Board member expects further resignations at Volkswagen

24 Sep 2015 | Author: | No comments yet »

Dealers, owners feel frustrated and betrayed by VW scandal.

The chief executive of Volkswagen has quit the car firm, insisting he was not involved in the emissions tests scandal that has rocked the automotive industry and could lead to one of the biggest ever legal claims.SAN FRANCISCO (Reuters) – In April of 2015, Volkswagen of America, Inc. sent letters to California owners of diesel-powered Audis and Volkswagens informing them of an “emissions service action” affecting the vehicles.It was publicly revealed last week that the company had fudged emissions tests using cheat software on diesel powered cars under its three mainstream brands, Volkwagen, Audi and Skoda.A Cambridge woman is among dozens of people who have filed lawsuits against Volkswagen, accusing the automaker of deceiving customers by marketing and selling tens of thousands of diesel cars that weren’t low emissions as promised, a scandal that yesterday prompted the CEO of the German company to resign. “Certainly there are cases where companies cut corners, but not to this extent,” said Thomas Shapiro, a lawyer who brought the suit on behalf of Nadine Bonda. “To design a car with the intention of deception like this, it’s a new one to me.

BERLIN —Volkswagen chief executive Martin Winterkorn resigned Wednesday, succumbing to pressure for change at the German carmaker, which is reeling from the admission that it deceived U.S. regulators about how much its diesel cars pollute. “Volkswagen needs a fresh start — also in terms of personnel. Owners were told they would need to take their cars to a dealer for new software to ensure tailpipe emissions were “optimised and operating efficiently.” The company didn’t explain that it was taking the action in hopes of satisfying government regulators, who were growing increasingly sceptical about the reason for discrepancies between laboratory emissions test results and real world pollution from Volkswagen’s diesel cars. The result? $41.5 billion wiped from the company’s value, up to $25 billion in penalties from the US alone, on top of the costs to recall and fix 11 million cars worldwide.

The resignation of Winterkorn follows five days of growing pressure on VW after the US Environmental Protection Agency (EPA) accused the carmaker of using a defeat device to cheat emissions tests on diesel cars. Officials at the California Air Resources Board and the EPA agreed in December of 2014 to allow a voluntary recall of the company’s diesel cars to fix what Volkswagen insisted was a technical – and easily solved – glitch. Volkswagen has admitted it intentionally installed software that switched engines to a cleaner mode during emissions tests and then switched off, improving cars’ performance, but emitting more pollutants. “She was motivated by clean emissions, like a lot of people,” Shapiro said. “The car was marketed that way.

Now, as Volkswagen comes clean about rigging diesel emissions to pass U.S. tests, Rand is desperately trying to sell the fully loaded model with white leather seats for $10,000 below what he paid. His sole bite has been from a man who offered $7,500 on speculation that he could resell it in Mexico. “Volkswagen was somebody that you could rely on for cutting-edge products and quality and all those things and now you find out that they’re not above lying just flat out,” said Rand, who plans to join a class-action lawsuit against VW. “That’s probably about as bad a thing as a company can do is lie to your face when you’re buying a $35,000 car.” Rand’s anger at the world’s top-selling car company was echoed Wednesday by private dealers, auto wholesalers and owners across the U.S. as fallout from the smog test trickery mounted.

The world’s biggest carmaker by sales has admitted to U.S. regulators that it programmed its cars to detect when they were being tested and alter the running of their diesel engines to conceal their true emissions. Volkswagen, which had no obligation at the time it initiated the recall to disclose the discussions that had led to it, declined to comment on the letter.

VW has enlisted Kirkland & Ellis, the US law firm that defended BP after the Deepwater Horizon oil disaster, to help it deal with the growing pile of investigations and lawsuits. Many also dealt with a flood of angry calls, emails and tweets from Volkswagen owners who felt betrayed because they believed they had bought a car that polluted less without sacrificing the good gas mileage and performance that comes with a diesel engine. “I think their feet should be held to the fire. Going by Volkswagen’s claims, it should easily have let out the least amount of pollution between those three cars — it had a more modern catalytic reduction system which is meant to convert toxic fumes into safer ones — but that wasn’t the case. Mueller, a former head product strategist, is also a management board member of Porsche SE, and close to the Piech-Porsche family that controls Volkswagen.

Dealers can’t give customers good answers because Volkswagen hasn’t said a whole lot, said AutoNation CEO Mike Jackson, the leader of the largest auto dealership chain in the U.S. Almost €25bn, or a third, has been wiped off the value of VW this week, although shares in the carmaker rebounded 5% after Winterkorn’s resignation. Winterkorn, who during his eight years in charge oversaw a doubling in Volkswagen’s sales and an almost tripling in profit, said he was shocked that misconduct on such a massive scale had been possible at the company. German Chancellor Angela Merkel had urged Volkswagen to move “as quickly as possible” to restore confidence in a company held up for generations as a paragon of German engineering prowess.

