California Teachers’ Pension Scolds Volkswagen on Emissions Dupe

Back Bloomberg Oct 6, 2015 By Alison Vekshin, Margaret Collins & Tim Jones

California’s $184-billion pension fund for school teachers chided Volkswagen AG for rigging some diesel engines to cheat on U.S. emission tests and said it is evaluating its exposure to losses from the scandal.

The California State Teachers’ Retirement System, the second biggest U.S public pension, held 37,580 Volkswagen shares valued at $4.85 million as of Sept. 25 and 284,856 of the company’s preferred shares worth $34.2 million.

The Wolfsburg, Germany-based company admitted Sept. 18 that it programmed some of its cars’ diesel engines to meet emissions standards only when undergoing official tests while letting them exceed legal pollutant limits on the road. Volkswagen’s market value has plunged 27 billion euros ($30.3 billion) since the announcement.

“Calstrs is clearly disappointed that a company in our portfolio has managed to simultaneously damage both its shareholder value and the environment that we’re pledging to protect,” said Michael Sicilia, a Calstrs spokesman. “As owners we actively monitor our holdings and expect our portfolio companies to govern themselves responsibly.”

About 11 million vehicles around the world were fitted with the defeat devices. The company has set aside 6.5 billion euros to cover damages including fixes, potential regulatory fines and lawsuits.

Not only is California home to the two biggest public pension funds, it has more of the cars on its roads than any other state and has the toughest carbon emission standards in the U.S.

Following the admission that the company cheated in order to try and gain U.S. market share, Chief Executive Officer Martin Winterkorn stepped down and the U.S. Federal Bureau of Investigation has opened a criminal probe. U.S. states also are looking into the company’s actions.

Volkswagen is facing more than 80 federal court lawsuits by consumers alleging the company committed fraud by cheating on emissions tests, inducing them to pay more for their vehicles. Those lawsuits were filed as class actions representing all consumers in the U.S. or in individual states who leased or bought the vehicles.

A Michigan pension fund for police and firefighters alleges in a lawsuit that holders of VW’s American depositary receipts lost hundreds of millions of dollars.

The $286 billion California Public Employees’ Retirement System said it has about $165 million invested in Volkswagen. The fund, the biggest in the U.S., is “examining the situation and continue to monitor,” said spokesman Joe DeAnda.

New York state’s pension fund — which was worth $184.5 billion as of March 31 — has 22,927 ordinary shares of Volkswagen valued at about $5 million, according to Matt Sweeney, a spokesman for state Comptroller Thomas DiNapoli, the fund’s sole trustee. It has another 159,979 shares of Volkswagen’s non-voting preferred shares worth $33.3 million, Sweeney said by e-mail.

The $50 billion Alaska Permanent Fund Corporation held 15,009 shares of Volkswagen stock as of June 30, valued at $3.47 million. “It doesn’t exactly move the needle, does it?” said Laura Achee, the fund’s director of communications.

The Teacher Retirement System of Texas declined to comment on its holdings but said that any investment in Volkswagen would be a drop in the bucket of its $132 billion assets, according to communications director Howard Goldman. At the $26 billion Employees Retirement System of Texas, which provides retirement benefits for state employees, retirees and their dependents, VW holdings are similarly negligible.

“We have some in equities and in fixed income, but very small,” said spokeswoman Mary Jane Wardlow in an e-mail.

Volkswagen shares are also held in the pension plans of private companies including General Motors Co. and International Business Machines Corp., according to their latest filings with the Labor Department.

GM doesn’t comment on individual holdings in its pension plans, spokesman Pat Morrissey said in an e-mail. The company reported shares in Volkswagen valued at about $1 million in its latest filing with the Labor Department as of Sept. 30, 2014. That’s a small portion of the plan’s about $80 billion.

–With assistance from Freeman Klopott in Albany, Lauren Etter in Austin and Romy Varghese in Philadelphia.