As VW pushed to be no. 1, ambitions fueled a scandal

27 Sep 2015 | Author: | No comments yet »

Diesel scandal victims await villains.

Just one week ago Volkswagen was a company oozing confidence, the world’s best-selling automaker with a global brand that appealed to car buyers seeking trustworthy German engineering at an affordable price.Switzerland said Saturday that it was suspending the sale of Volkswagen diesel vehicles most likely equipped with software capable of cheating environmental tests.WOLFSBURG • Embattled carmaker Volkswagen’s new boss, Mr Matthias Mueller, faces a daunting challenge as he tries to steer it out of the wreckage of a widening scandal over pollution test rigging. “Under my leadership, Volkswagen will do everything it can to develop and implement the most stringent compliance and governance standards in our industry,” he said in a statement. The announcement followed the German automaker’s revelation that 11 million vehicles worldwide were fitted with the software, which can switch pollution controls on during emissions tests but shut them off during normal driving.

Here’s what’s known about the Volkswagen affair so far: Researchers at West Virginia University, tipped off by an environmental group, conducted tests on several diesel vehicles and discovered that two Volkswagen models, a 2012 VW Jetta and a 2013 VW Passat, had much higher emissions than permitted. Mueller, 62, who headed Volkswagen’s Porsche subsidiary, pledged to help the automaker get through the biggest business crisis in its 78-year history. That quality might serve the 62-year-old well as he takes charge of the carmaker now mired in its deepest crisis ever over a massive emissions test scam. Mr Mueller, born in 1953 in the former communist East Germany, had already been tipped to take over VW during a bitter leadership struggle earlier this year between outgoing CEO Martin Winterkorn and his one-time mentor and former supervisory board chief Ferdinand Piech.

Still, we see far too little responsibility-taking in American business, where failed CEOs more often extort seven-figure payouts and go on to rule again. Die Welt dubbed Volkswagen’s new CEO as “The Imperturbable”, saying he was someone who knows how to use his elbows. “But I don’t see it as playing foul, rather as a sign of perseverance,” the newspaper quoted Mr Mueller as saying.

In a recent interview with the daily Sueddeutsche Zeitung, Mr Mueller said he saw himself as an “approachable team-player”, who tried “to push through his decisions in a collegial and harmonious way” . The ban came as the authorities from India to Norway announced new probes, while the US environmental regulator said it would test all diesel car models. “Today, we are putting vehicle manufacturers on notice that our testing is going to include additional evaluation and tests designed to look for potential defeat devices,” said Mr Christopher Grundler, director of the US Environmental Protection Agency’s Office of Transportation and Air Quality. VW has admitting using software that allowed its diesel cars to fool U.S. emissions tests, releasing fewer smog-causing NOx during the tests than in real-world driving conditions. France and Britain have announced new checks and the European Union urged its 28 member states to investigate whether Volkswagen vehicles in their countries complied with pollution rules. No matter that perp walks were absent from far more serious scandals, ranging from incendiary gas tanks to rollover-prone designs to exploding air bags.

VW faces a potential fine of up to $18 billion in the United States, though analysts say the real figure is likely to be significantly lower if the company cooperates with regulators. Given the ratcheting down of emissions over the years, nobody should pretend that even the tenfold increase in nitrogen oxide emissions discovered in some VW testing will directly kill anybody. As a certified energy efficiency and environmental zealot, I passed up a hybrid to buy my first “clean diesel.” They also use less fuel, thus producing less carbon dioxide that causes climate change. First may come a sustained show of contrition in a US advertising campaign, said one Volkswagen manager, who asked not to be identified. “Humility will be the name of the game,” he said.

Mr Herbert Diess, head of the Volkswagen brand worldwide, said on Friday that the company is “working at full speed on a technical solution” to bring the emissions systems into compliance “as swiftly as possible”. The company faces three big challenges ahead: satisfying regulators that it now meets all the emissions rules, rebuilding customers’ trust in its tarnished brand and restoring investor confidence. VW has already pledged to cooperate with the EPA and other regulators investigating the emissions fraud and replaced Winterkorn with Porsche chief Matthias Mueller. According to a report Saturday by German daily Handelsblatt, VW is planning to offer a free fix for the 11 million affected vehicles and customers will be contacted in the coming weeks.

The EPA said Friday, however, it will change the way it tests diesel emissions, adding on-road tests to check for “a potential defeat device” similar to the one used by Volkswagen. It’s probably not enough: The Obama administration has extracted $132 billion to punish financial institutions since the 2008 crisis, according to SNL Financial. If state and federal officials can design a low-cost, effective plan to both fix an environmental mess and fairly compensate victims, it would be the first time.

Certainly, Volkswagen has admitted that for 11 million of its cars around the world, emissions of nitrogen oxide (NOx) can display “a noticeable deviation between bench test results and actual road use.” U.S. and California officials say this deviation was designed into software and amounts to a “defeat device” outlawed by the Clean Air Act. But we don’t know whether the EPA forced this confession by cranking up enforcement or reinterpreting rules, as it has for so many other industries lately. As for the 500,000 U.S. consumers directly involved, it’s not at all clear who will emerge as the most frustrating villain; the company that made this mess, or the government that responds.

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