Volkswagen Just Avoided Collapse Because It’s ‘Too Big To Fail’

Government

Did VW just pull a move out of GM and Chrysler’s playbook?

Some bailouts come in the form of monetary funds rushed into an automaker’s bleeding bank account before stock prices dip to the value of the paper they are printed on. But that isn’t the only form of government help available to automakers. In Volkswagen’s case, aid came from the German government via an agreement to not fine the auto giant. The automaker not only also managed to escape the wrath of regulatory fines but it avoided having to pay off German VW owners.

Unlike in the US, the only condition was that VW has to fix every dirty diesel in the country. This is in direct contrast to what US regulators forced the cheating car manufacturer to do. As expected, Volkswagen owners within Germany’s borders are wondering why the hell US VW drivers get $15 billion of preferential treatment and not the citizens of VW's home country? The fact that if Germany is allowing VW to get away with such a blatant disregard for the rules is infuriating to many, but as always, things are more complicated than they seem on the surface. On one hand, if Germany decides to make Volkswagen compensate its diesel-owning customers the same as US buyers, it would set a precedent that would span to all affected cars in the EU.

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That would effectively kill Volkswagen, especially since there are 17 times more dirty diesels in Europe than there is in the US. In this case, the German government is succumbing to VW’s statements that it is too big to fail because as is typical with industry and government relations, polluted air takes a back seat to lost jobs. The German state of Lower Saxony also holds a 20% stake in the company, meaning that its demise would send financial ripples through German coffers. Ultimately, Germany did what was in its best interest in terms of protecting its finances, its economy, and the innocent factory workers. Further financial sanctions may not drive the lesson any further into VW's head, but the executives responsible should at least face justice.

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