With online stock trading, it is important to study the fortunes of the major businesses and understand the impact it could have on stocks. Some companies could have legal issues that bring down investor confidence and reduce the share price. Volkswagen (VW) is currently going through a big legal nightmare.
Volkswagen is in for some tough times. The troubles began ever since the company's deliberate cheating with regard to emission tests of its diesel vehicles came to light, followed by the company's own admittance of the deliberate error.
VW to Pay $14.7 Billion in Settlement
Volkswagen will have to shell out $14.7 billion for cheating on emissions using software during the emission tests. The company itself admitted to it in September 2015. This payment will be divided among VW customers who have the option of either returning their Volkswagen vehicles fitted with the affected diesel engine, or getting it fixed by the company. They can decide on it till May 2018. Customers getting their car fixed will receive cash somewhere between $5,100 and $10,000 while those returning their VWs will each have to be paid between $12,500 and $44,000.
More Penalties on the Way
This customer settlement isn't the end of it though. Volkswagen will have to pay $2.7 billion for cleanup of the environment as well as $2 billion to help the various American states to promote the use of zero-emission vehicles and replace older diesel engine buses and trucks.
But the German automaker still has possible civil penalties to face for violating the Clean Air Act as well as possible criminal charges against the company and individuals by the Department of Justice (DOJ).
The amount involved in this settlement that VW would have to pay is quite unprecedented for a single auto manufacturer, but the nature of the wrongdoing is also unprecedented. It wasn't a mistake on the part of the company that led to faulty emission readings, but a deliberately installed system that limited emissions during the test and then emitted close to 40 times the permitted levels of certain pollutants on the road. Deliberate violations come with hefty penalties.
Shareholder Taking VW to Court
Earlier, in May 2016, the company's biggest shareholder announced that it was taking VW to court since it wasn't informed about the emission tests cheating. This shareholder is the world’s largest sovereign wealth fund, the state pension fund of Norway. Following this news, the stock fell by up to 40% to which the fund responded by selling a significant portion of its holdings in the company, with its stake cut to just around $720 million from a massive $1.2 billion.
The struggles and legal battles faced by a company inevitably reflect on its stock prices. With a reliable online broker like TradeZero you can carry out online stock trading with the right tools and resources to make the right decisions. Contact us by phone at +1 954-944-3885 or email us at firstname.lastname@example.org.
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