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Rough Ride for Volkswagen

For the past week, the alleged discovery of a ‘defeat device’ in Volkswagen’s [VW’s] diesel cars has been headlined as a “mess, wreckage, scandal, ‘stunning betrayal of trust’, cheat, and crisis”—in short, a story with legs.
The numerical reports of implicated vehicles and locales skyrocketed almost immediately from 500,000 in North American alone to 11 million worldwide.  VW shares fell precipitously; the shares of other car and car-parts companies likewise tumbled.  On the personnel front: CEO Martin Winterkorn’s mid-week resignation was followed two days later by the appointment of his replacement, Matthias Mueller, the former head of Porsche.
The head of VW’s US operations and top engineers at its Audi and Porsche brands are also gone. On the regulatory front: both German and North American regulators are under scrutiny.  That the discovery was made, not by the US Environmental Protection Agency, but by a US non-profit, The International Council on Clean Transportation [ICCT], working with the Center for Alternative Fuels, Engines and Emissions at West Virginia University has been detailed.
We are now told that self-testing and self-auditing were routine.  Backgrounders on the importance of the auto industry to the whole German economy provide context for analysis on the “cozy relationship between the industry and [German] politicians.”  And on the geopolitical front:  alarmists have gone so far as to say that “All of a sudden, Volkswagen has become a bigger downside risk for the German economy than the Greek debt crisis.”
In the debate over the pros and cons of diesel technology, some predict the certain end of diesel cars in North America.  Others say the diesel/electric combination is the future for hybrids.
The fix and the fix timelines are vaguely described.  Germany has set an October 7th deadline for VW’s plan to bring diesel emissions from the 2.8 million affected cars on German roads into compliance.  In North America, stop-sell orders appear to be in place and recalls may be forthcoming.
The core mystery captivates: who was responsible and what, exactly, were they thinking?  Will we ever fully understand how such a well-respected brand could come to this?  The discovery timeline is under scrutiny.  German newspapers report that VW’s own staff in 2011 and one of its suppliers in 2007 warned about software designed to thwart emissions tests, but leave open why the matter was not addressed then.
We have been reminded of other emission test cheaters: in 1995 General Motors US$11 million fine for defeat devices on some Cadillacs; in 1998, Ford’s US$7.8 million fine for defeat devices on Econoline vans, and Honda’s US$17.1 million fine for disabling a “misfire” device that warned about excess emissions, and the largest penalty for defeat devices to date, the US$83.4 million fine on Caterpillar, Volvo, Renault and other manufacturers.
Clearly, VW will have to pay.  In many countries where VW diesel cars are on the road, there is much ado about fines, class action lawsuits, and criminal investigations.  VW has reportedly already set aside US$7.3billion to cover the fallout.  Some estimate the final cost at triple this amount …or more.
It looks like a rough ride for otherwise well-engineered vehicles.

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