://www.reddit.com/r/business/comments/3ljng2/volkswagen_ordered_to_recall_500000_cars_after/cv6y2uo https://www.reddit.com/r/business/comments/3ljng2/volkswagen...) suggested the only way they were able to pass emissions was to keep the exhaust gas recirculator (EGR) operational during the test reducing NOx emissions. Keeping the EGR open has a lot of drawbacks and probably isn't a viable long term solution as it results in loss of power in the engine, reduced fuel economy, greater wear on the engine, increased particulate emissions, increased overall operating temperatures. The later drawback would probably require a hardware solution. A diesel engine with an EGR operating doesn't efficiently burn off all the fuel which, in addition to loss of power, produces greater particulate matter (pm) emissions which intern need to be filtered from the exhaust. The exhaust filters can become clogged with pm soot and the way it's cleansed is by injecting and igniting fuel in the exhaust to burn off the soot. If the EGR was continuously in operation then this burn off process would happen with greater regularity increasing the operating temperature of the exhaust system which would probably require more heat shielding and cooling. Another option is a selective catalytic reduction (SCR) system. Assuming one could be retro fit on these cars, an SCR would probably have the last impact on the vehicle's operation but would introduce new maintenance concerns for the operator (DEF fluid) and Volkswagen.
adventured 11y ago
It would instantly bankrupt VW, in almost any way you cut it. I have no idea what the intricacies of German bankruptcy laws are, but I imagine they could cut a deal with car owners, and then emerge back out of bankruptcy in whatever German equivalent manner that would occur. That scenario will never happen though, there won't be enough global coordination between vehicle owners. The only way that type of outcome occurs, is if the US Government nudges it that direction (US car owners doing that would be enough to bankrupt VW).
- deleted 11y ago
  [deleted]
- arethuza 11y ago
  International companies of any size aren't a single legal entity - bankrupting VW USA (which presumably sold the cars) is probably a limited liability subsidiary of VW - so it could go bankrupt without necessarily bankrupting the parent company.
  - a3n 11y ago
    If VW USA went bankrupt, and ceased to operate, then that loss of sales might contribute to a mothership bankruptcy or bailout.
    - arethuza 11y ago
      I don't think US revenue for VW is that big - they could probably have no sales in the US and still have more revenue than GM globally.
  - deleted 11y ago
    [deleted]
brianwawok 11y ago
Maybe. I am not sure this would be the way to go on this. Really the car the consumer got was better (to them) than the product ordered. It had better gas mileage, and better performance than it should have had. The net loser in the trick was the environment (/ the world). If a company does a trick to make money and hurt the environment, the government should step in and make them pay, right? Like if I run a tire shop and secretly burn all my old tires in the back yard.. my customers weren't hurt (directly), but the entire environment was.
- qyv 11y ago
  The car may have been better than it should have been, but it was NOT better than was claimed. It is not the product itself that is the problem, it is the claims made of the product by the manufacturer. VW made claims about the power, fuel economy and emissions. In as-delivered configuration the emissions claim is false and in order to live up to the emissions claim they will need to negate the power and economy claims.
- ubercore 11y ago
