As VW Pushed to Be No. 1, Ambitions Fueled a Scandal

26 Sep 2015 | Author: | No comments yet »

Business Highlights.

BERLIN: Volkswagen’s new boss began trying to pull the embattled carmaker out of the wreckage of a pollution test rigging scandal Saturday, as the United States and Switzerland banned the sale of the group’s new diesel cars. WASHINGTON (AP) — The Environmental Protection Agency said Friday that it will launch sweeping changes to the way it tests for diesel emissions after getting duped by clandestine software in Volkswagen cars for seven years.Something was different last January when Volkswagen CEO Martin Winterkorn took the stage for his annual speech at the Detroit auto show: He addressed the industry’s most important confab in English. The 62-year-old former Porsche chief Matthias Mueller was tapped on Friday to replace Martin Winterkorn, who resigned over stunning revelations by US environmental authorities that the German carmaker had fitted some of its diesel cars with software capable of cheating environmental tests. In a letter to car manufacturers, the EPA said it will add on-road testing to its regimen, “using driving cycles and conditions that may reasonably be expected to be encountered in normal operation and use, for the purposes of investigating a potential defeat device” similar to the one used by Volkswagen.

His speech at Fishbone’s, a Cajun restaurant a short walk from both the Chrysler Freeway and the riverfront GM Plaza, was halting, uneven, and read from a script. The scam could lead to fines worth more than $18 billion (16.1 billion euros), while the German giant has already seen billions of euros wiped off its stocks this week. “We will overcome this crisis,” he said Friday, adding that the carmaker could “emerge stronger from the crisis in the long term” if it learned from its mistakes. The hullabaloo also exposed flaws and gaps in the US Environmental Protection Agency’s emissions testing practices that allowed Volkswagen to sell some 482,000 emissions skirting vehicles in the US over the course of seven years.

For the 68-year-old executive, the switch was a symbol of his commitment to reversing years of underperformance in the world’s most competitive auto market. The affected cars are Volkswagen and Audi models powered with 2-liter, turbocharged diesel engines: VW Jetta TDI (model years 2009-15), VW Beetle TDI (model years 2009-15), VW Golf TDI (model years 2009-15), VW Passat TDI (model years 2014-15) and Audi A3 TDI (model years 2009-15).

The overall economy expanded at an annual rate of 3.9 per cent in the April-June quarter, up from a previous estimate of 3.7 per cent, the Commerce Department reported Friday. Volkswagen introduced its new 2016 Passat — which includes a diesel version — in New York on Monday just as the scandal over cheating on pollution controls broke. Such testing can be expected in addition to the standard emissions test cycles when Emissions Data Vehicles (EDV), and Fuel Economy Data Vehicles (FEDV) are tested by EPA.” TL;DR? American environmental officials had begun investigating why emissions from VW diesels were many times higher in road tests than levels measured in labs — which ultimately led to revelations that the company’s cars had software intended to fool regulators.

Some 180,000 vehicles on Swiss roads made by Volkswagen’s Audi, Seat, Skoda and VW brands between 2009 and 2014 could be affected by the scandal, the Federal Roads Office said in a statement. The agency is using random spot checks of production cars to make sure that automakers are being honest and to detect any other rule-breaking technology, like VW’s sneaky emissions software that tested clean in a lab but ran dirtier in real-world conditions. The second quarter expansion in the gross domestic product, the economy’s total output of goods and services, was a marked improvement from an anemic 0.6 per cent increase in the first quarter when the economy was battered by a harsh winter. France and Britain have announced new checks and the European Union has urged its 28 member states to investigate whether vehicles in their countries complied with pollution rules.

The issue heated up this week on news that Turing Pharmaceuticals raised the price of Daraprim, the only approved treatment for a rare, life-threatening parasitic infection, by more than 5,000 per cent to $750 a pill. The gamble seemed to pay off — until this week. “They were under a great deal of internal pressure to ‘do something’ in America,” said Stefan Bratzel, a former product manager with Daimler who now teaches at the University of Applied Sciences, near Cologne. “They wanted to deploy diesel in America as a way of differentiating themselves from Toyota.” The scale of the diesel scandal, which has now claimed Winterkorn’s job and wiped about 21 billion ($24 billion) off of Volkswagen’s market value, has stunned industry veterans, lawyers, and regulators. The Japanese corporation’s decision to sell up in the midst of the scandal came as a new sign of distrust in VW after it lost a third of its market capitalisation — over 20 billion euros — this week. Even though a smog check on an affected vehicle will trick the system by engaging the emissions controls only when the car is in test mode, “VW owners should continue to have their vehicles smog checked, when required, in order to renew their registrations,” said California Department of Motor Vehicles spokesman Jaime Garza. Reuters points out a tweet posted Thursday by Italian Transport Minister Graziano Delrio stating there will be 1,000 sample checks for all automakers selling vehicles in Italy.

