US, EU vow emissions crackdown in wake of Volkswagen scandal

26 Sep 2015 | Author: | No comments yet »

Could Volkswagen scandal be diesel’s death knell?.

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.The Volkswagen emissions scandal, which has lowered resale values for thousands of VW owners and spread to other automakers, could also lower demand for what was once thought of as the fuel of the future in North America. “Maybe Europe will be OK because we all kind of got used to them and we appreciate their advantages.Incoming Volkswagen Group CEO Matthias Mueller (behind the wheel) with his predecessor Martin Winterkorn in a Porsche 911 in Stuttgart, southern Germany.The Swiss Federal Roads Office (French/German), which has established a special task force on the issue, estimates that up to 180,000 new, still-unsold diesel vehicles manufactured by the German company could be affected in Switzerland.

Volkswagen (VOWG_p.DE) named company veteran Matthias Mueller as its chief executive on Friday as the German carmaker struggles to get to grips with a crisis over rigged diesel emission tests that its chairman called “a moral and political disaster.” After a marathon board meeting at its headquarters in Wolfsburg, the world’s biggest automaker said Mueller, the 62-year-old head of its Porsche sports car division, would replace Martin Winterkorn, who resigned as CEO on Wednesday. But I think outside of Europe where it was difficult anyway, I think diesel cars for now are dead, maybe forever.” Manufacturers saw diesel engines, which are 20 to 30 per cent more efficient than gasoline engines, as a way to meet strict new American fuel efficiency standards brought in by the Obama administration.

According to German newspaper Die Welt, Mueller is a ‘man who loves cars and who loves people who love cars.’ Frankfurt: Matthias Mueller, head of luxury sports car maker Porsche now taking the steering wheel at scandal-hit Volkswagen, is a man described as ‘The Imperturbable’. The move effects roughly 180,000 cars that are yet to be sold or registered, including 1.2-litre, 1.6-litre and 2.0-litre diesel engines for the VW, Audi, Seat and Skoda brands. The scale of VW’s deception became clear when the company admitted that 11 million of its diesel cars are equipped with so-called defeat devices that covertly turn off pollution controls when the car is being driven — and back on when tests are being conducted. Automakers selling in the U.S. will have to have a combined fuel rating of 54.5 miles per gallon (4.3 litres per 100 kms) across their line of cars and small trucks by the year 2025.

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. “We will overcome this crisis,” vowed the white-haired and blue-eyed manager, a trained tool maker and IT expert, pledging to “restore confidence… through an unsparing investigation and maximum transparency.” Mueller, born 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. Volkswagen, for generations a model of German engineering prowess, is under huge pressure to take decisive action over the biggest business-related scandal in its 78-year history. “Under my leadership, Volkswagen will do all it can to develop and implement the strictest compliance and governance standards in the whole industry,” Mueller said in a statement. They already worked together at VW’s top-line brand, Audi, in Ingolstadt in Bavaria, where Mueller began his career; Winterkorn was appointed chief in 2002. Countries around the world, including Germany, US, and the UK, have launched investigations into diesel emissions since the scandal emerged and more could now ban cars from their roads. The company said it would appoint a U.S. law firm to conduct a full investigation, suspend an unspecified number of staff and adopt a more decentralized structure with a slimmed down management board.

VW has admitted that 11m vehicles, including 5m Volkswagen passenger cars, were fitted with defeat devices and set aside €6.5bn (£4.8bn) to pay for the costs of the crisis. 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. With lower taxes keeping gasoline prices relatively cheap, North Americans — and Americans in particular — haven’t had the same incentive to move to diesel as Europeans. Bild, a German automotive magazine, reports the BMW X3 diesel has real-world emission levels that are 11 times greater than allowed under European regulations.

Born on June 9, 1953, in Limbach-Oberfrohna in what is now the eastern part of reunited Germany, Mueller fled communism to the neighbouring West German regional state of Bavaria with his parents. VW owners’ cars could face increases to their fuel bills of up to £100 a year if the Vehicle Certification Agency, the UK’s emissions testing watchdog, demands modification to affected pollution control systems, The Times reports. 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.

And the International Council on Clean Transportation, the same group that discovered the Volkswagen deception, said Renault, Hyundai, and Volvo each have single diesel models that would not pass real-world emission tests. “We invite all member states, in addition to the ones who are already doing so, to carry out all the necessary investigations,” European Commission spokesperson Lucia Caudet said. “I’m sad, and I’m sure that the dealers are sad. 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. The car business is a great industry and we don’t need this kind of situation,” said Jacques Bechard of the Automobile Dealers Corporation of Quebec. “I think the reputation of the industry is going to be trashed over this scandal,” said Chris Archer, of the Brussels-based environment group Transport & Environment. 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. 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.

Sixty-five per cent of new cars sold in France in the first six months of the year were diesel. “A comparable diesel engine, say to a comparable gas engine, will use about 20 per cent less fuel. His engine is seated lower and he has wide tyres.” Mueller — who tends to lapse into a strong Bavarian dialect when not on duty — was appointed CEO at Porsche in 2010, not long after VW had emerged victorious in its tortuous takeover battle with Porsche.

The task facing Mueller is enormous, with the latest issue of influential German weekly Der Spiegel showing pall-bearers carrying a Volkswagen car decked out as a coffin under the headline “The Suicide.” “His appointment is a step towards cleaning-up,” said LBBW analyst Frank Biller about Mueller, a former head of product strategy close to the Piech-Porsche family that controls Volkswagen. 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. It’s the oxides of nitrogen that are the issue,” said Kenzie. “Personally, if I knew — as some people are saying — that the [Volkswagen] Golf Sport Wagon has lost $10,000 of its value overnight, give me a call.

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. Porsche was “almost like a family company with 20,000 employees,” while VW in Wolfsburg “was in charge of 600,000 people around the world,” he said. But Henning Gebhardt, global head of equity at Deutsche Asset & Wealth Management, said Volkswagen had missed an opportunity with its choice of new CEO. “He won’t be able to lead the company for 10 years due to his age alone,” he said. “That means there will be discussions about succession in the foreseeable future again.” Bernstein analyst Max Warburton also questioned whether a man who has spent more than three decades at the company was the right man to signal a break with the past. Now that Mueller has taken over from Winterkorn at the helm of VW, one of Germany’s biggest companies, his words are likely to carry even more clout. We can only apologise and ask our customers, the public, the authorities and our investors to give us a chance to make amends.” The German government has said that 2.8m of the 11m cars installed with the defeat device were sold in Germany and that commercial vehicles were also involved.

Documents have also emerged that showed EU offices knew two years ago that devices could skew emissions tests, and the US’s Environmental Protection Agency warned that it would step up its emissions test against all carmakers and that VW faced “massive fines”. The Automobile Protection Association (APA) said Volkswagen will eventually issue a recall and fix the emissions systems, although that may reduce engine power or increase fuel consumption. The APA said VW will likely have to provide compensation for any reduction in performance or may even offer to buy back vehicles for their current market value, plus a small premium. “The longer the new 2015 and 2016 models stay off the road, the scarcer good, used diesels will become. But he did not say when the fix would be delivered, or offer details on what VW might do to appease angry customers. “They have lost any contact with the real world, the customers who have been buying their cars in good faith,” he said, pointing to the firm’s 13-storey administrative building. “Everyone in Wolfsburg is expecting tough times and job cuts.”

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