Volkswagen CEO Faces Board Showdown as Diesel Scandal Widens

23 Sep 2015 | Author: | No comments yet »

Volkswagen admits 11 million cars have emissions cheating device.

Of the five models equipped with test-cheating software in the United States, four have been imported to South Korea – the Golf, Audi A3, Jetta and Beetle – and about 59,000 of them are on the road. The German giant has admitted that 11 million of its diesel cars worldwide are equipped with devices that can cheat pollution tests, and is now facing billions of dollars in recall costs, fines and potential criminal charges. John German works for a small group called the International Council on Clean Transportation (ICCT) that set out last year to prove diesel vehicles were now cleaner than other cars.

Meanwhile, the New York Attorney General announced a criminal investigation into Volkswagen and there are reports from Bloomberg that VW has hired the US law firm Kirkland & Ellis to help it deal with the widening scandal over the carmaker’s faked pollution controls. “Of all the factors that we saw yesterday the one that is most likely to be a particular worry is the spill over effects this drama surrounding Volkswagen will have on the wider German economy in the weeks and months ahead at a time when there appears to be some evidence that growth may well be slowing in the euro area,” says Michael Hewson, chief market analyst at CMC Markets UK. But their road tests in California with Volkswagen uncovered massive disparities from the Environmental Protection Agency’s (EPA) lab tests, sparking the current scandal. “Especially when EPA and CARB (California Air Resources Board) have the stringent standards and do the best job of enforcement — if it’s happening here, how widespread is it?” he said. “The idea was that in the US, because the emission standards are more stringent, and because both EPA and CARB have a lot of experience and expertise and legal authority to do enforcement, that the vehicles here would be clean,” Mr German said. “And then we thought, well we could take the, get these clean results, take them back to Europe and say, ‘Hey, look guys, it can be done, you should be doing it too’.” The scandal went public on Friday when US regulators ordered Volkswagen, the world’s largest automaker by sales, to fix the defect and said they were launching a probe.

The shockwave immediately hit stock markets, with VW shedding more than a quarter of their value — or more than 20 billion euros — since last week. I offer my deepest apologies,” the 68-year-old executive said in a video statement, promising to be “ruthless” in getting to the bottom of the scandal.

Look what they did,” he said. “And to us that will be, what we’d be most happy about is if the governments around the world would respond with stricter enforcement and stricter oversight.” CEO Martin Winterkorn apologized for the deception under his leadership and pledged a fast and thorough investigation, but gave no indication that he might resign. With the so-called “defeat device” deactivated, the car can spew pollutant gases into the air, including nitrogen oxide in amounts as much as 40 times higher than emissions standards, said the US Environmental Protection Agency (EPA).

I apologize in every way to our customers, to authorities and the whole public for the wrongdoing.” “I thought I was doing something good and not something bad,” said Zandy Hartig, an actress in Los Angeles who bought a diesel-powered Jetta Sportswagen in 2013. It’s deliberately manipulating the system, and it’s quite evil,” Hartig said. “I do not have the answers to all the questions at this point myself, but we are in the process of clearing up the background relentlessly,” Winterkorn said.

The EPA said Friday that VW faces potential fines of $37,500 per vehicle, and that anyone found personally responsible is subject to $3,750 per violation. “I don’t think this is a life-threatening event, but it’s clear it’s going to be very expensive,” said Christian Stadler, who teaches strategic management at the Warwick Business School. US auto giants Ford and General Motors also saw their shares drop 2.8 percent and 1.9 percent respectively as the impact of the VW scandal hit other carmakers. While the scandal has been restricted to Volkswagen so far, environment protection groups, particularly in Germany, suspect other carmakers may be using similar technology.

France called for a Europe-wide investigation and announced it would launch an “in-depth” probe, while Germany called for “full transparency” in the scandal. Britain called on the European Commission to urgently investigate vehicle emissions tests, and the United Nations described Volkswagen’s admission as “extremely troubling.” “Our company was dishonest… in my German words—we have totally screwed up,” the chief executive of Volkswagen America, Michael Horn, said at an event in New York late Monday, according to video posted by CNBC.

But in the space of 24 hours, Volkswagen has gone from one people could trust to one people don’t know what to think of,” said Nigel Currie, an independent U.K.-based branding consultant. Volkswagen’s stock plunged again Tuesday after the company said similar “discrepancies” in Type EA 189 engines involve some 11 million vehicles worldwide — more than the 10 million or so cars it sold last year. Now, she’s dismayed to know that during a recent cross-country trip, she was “polluting all the way.” And if Volkswagen’s eventual repair diminishes her car’s sportiness or fuel efficiency, she’s not sure she wants it.

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