As they say in the Mexico’s Puebla state, paraphrasing General Motors president Charles Wilson, “What’s good for Volkswagen is good for Puebla” and, conversely, one may also say that what is bad for Volkswagen is bad for Puebla. After his initial discreet reaction to news of the scandal, Puebla’s governor accepted the fact that the automaker would suffer losses in sales, production and exports manufactured in Puebla. However, the planned investment of one billion dollars by Audi in the city of San Jose Chiapa, also located in the State of Puebla, to produce the Q5 SUV and Tiguan van for Volkswagen, will not be affected by VW’s emissions control problem. Mexico’s Federal Consumer Protection Agency announced that Volkswagen could be subject to a fine of 118 billion pesos, which would be an historic high, but any such fine would need to be approved by the Federal Environmental Protection Prosecutor’s Office. However, in Mexico vehicles do not use low sulfur diesel, and so it is not likely that environmental tests would detect that fraudulent emissions controls that have been admitted by Volkswagen. In the next few weeks, Mexico will determine the specifics of recalls for vehicles sold in Mexico. Further, the Company will need to stay alert in case groups of its customers decide to pursue class action claims against Volkswagen in Mexico.
