Volkswagen could go bankrupt over class-action lawsuits, EPA fine, fall in share price and loss of goodwill
Volkswagen may have to cough up penalties to the tune of $18bn according to the The US Environmental Protection Agency Reuters

German automaker Volkswagen, which is battling a massive emissions scandal, faces at least 25 lawsuits from claimants across the 50 states in the US after it admitted to rigging tests to make its cars appear greener. Some experts have warned that the sum of fines, falling sales and decline in stock prices could be so high that it might force Volkswagen into bankruptcy.

Seattle-based law firm Hagens Berman, has filed its first class-action suit within hours of the scandal being uncovered. According to managing partner Steve Berman, he has received more than 2,000 calls and emails from claimants looking to sue Volkswagen. Berman said: 'I was like, "Holy Batman, I've talked other people into buying those cars. We have never seen anything like this."

Volkswagen has put aside almost $8bn (£5.2bn) to deal with the lawsuits and has hired Kirkland & Ellis -- the same legal firm that defended BP after the Deep Water Horizon oil rig disaster. Lawsuits aside, Volkswagen may have to cough up penalties to the tune of $18bn that could be levied by the US Environmental Protection Agency, a figure that exceeds its entire operating profit for last year.

Volkswagen, the second-largest automaker by market cap, has slipped to fourth position after the emissions scandal came to light. Its shares have tumbled leading to a loss of nearly $34bn in market value. It is still valued at nearly $55bn.

Emmanuel Bulle, an analyst with Fitch Ratings, said the scandal "...could seriously undermine the group's brand image, particularly in the US, where Volkswagen is already struggling to increase its market share".

While Mark Holman of TwentyFour Asset Management was of the view that the scandal could even bankrupt Volkswagen. "This is obviously extrapolating to a worst case scenario but just what a bear market thrives upon; any potential floor on prices will probably be reached before all these headlines are out of the way," he said.

The chances of bankruptcy would rise if this scandal -- which is currently related only to Volkswagen's diesel cars -- extends to its petrol cars. Moreover, Greg Archer, former managing director of the UK's Low Carbon Vehicle Partnership said, "It is probably not limited to diesel and not limited to emissions".

CEO Martin Winterkorn has resigned following the scandal, despite claiming earlier that he would not step down. Volkswagen has not announced a successor as yet. However, CEO of Porsche, Matthias Muller, and Herbert Diess who joined Volkswagen from BMW, have been touted as potential candidates for the top job.