  A closer analogy would be selling tires that spew asbestos as you drive. The consumer _is_ damaged by the sale because the cars are no longer legal to drive on roads. Even with good-faith doctrines that mean the consumer isn't in the wrong, there are commensurate damages in resale value, and performance _below_ what the consumer was sold. Horsepower and torque numbers will almost certainly need to go down, and urea NOx recovery systems aren't cheap, and it's one more part to maintain. So I disagree with that interpretation (getting something better than promised; it's only in the very limited sense of average gas milage). I own a TDI and am affected, fwiw.
  - brianwawok 11y ago
    Are these cars not legal? has any action been brought on the owners? If the tires spewed asbestos and no law was against you driving them, then I think my argument still stands.
- dalke 11y ago
  > the car the consumer got was better (to them) than the product ordered Two exceptions are: people who prioritize environmental impact over solely personal short-term ones ("act local, think global"); and people who will now have to waste time to get the car fixed so it will pass local smog testing.
DasIch 11y ago
It's not at all clear that they would win. There is an article by a German lawyer on the topic[1]. The tl;dr of it is, that given that the car works mostly as intended and that any damage to individual customers is little (if it even exists) customers won't get back the full purchase price and probably not even any money, especially if VW were to provide a fix. [1]: http://www.ferner-alsdorf.de/rechtsanwalt/zivilrecht/vertragsrecht-agb/vw-skandal-ruecktrittsrecht-vom-autokauf-wegen-manipulation-von-abgaswerten/19196/?pk_campaign=feed&pk_kwd=vw-skandal-ruecktrittsrecht-vom-autokauf-wegen-manipulation-von-abgaswerten http://www.ferner-alsdorf.de/rechtsanwalt/zivilrecht/vertrag...
- qyv 11y ago
  Seems to me that any 'fix' that lowers fuel economy would have a real and measurable damage on the owners in the way of increased fuel costs. Wouldn't this just be deflecting the problem from one area to another?
  - noir_lord 11y ago
    If I was VW I'd calculate the fuel economy difference between with fix and without fix, factor oil prices and inflation over life of the car and just offer drivers the difference. It's be cheaper than a refund (which is unlikely) and would allow them to bring the cars back into compliance.
    - mikeash 11y ago
      Note that this is what Hyundai did in the US a few years ago when they were found to have overstated their efficiency numbers. They simply reimburse you the difference in fuel costs, plus a little extra as their way of saying "sorry" or something like that. https://hyundaimpginfo.com/customerinfo/compensation-information https://hyundaimpginfo.com/customerinfo/compensation-informa...
  - DasIch 11y ago
    It would only lower the fuel economy (as advertised), if they didn't apply the cheat during those tests. If they did, the cars fuel economy right now is higher than advertised. Besides fuel economy heavily depends on load, driving style, trip length, conditions, where you are driving (city, autobahn, ...), how fast you are driving, which tires you're using and so on. Even if there is a measurable change I think it would still be difficult to convince a court that this is a damage, a customer deserves to be compensated for.
jsnathan 11y ago
I just took a quick look at WP [1], and it looks like they have over $350b in assets. Don't think it will bankrupt them, either way. Not to mention that they are probably "too big to fail" [2]. [1]: https://en.wikipedia.org/wiki/Volkswagen_Group https://en.wikipedia.org/wiki/Volkswagen_Group [2]: https://en.wikipedia.org/wiki/Too_big_to_fail https://en.wikipedia.org/wiki/Too_big_to_fail
- ibejoeb 11y ago
  Even if it were flirting with bankruptcy, I don't think VW is integral to the economy. Specifically, I don't imagine anything beyond normal bankruptcy protections would be offered to VW, especially something to the extent of a bail-out. There are plenty of alternatives for VW customers. That said, the US has bailed out the auto industry before to preserve American presence in the market. Germany may opt to do the same, but they are home to other successful automakers.

