Volkswagen's Workers May Pay The Price For Dieselgate

Illustration for article titled Volkswagen's Workers May Pay The Price For Dieselgate

Good Morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know.


1st Gear: That’s Always How It Works

In the wake of the diesel cheating scandal, Volkswagen has already seen a major executive shake-up. But the company’s labor chief warns the automaker may have to cut jobs in the U.S. and Europe, depending on the size of the fines.

In the U.S. alone, VW is being sued for up to $46 billion by the Department of Justice, though a fine that high is probably unlikely.

Via Reuters:

The extent to which VW may be forced to cut jobs to help meet the costs of ‘Dieselgate’ depends “decisively” on the level of fines, VW’s works councils chairman Bernd Osterloh said on Tuesday at the meeting of workers in Wolfsburg which was also attended by the carmaker’s top managers.

“Should the future viability of Volkswagen be endangered by an unprecedented financial penalty, this will have dramatic social consequences,” said Osterloh, who also sits on VW’s 20-member supervisory board.

Osterloh, speaking to workers at VW’s flagship plant about the emissions crisis and structural changes, called on the U.S. authorities to consider the risk of possible job cuts in deciding on penalties.

“We very much hope that the U.S. authorities also have an eye for this social and employment-political dimension,” he said.

2nd Gear: VW Delayed Announcing Diesel Scandal To Cut A Deal

Volkswagen told U.S. regulators on Sept. 3 about the diesel cheating, but the public didn’t know until Sept. 18. Why the delay? Reuters reports the automaker was trying to reach a settlement then with said regulators, but that didn’t happen:

In a 113-page report submitted to the court on Feb. 29, law firm Goehmann said the delay was to allow for talks aimed at reaching a settlement with U.S. regulators, and that the talks could have been jeopardized if the matter was already public.

“The Volkswagen management board had a reason to assume that a consensual solution would be possible with the authorities, that would not have led to significant economic consequences for VW,” the law firm said in the report seen by Reuters.

“The temporary non-disclosure did not serve the purpose of covering up the breach of compliance (of U.S. rules),” the report said, adding the attempt to reduce the cost of the scandal was “not only legitimate but almost advisable.”


3rd Gear: Clinton v. Sanders On The Auto Bailout

As mentioned in yesterday’s Morning Shift, the two Democratic presidential candidates’ approaches to the auto bailout is likely to be a big deal in today’s Michigan primary.


Hillary Clinton accused Sen. Bernie Sanders of opposing the bailout, a talking point that got repeated by many outlets (including us at first, admittedly) but an analysis by Automotive News reveals “the full story is a bit murkier.”

Sanders, then an independent U.S. senator from Vermont, supported a 2008 measure that would have provided $14 billion in relief to the automakers. The bill, which passed the House, failed in December of that year to reach the 60 votes needed under Senate rules to consider the measure.

President George W. Bush then tapped about $17.4 billion in funds from the Troubled Asset Relief Program — the Wall Street bailout Clinton voted for and Sanders voted against in October 2008 — to keep GM and Chrysler alive through the beginning of Obama’s term.

The Senate then voted in January 2009, five days before Obama took office, on a measure that would have blocked $350 billion of the $700 billion in TARP funds from being disbursed. The resolution, which Sanders supported and Clinton opposed, would have blocked some of the money Bush promised for the auto industry.


4th Gear: More Shutdowns At Sterling Heights

As the Chrysler 200 sedan appears dead in the water and sinking fast, workers at the Sterling Heights Assembly Plant where the midsize sedan is made will be shut down for three weeks longer than expected, reports The Detroit Free Press:

The automaker confirmed Monday that it has extended the shutdown of the plant until April 4. Workers who were temporarily laid off on Feb. 4 were originally scheduled to return to work on March 14. Chrysler employs about 3,000 hourly workers at the plant.

Sales of the Chrysler 200 midsize sedan have been sinking fast since November when the automaker pulled back on dealer incentives. Over the first two months of this year, sales have dropped 61% in the U.S. to fewer than 12,000 cars.

At the end of February, FCA had a 147 days supply of inventory on dealer lots of the Chrysler 200, according to Wards Auto. That’s far above the approximately 60 to 65 days supply of inventory considered healthy for a car or truck.


5th Gear: No Endorsements In Michigan

Back to the election for a second. (Because you can’t possibly be sick of hearing about it, right?) Ahead of today’s Michigan primary, still no endorsements from the local unions, reports the Detroit News:

When Michigan workers vote for presidential candidates in the state’s primary election Tuesday, they will do so without relying on endorsements from the United Auto Workers, Teamsters and AFL-CIO.

None of the three unions have announced endorsements, even as Democratic and Republican presidential candidates toured the union-heavy state this week. Representatives from each told The Detroit News they are either not commenting on their endorsement process or are not ready to announce support.

“The UAW is conducting a survey of its members; we have some returns already in but not all,” UAW President Dennis Williams said in a statement to The Detroit News. “UAW regions and locals have different processes they use. It’s totally voluntary. At this time we do not anticipate endorsing before the Michigan primary.”


Reverse: Type 2!


Neutral: What Penalties Should VW Really Face?

We’re coming up on six months of Dieselgate with no fix in sight. What should happen?


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Jake Kirn

So basically VW is making sure the justice department knows that if they fine VW an amount that is meaningful, VW will make sure it hurts the US economy by cutting a significant amounts of jobs. Awesome.