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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.


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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Yes, Xi Jinping Is Now More Powerful Than Mao Zedong Ever Was

After being re-elected as head of the Communist Party last year, the Chinese leader has been unanimously re-elected to another five-year term as head of state. Now, wielding more power than any other past Chinese communist leader, he wants to accelerate the rise of Chinese influence around the world.

Photo of huge portrait of Xi Jinping

Huge portrait of Xi Jinping is displayed in the National Day mass pageantry celebrating the 70th founding anniversary of the People's Republic of China

Yann Rousseau


BEIJING — Chinese Communist Party leader Xi Jinping has been re-elected to a third five-year term at the head of the world's second largest economic power. Nobody was surprised.

The vote took place during a legislative assembly convened to rubber stamp decisions of the authoritarian power, during which 2,952 parliamentarians unanimously approved Xi's re-election before rising, in perfect choreography, to offer a prolonged standing ovation to their leader. As usual, Xi remained completely neutral in the face of the enthusiasm.

His victory was a mere formality after his re-election last fall as the head of the all-powerful party, which controls all of the country's political institutions, and after legislative amendments to erase term limits that would have forced him out.

Xi Jinping, who took over the presidency in 2013, "is now the most powerful leader in the history of the People's Republic, since its founding in 1949. Institutionally, he holds even more power than Mao Zedong," says Suisheng Zhao, a professor and Chinese foreign policy expert at the University of Denver.

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