From 2008 through 2014, average prices for the most widely used brand-name drugs jumped 128 per cent, according to prescription benefit manager Express Scripts Holding Co. Volkswagen’s shareholders, dominated by the Porsche SE holding company — a separate entity to the luxury brand car — are expected to hold emergency talks in Berlin on November 9. Regulators worldwide are miffed in the wake of the admission that 11 million Volkswagen Group autos, which includes Audi, Porsche and other brands, contain the software. In an interview with FAZ that will be published in full on Sunday, Daimler’s CEO Dieter Zetsche expressed “compassion” for his former VW opposite number Winterkorn, who was forced to quit Wednesday over the scandal.

Winterkorn, who once famously said he knows “every screw in our cars”, said he was “stunned that misconduct on such a scale was possible in the Volkswagen group.” The group says that five million Volkswagen brand vehicles — including the sixth-generation Golf, seventh-generation Passat and Tiguan models — are affected worldwide. Once that fix has been determined and approved by the EPA and the California Air Resources Board, Volkswagen will send notices directly to consumers with instructions on the steps they need to take to get their vehicles repaired. SAN FRANCISCO (AP) — For a change, Silicon Valley is buzzing about something besides a sleek new device, mind-bending breakthrough or precocious billionaire. VW has set aside 6.5 billion euros in provisions for the third quarter to cover the potential costs of the disclosures, while ratings agencies have warned they may cut Volkswagen’s credit rating, which could increase the company’s financing costs.

A rare visit by Indian Prime Minister Narendra Modi this weekend has captivated his extensive fan club in the area and commanded the attention of major U.S. technology companies eager to extend their reach into a promising overseas market. Diesel, though, was always going to be a tough sell to American car buyers, who mostly associate it with smoke-belching buses and roaring 18-wheelers. Other challenges VW faces include competition in the fast-growing car market in China, where the German carmaker’s sales have dropped by 5.8 per cent this year. It will also give Modi, a Hindu nationalist elected to office last year, an opportunity use the world’s high-tech capital as a pulpit to promote his plan to transform India into a hub of innovation.

To change that perception, Volkswagen, along with Daimler and Bayerische Motoren Werke, marketed “clean” diesel as a sort of petrochemical miracle cure that offered more miles per gallon than gasoline. He envisions a “Digital India,” where ubiquitous high-speed Internet access will empower entrepreneurs to build software and other technology products that will raise the standard of living in a country where many households are still impoverished. Diesels often have a tank of a urea-based solution that’s mixed with exhaust where it binds with nitrogen oxides — a big component of smog — to reduce emissions. NEW YORK (AP) — As world leaders descend on the United Nations this weekend, former President Bill Clinton will be taking them to East Africa through virtual reality.

You feel as though you’re sitting in the same living room as Clinton chats with an entrepreneur in Karatu, Tanzania, who sells solar-powered products. If Volkswagen opts to bring the cars into compliance by reprogramming the engine control unit so the cars are always operating with full emissions controls, both the acceleration and the fuel economy of the car are likely to suffer. If it opts to add a urea tank, it would make the emissions system more complex, take up space in the car and also add thousands of dollars to the cost of the repair, but it could preserve the cars’ performance.

The researchers published the findings in May 2014 without naming the vehicles, though they were identifiable by engine specifications that were reported. That prompted regulators in California to start their own investigation, which eventually uncovered the so-called defeat device — software that VW had installed to cheat on emissions tests. Nitrogen oxides are a major contributor to ground-level ozone and the formation of particulates, exposure to which has been linked to increased asthma attacks and other respiratory illnesses that can be serious enough to send people to the hospital, according to the EPA. Richard Curtin, chief economist for the survey, said consumers are disturbed by signs of trouble in the Chinese economy, the world’s second-biggest, and continued economic stress in Europe.

OMAHA, Neb. (AP) — ConAgra employees will learn next week about upcoming changes that the company’s chief executive said Friday likely will include jobs cuts and a shuffling of operations that could boost the company’s presence in Chicago and lower it in Omaha. RIDGEVILLE, S.C. (AP) — Volvo has broken ground on its first auto manufacturing plant in North America, and says workers at the $500 million plant will build a car still being designed in Sweden. In July 2014 in Wolfsburg, the company town west of Berlin where Volkswagen has its headquarters, Winterkorn had spoken at length — in German — about his ambitions for the US. As an owner, “you don’t have to do anything affirmatively to join,” said Richard McCune, partner in the Redlands law firm McCuneWright LLP, which filed a class-action suit against Volkswagen on Monday. “That’s the beauty of a class action. The occasion was the announcement of a new sportutility vehicle to be built in Tennessee, “a true American car, big, attractive, and with lots of high-tech,” as Winterkorn put it, that would capture the country’s attention.

If the court certifies it, everybody is grouped together.” McCune estimates as many as 200 class-action suits could eventually be filed against VW in multiple states. Volkswagen has instructed its dealers not to sell its remaining stock of new 2015 TDI cars and to stop selling used models of affected cars, as well. Even the out-of-it others say they stumble on news while they’re catching up with friends on Facebook, scanning their Twitter feeds or looking for entertainment online.

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