thrownaway2424 11y ago

I don't think it's clear that they would win. The cars will be reprogrammed to meet EPA rules, and then they will have less power and use more fuel. The will be worth X on the resale market. Two weeks ago they were worth Y, where X < Y. The damages owners might be entitled to are probably Y-X, not Y.

jonknee 11y ago
They should clearly win because they were sold a fraudulent product. If I sold you a gold watch that didn't turn out to be gold I don't just owe you the difference, I owe you back all the money and I go to jail. The good news for VW is that the cars aren't worthless, so they can buy them back and sell them. For people who want to keep their car there will probably also be a cash offer.
- thrownaway2424 11y ago
  Yeah, but it's going to be a mess. The person who sold you the car, at the VW dealership, unknowingly misrepresented the product to you. As a consumer under US law you are entitled to certain remedies (such as: the retailer has to take the product back). Then the dealer, who is not, under US law, a "consumer" and is also not identical to Volkswagen itself, has to seek relief from VW for providing it with the bogus merchandise in the first place. But in practice you're not going to be able to walk into the VW dealer and demand your money back, you'd have to take them to court, and there will probably be strong arguments on their side that the case is preempted by some other, much larger suit.
  - jonknee 11y ago
    It will definitely be a mess. There are already class action suits in progress and I'm sure many more on the way. There is some precedent for buybacks and they typically take depreciation into account, though this is a whole other level of scandal so the rules may be different. Fiat Chrysler recently announced a buyback as part of a consent decree with the NHTSA: http://www.nbcnews.com/business/autos/fiat-chrysler-buy-back-recalls-heres-what-you-need-know-n401046 http://www.nbcnews.com/business/autos/fiat-chrysler-buy-back... > As to how much money an owner might receive under the buy-back program, the consent order stated that FCA must "refund the purchase price paid by the first purchaser of the vehicle for purposes other than resale, less a reasonable allowance for depreciation, and not including the cost of modifications made to the vehicle after the first retail sale." To sweeten the deal, a 10 percent premium will be factored into the initial purchase price. Not a bad deal actually and this was defect based, not fraud based. I think VW would be incredibly lucky to have such a settlement.
tantalor 11y ago
If the warranty/purchase agreement indemnifies the manufacturer against lost value, then they won't pay anything. Did you read the whole contract?
- thrownaway2424 11y ago
  The law (in the USA, and many of its states, at least) prescribes what can and cannot be disclaimed in a warranty.
- papercrane 11y ago
  Depends on the consumer protection laws of Germany, but I doubt that bit of the contract would hold up in court.
cptskippy 11y ago
I'm not sure there is a way to fix the cars without a hardware retrofit if that is even a viable option. Someone on reddit (https://www.reddit.com/r/business/comments/3ljng2/volkswagen_ordered_to_recall_500000_cars_after/cv6y2uo https://www.reddit.com/r/business/comments/3ljng2/volkswagen...) suggested the only way they were able to pass emissions was to keep the exhaust gas recirculator (EGR) operational during the test reducing NOx emissions. Keeping the EGR open has a lot of drawbacks and probably isn't a viable long term solution as it results in loss of power in the engine, reduced fuel economy, greater wear on the engine, increased particulate emissions, increased overall operating temperatures. The later drawback would probably require a hardware solution. A diesel engine with an EGR operating doesn't efficiently burn off all the fuel which, in addition to loss of power, produces greater particulate matter (pm) emissions which intern need to be filtered from the exhaust. The exhaust filters can become clogged with pm soot and the way it's cleansed is by injecting and igniting fuel in the exhaust to burn off the soot. If the EGR was continuously in operation then this burn off process would happen with greater regularity increasing the operating temperature of the exhaust system which would probably require more heat shielding and cooling. Another option is a selective catalytic reduction (SCR) system. Assuming one could be retro fit on these cars, an SCR would probably have the last impact on the vehicle's operation but would introduce new maintenance concerns for the operator (DEF fluid) and Volkswagen.

adventured 11y ago

It would instantly bankrupt VW, in almost any way you cut it. I have no idea what the intricacies of German bankruptcy laws are, but I imagine they could cut a deal with car owners, and then emerge back out of bankruptcy in whatever German equivalent manner that would occur. That scenario will never happen though, there won't be enough global coordination between vehicle owners. The only way that type of outcome occurs, is if the US Government nudges it that direction (US car owners doing that would be enough to bankrupt VW).

deleted 11y ago
[deleted]
arethuza 11y ago
International companies of any size aren't a single legal entity - bankrupting VW USA (which presumably sold the cars) is probably a limited liability subsidiary of VW - so it could go bankrupt without necessarily bankrupting the parent company.
- a3n 11y ago
  If VW USA went bankrupt, and ceased to operate, then that loss of sales might contribute to a mothership bankruptcy or bailout.
  - arethuza 11y ago
    I don't think US revenue for VW is that big - they could probably have no sales in the US and still have more revenue than GM globally.
- deleted 11y ago
  [deleted]

brianwawok 11y ago

Maybe. I am not sure this would be the way to go on this. Really the car the consumer got was better (to them) than the product ordered. It had better gas mileage, and better performance than it should have had. The net loser in the trick was the environment (/ the world). If a company does a trick to make money and hurt the environment, the government should step in and make them pay, right? Like if I run a tire shop and secretly burn all my old tires in the back yard.. my customers weren't hurt (directly), but the entire environment was.

