September 19, 2020

US SEC regulator sued Volkswagen for "massive fraud to investors"

US SEC regulator sued Volkswagen for "massive fraud to investors"


Volkswagen is once again facing another hard blow whose consequences are still difficult to quantify. The American regulator (SEC) has demanded tonight the German car company and its former CEO, Martin Winterkorn, for the scandal of emissions from diesel engines, accusing the company this time of having perpetrated a "massive fraud" against US investors.

In the lawsuit, filed in San Francisco, the SEC argues that from April 2014 to May 2015, Volkswagen issued more than 13,000 million dollars in bonds and asset-backed securities in the US markets, at a time when top executives knew that more than 500,000 diesel vehicles in the country greatly exceeded the legal limits on vehicle emissions. Volkswagen "reaped hundreds of millions of dollars in profits by issuing the securities at more attractive rates for the company," according to the lawsuit, which seeks to prohibit Winterkorn from serving as a director of a public company in the United States and, this is the part more serious for the company, recover "ill-gotten gains".

Winterkorn was already indicted by the US Attorney's Office in 2018 and accused of conspiring to cover up the deception of the German manufacturer's diesel emissions, so his personal situation only gets worse. For the company, the demand implies new provisions for lawsuits and fines that will ballast their accounts. Volkswagen has merely responded that the SEC's complaint "has legal and de facto flaws and we will vigorously challenge it". The SEC has presented «an unprecedented complaint on securities sold only to sophisticated investors who were not harmed and who received all payments of interest and capital in full and on time, "the company alleges.

Volkswagen has already agreed pay more than 25,000 million dollars in the United States in relation to a scandal that weighs on its results for three and a half years, paying claims from owners, environmental regulators, states and concessionaires, and has committed to buy back around 500,000 polluting vehicles from the United States. The case dates back to September 2015, when the company acknowledged having secretly installed software on 500,000 US vehicles to cheat on government emissions tests and pleaded guilty in 2017 to felony charges. In total, 13 people have been charged in the United States, including Winterkorn and four Audi managers.

During its last annual press conference, the Volkswagen Group reported that its profit margin it has been reduced to 3.8% compared to 4.2% of the year 2017, figures very far from the objectives of between 4% and 5% that the company proposed for this year. Audi's profits fell as much due to the decline in sales of diesel vehicles as the delays in testing the new WLTP approval cycle. Bentley, compared to the 55 million profit of 2017, recorded a loss of 288 million in 2018. SEAT however achieved its best results to date, with profits of 254 million that undoubtedly place the Spanish brand in a good position within the German group, but the new WLTP test cycle causes delays in the production of several brands and numerous models have been unavailable for months, problems that are now added to the new judicial situation in the US: ..

The questioning of its bond issues, a fundamental means of financing, will have a negative impact at a time when Volkswgen requires new immediate financing for develop electric cars. The German manufacturer has continued making its massive investments in this field and by the year 2028 intends to have manufactured some 22 million units, including both the ID range. of Volkswagen as the e-tron of Audi and the electric models of SEAT, Skoda, Porsche and Bentley. The objective of the group is to increase its profit margins to 6% by the year 2022, which will imply the dismissal of between 5,000 and 7,000 workers. This is due to the fact that, according to Diess, less labor is needed to manufacture electric cars: "The reality is that the construction of an electric car involves 30% less labor than one with an internal combustion engine". recognized. But he also admits that the investments will be the largest carried out so far by the group and the demand of the SEC will make it difficult for private investors to go to that line of financing.


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