They triple-checked the accuracy of their equipment after the Volkswagen Jetta they tested showed readings 30 times more than the claimed pollution rating. “It wasn’t that we tested three vehicles and brought down a corporation. Three vehicles is a very, very small subset of a half-million vehicles, so it was more that we had a role, the data we collected spoke for itself and CARB and EPA did their due diligence. The committee said it had “tremendous respect for his willingness to nevertheless assume responsibility” and added that VW’s global expansion would be “inextricably linked to his name”.

However, a few months later at a 2014 conference in San Diego, they presented their research to an audience that just happened to have several EPA officials in it. Senior members of Volkswagen’s board said in a statement that they expected more heads to roll as an internal investigation seeks to identify who was responsible for the wrongdoing. As the carmaker seemed to be clearing the way to pin the scandal on workers below Winterkorn, Simon Walker, the director general of the Institute of Directors, criticised the company’s response. The officials immediately started an investigation after talking to the researchers and their funders from the International Council on Clean Transportation.

When the EPA confronted Volkswagen, the company blamed “various technical issues” for the results but still voluntarily recalled nearly 500,000 cars in December last year to issue a software patch. We’re just one dealer,” he said, adding that diesel models make up about 30 percent of the business. “This is definitely going to impact our business. That decision was taken and put into action by people of reasonable seniority. “If the board members knew what was happening, that is clearly severe – and possibly criminal – malpractice. We’re trying to focus on positive, not negative things because there’s nothing we can do.” Volkswagen has taken steps to help out the dealership, Murphy said. Volkswagen said Tuesday that about 11 million of its cars were fitted with Type EA 189 engines that had shown a “noticeable deviation” in emission levels between testing and road use.

Eventually they found software called “the switch” which tracks the position of the steering wheel, vehicle speed, how long the engine is on, and air pressure to determine if it is being subjected to an emissions exam. That includes guaranteeing reimbursement for sales objectives for two quarters whether or not the goals are met and waiving the interest the local franchise normally pays on unsold cars on their sales floor, he said. “They’re making all the right steps. … The 20-strong board includes members of the Porsche and Piëch families, union leaders, politicians from Lower Saxony, where VW is based, and representatives from Qatar, a major shareholder. “Ultimately, this must happen quickly,” he said. “We must not allow the impression to arise that this is a problem for the whole auto industry or that it raises questions over the integrity of Volkswagen overall.

Finally, on September 3 2015, the EPA presented mountains of evidence to Volkswagen and forced them to confess the vehicles were loaded with software to cheat on emissions testing. The story has shocked the car market, with dealers in the United States reporting people holding back from buying diesel cars and “#dieselgate” trending on Twitter. Lash Volkswagen of White Plains, N.Y., has been scrambling to accommodate affected Volkswagen owners by giving them loaner cars and picking up or dropping off their cars when it’s time for repair, said Tom Backer, general manager of the dealership in New York’s Westchester County. I am convinced that the Volkswagen Group and its team will overcome this grave crisis.” Earlier, Prof Karel Williams of the University of Manchester business school told BBC Radio 4’s Today programme that the VW scandal reflected badly on Germany. “Germany has been lecturing the Greeks for years on how they cheated on the budget deficit calculations and now look at this – Germany’s largest company is cheating on emissions,” Williams said. Diesel engines have been hugely popular in Europe and Australia, especially with recent high unleaded petrol prices due to diesel’s much better fuel economy.

Diesel fuel contains much more energy per litre than a standard litre of petrol, which, combined with the efficiency of diesel engines, allows modern cars to get over 1000kms of highway driving off just one tank of fuel. Diesels make up less than 20 percent of his business and draw the most interest from customers looking for better gas mileage, he said. “We have 200 Volkswagens in stock; three of them are Jetta diesels,” he said. “So, it’s not like every Volkswagen out there has got a diesel motor in it. He said: “The government worked together with the auto industry, not to ensure that the emissions levels were reduced, but so that the measuring system was set up in such a way that on paper the cars met the necessary standards.” The European Automobile Manufacturers’ Association (ACEA) said European rules will soon require testing to be conducted in realistic driving conditions as well as in laboratories, creating the strictest regime in the world.

Yes, until you realise there’s a huge catch — diesel engines emit a large amount of nitrogen oxides (NOx) which can cause serious health problems and form a large amount of smog. It said: “The ACEA will continue to engage with the European commission and national governments to address the current challenges and ensure that trust and confidence in the car industry and clean diesel technology are maintained.” In the past, Europe has been quite loose on its regulations, resulting in around one-third of European cars running on diesel, however it’s also the reason why big cities such as Paris and London have smog problems.

Commerzbank’s Sascha Gommel said that if Volkswagen had to recall all 11 million affected cars, the cost of that alone could top 6 billion euros ($6.7 billion). Companies such as Volkswagen took advantage of this to break into the huge US market, offering “clean diesel” cars that theoretically offered great fuel economy without giving off too much poisonous NOx. Environmentalists have long complained that carmakers game the testing regime to exaggerate the fuel-efficiency and emissions readings of their vehicles. For Australians, there is no word yet as to whether the scandal will hit home, although experts have told News Corp Australia as many as 50,000 diesel Volkswagens could be affected.

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