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What Volkswagen Can Learn From Toyota About Ruthless U.S. Regulators

There are billion-dollar fines, but the humiliation is what really hurts the bottom line. This is the lesson VW faces amidst the emissions scandal snowballing in the U.S.

VW, Uncle Sam's coming after you next
VW, Uncle Sam's coming after you next
Thomas Fromm

MUNICH — The car industry knows how unpleasant legal problems in Europe can be. And yet, somehow, they always seem to find a way of getting resolved. In the United States, such matters are handled differently. Very differently.

For starters, there are the penalties. The current fraud scandal around falsified auto emissions may cost Volkswagen up to $18 billion and has already forced the resignation of CEO Martin Winterkorn. Add to that huge number billions more from recall costs and potential claims of recourse from disappointed clients and shareholders.

But that's not all. Foreign automakers that wind up in a battle with U.S. authorities will also suffer damage to the brand's image, the cost of which simply cannot be measured. In 2010 Akio Toyoda, the CEO of Japanese automaker Toyota, had to sit through an excruciating hearing in front of a Congressional committee. It's the kind of appointment most top managers would do anything to avoid. Back then, Toyota had to recall millions of cars due to mechanical defects that had led to multiple deaths of American motorists. The hearing lasted seven hours, and it was described as nothing less than a "grilling," as a long series of accusations and allegations prompted a final kowtow, and Toyoda acknowledging that both he and his company fell far short of being "perfect."

At the end of the day, the group paid a $1.2 billion penalty for its sins. But the words and images, capped by the U.S. Attorney General chiding Toyota for "deceiving its customers," were far more damaging.

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Toyota CEO Akio Toyoda — Photo: Bertel Schmitt

Toyota's experience offers a hint of what may happen to VW, following the accusation that it manipulated software that measured its car emissions. One thing is clear: A special commission from the U.S. congress will investigate the case, while the Environmental Protection Agency is obliged to probe which regulations have been violated. "The American people deserve some answers," said one lawmaker. Other reports suggest that Volkswagen and its managers could face criminal charges.

GM

The central concern over the last couple of years for Volkswagen — how to keep growing in the difficult American market — is no longer on the agenda. Today, instead, the question is whether VW can even survive in the U.S. Some executives from Toyota, VW and other foreign car companies have said in the past that U.S. regulators have a tendency to target non-American groups. The fight for market share is ruthless. Still, a recent example of General Motors undermines such a theory, as a case of broken ignition keys led to a settlement that forced the American automotive giant to pay penalties. Nevertheless, we're not speaking of billions here — a mere $900 million.

The U.S. National Highway Traffic Safety Administration (NHTSA) had accused GM of not having reported the broken ignition keys soon enough. As a result, GM had to order back 2.6 million vehicles worldwide. There is also a compensation fund for victims' families in the 124 deadly cases linked to the faulty piece.

GM's CEO Mary Barra was sent to Washington, to sit in front of another Congressional hearing. The lawmakers wanted to understand how it could be that it took more than 10 years for such a dangerous defect to be detected and corrected. Barra and Toyoda: Two recent examples of how serious the U.S. really is about corporate responsibility. Now get ready to see some German executives in the American hot seat.

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Society

Whispers In The Abbey: How Long Can King Charles III Hold On To The Crown?

It's passed down by bloodline, and Charles has publicly vowed to a life of service. But is a rather un-beloved old white man with a complicated past the right royal for this moment? Even if a monarchy is undemocratic by design, popular opinion matters today more than ever. Just look at the Spanish monarchy.

King Charles III during the ceremonial procession from Buckingham Palace to Westminster Hall on Sept. 14

Sophia Constantino

-Analysis-

Grappling with the loss of its Queen, Britain is simultaneously embarking on a rapid process of transition — and that begins with a face and few key words. Postage stamps, speeches, national anthems: all of it will change visage and verbiage from Queen to King, Her Majesty to His Majesty, as Elizabeth’s son Charles III takes power.

But these differences are just scratching the surface of potentially far deeper changes afoot, and a looming sense of trepidation only being whispered about, as the nation joins together to try to assure a smooth transition of royal power.

Yet there are questions that will only grow louder: Will the aging son pale in comparison to his mother’s lifelong standard? How far has society evolved since Elizabeth took the crown in 1952? Will Charles' past as prince come back to haunt him?

Put a tad more bluntly: How long will his reign last?

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