qyv 11y ago
The car may have been better than it should have been, but it was NOT better than was claimed. It is not the product itself that is the problem, it is the claims made of the product by the manufacturer. VW made claims about the power, fuel economy and emissions. In as-delivered configuration the emissions claim is false and in order to live up to the emissions claim they will need to negate the power and economy claims.
ubercore 11y ago
A closer analogy would be selling tires that spew asbestos as you drive. The consumer _is_ damaged by the sale because the cars are no longer legal to drive on roads. Even with good-faith doctrines that mean the consumer isn't in the wrong, there are commensurate damages in resale value, and performance _below_ what the consumer was sold. Horsepower and torque numbers will almost certainly need to go down, and urea NOx recovery systems aren't cheap, and it's one more part to maintain. So I disagree with that interpretation (getting something better than promised; it's only in the very limited sense of average gas milage). I own a TDI and am affected, fwiw.
- brianwawok 11y ago
  Are these cars not legal? has any action been brought on the owners? If the tires spewed asbestos and no law was against you driving them, then I think my argument still stands.
dalke 11y ago
> the car the consumer got was better (to them) than the product ordered Two exceptions are: people who prioritize environmental impact over solely personal short-term ones ("act local, think global"); and people who will now have to waste time to get the car fixed so it will pass local smog testing.

DasIch 11y ago

It's not at all clear that they would win. There is an article by a German lawyer on the topic[1]. The tl;dr of it is, that given that the car works mostly as intended and that any damage to individual customers is little (if it even exists) customers won't get back the full purchase price and probably not even any money, especially if VW were to provide a fix. [1]: http://www.ferner-alsdorf.de/rechtsanwalt/zivilrecht/vertragsrecht-agb/vw-skandal-ruecktrittsrecht-vom-autokauf-wegen-manipulation-von-abgaswerten/19196/?pk_campaign=feed&pk_kwd=vw-skandal-ruecktrittsrecht-vom-autokauf-wegen-manipulation-von-abgaswerten http://www.ferner-alsdorf.de/rechtsanwalt/zivilrecht/vertrag...

qyv 11y ago
Seems to me that any 'fix' that lowers fuel economy would have a real and measurable damage on the owners in the way of increased fuel costs. Wouldn't this just be deflecting the problem from one area to another?
- noir_lord 11y ago
  If I was VW I'd calculate the fuel economy difference between with fix and without fix, factor oil prices and inflation over life of the car and just offer drivers the difference. It's be cheaper than a refund (which is unlikely) and would allow them to bring the cars back into compliance.
  - mikeash 11y ago
    Note that this is what Hyundai did in the US a few years ago when they were found to have overstated their efficiency numbers. They simply reimburse you the difference in fuel costs, plus a little extra as their way of saying "sorry" or something like that. https://hyundaimpginfo.com/customerinfo/compensation-information https://hyundaimpginfo.com/customerinfo/compensation-informa...
- DasIch 11y ago
  It would only lower the fuel economy (as advertised), if they didn't apply the cheat during those tests. If they did, the cars fuel economy right now is higher than advertised. Besides fuel economy heavily depends on load, driving style, trip length, conditions, where you are driving (city, autobahn, ...), how fast you are driving, which tires you're using and so on. Even if there is a measurable change I think it would still be difficult to convince a court that this is a damage, a customer deserves to be compensated for.

jsnathan 11y ago

I just took a quick look at WP [1], and it looks like they have over $350b in assets. Don't think it will bankrupt them, either way. Not to mention that they are probably "too big to fail" [2]. [1]: https://en.wikipedia.org/wiki/Volkswagen_Group https://en.wikipedia.org/wiki/Volkswagen_Group [2]: https://en.wikipedia.org/wiki/Too_big_to_fail https://en.wikipedia.org/wiki/Too_big_to_fail

ibejoeb 11y ago
Even if it were flirting with bankruptcy, I don't think VW is integral to the economy. Specifically, I don't imagine anything beyond normal bankruptcy protections would be offered to VW, especially something to the extent of a bail-out. There are plenty of alternatives for VW customers. That said, the US has bailed out the auto industry before to preserve American presence in the market. Germany may opt to do the same, but they are home to other successful automakers.