VW scandal is personal for many Germans

24 Sep 2015 | Author: | No comments yet »

How uni students took down Volkswagen.

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.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.

Long before Volkswagen admitted to cheating on emissions tests for millions of cars worldwide, the automobile industry, Volkswagen included, had a well-known record of sidestepping regulation and even duping regulators.BERLIN— Volkswagen AG VLKAY 6.53 % raced Wednesday to contain the widening scandal threatening Germany’s most important company, ousting its chief executive and pledging to prosecute those involved in a scheme to cheat U.S. auto-pollution tests. 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. No replacement was announced, and VW still has no easy exit from a scandal that has suddenly dented a reputation for trustworthiness that took decades to build.

Environmental Protection Agency that Europe’s biggest auto maker employed software on some VW and Audi NSU 4.99 % diesel-powered cars to manipulate the results of routine emissions tests. 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. Winterkorn said that he took responsibility for the “irregularities that have been found in diesel engines,” but maintained that “I am not aware of any wrong doing on my part.” Volkswagen didn’t immediately name Winterkorn’s successor, but the board will consider his replacement Friday, according to its executive committee, which includes top shareholders.

In the Autumn of 2014, researchers from the West Virginia University in America were given a grant to do the first ever evaluation of the tailpipe emissions of diesel cars in America made by European manufacturers. Wolfsburg-based Volkswagen is as much institution as corporation at home, with nearly 300,000 employees, 29 plants across the country and deep ties to the government—Lower Saxony owns 20% of VW. Its stock climbed 7 percent Wednesday. “In the view of the Executive Committee, criminal proceedings may be relevant due to the irregularities,” the committee said in the statement, adding that Volkswagen will cooperate in those investigations. The company’s next CEO faces a daunting task of cleaning up the scandal—the scope of which remains unclear—and keeping its sales expansion on track. I am clearing the way for this fresh start with my resignation.” Winterkorn, 68, resigned following a crisis meeting of the Volkswagen supervisory board’s executive committee.

Its acting chairman, Berthold Huber, said company directors are “resolved to embark with determination on a credible new beginning.” Huber said a successor will be discussed at a board meeting on Friday that was originally intended to approve extending Winterkorn’s contract through 2018. 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.

The company said earlier this week that it had set aside more than $7 billion to fix the problems with its cars and begin to repair its reputation with customers. “This is going to cost the company a fortune, and that’s not what’s supposed to happen under a CEO’s leadership,” said Charles Elson, director of the University of Delaware’s Weinberg Center for Corporate Governance. Winterkorn, VW’s boss since 2007, had come under intense pressure since the EPA’s disclosure Friday that stealth software makes VW’s 2009-2015 model cars powered by 2.0-liter diesel engines run cleaner during emissions tests than in actual driving. 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.

In this Sept. 14, 2015 photo Volkswagen CEO Martin Winterkorn, center, leaves the stage during the Volkswagen group night on the eve of the Frankfurt Auto Show IAA in Frankfurt, Germany. 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. And since VW has not yet said how it will fix the problem, it’s not clear how its cars’ fuel economy and performance will change. “The CEO resigning, it doesn’t really impact me.

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. VW later acknowledged that similar software exists in 11 million diesel cars worldwide and was setting aside 6.5 billion euros to cover the costs of the scandal.

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. Lutz, the former General Motors vice chairman and Chrysler president, often said the rules were like “trying to cure obesity by requiring clothing manufacturers to make smaller sizes.” The universe of automotive scandals has been a broad and often tragic one, including Ford’s 1978 recalls of 1.5 million Pintos after evidence emerged that its gas tanks were prone to catch fire during impacts. 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. The Chrysler Corporation was indicted in 1987 on charges of disconnecting the odometers of 60,000 cars used by executives and then selling them as new.

An engineer by training and VW’s former research and development chief, Winterkorn, 68, was known for his detail-minded style after taking the helm in 2007, helping to foster the company’s image as a green automaker and setting its global ambition. “His thoughts for the company permeated throughout the company,” said Jack Nerad, executive market analyst at Kelley Blue Book. “He had very strong opinions about what Volkswagen should be as a group, what its brand should be. Winterkorn on Wednesday, Sept. 23, 2015 said he is stepping down “in the interests of the company” as it grapples with the scandal over Volkswagen’s evasion of U.S. emissions controls. (AP Photo/Frank Augstein, File) (Frank Augstein/AP) Weil, also a VW director, promised to “clear up these events with all the possibilities we have inside the company and ensure that those involved are punished severely.” Other governments from Europe to South Korea have begun their own inquiries, and law firms have already filed class-action suits on behalf of customers. The officials immediately started an investigation after talking to the researchers and their funders from the International Council on Clean Transportation. He was very, very hands-on.” In the aftermath of that failed corporate ouster, Winterkorn, who earned 15.9 million euros ($17.7 million) last year, was up for a contract extension from VW, according to the Associated Press, a deal that would have kept him at the helm until his retirement. “I have always been driven by my desire to serve this company, especially our customers and employees. There is no immediate way of restoring VW’s reputation, but only total transparency can resolve the scandal and salvage its brand, said Jeremy Robinson-Leon, chief operating officer at Group Gordon, a New York-based corporate and crisis PR firm.

FILE – In this May 13, 2009 file photo Martin Winterkorn, CEO of Volkswagen, ponders during the shareholders’ meeting of German car producer Audi in Neckarsulm, Germany. 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. In the United States, automakers’ lobbying has ensured that the statute giving powers to the National Highway Traffic Safety Administration “has no specific criminal penalty for selling defective or noncompliant vehicles,” says Joan Claybrook, a former administrator of the agency and a longtime advocate of auto safety. 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. There are no criminal penalties under laws applying to the E.P.A. for violations of motor vehicle clean air rules, though there is a division of the Justice Department devoted to violations of environmental law. “I don’t see them changing this behavior unless criminal penalties are enacted into law that allow the prosecutor to put the executives in jail,” Ms.

The company’s culture is famously clubby and success depends on being well-connected in Wolfsburg and striking a balance between boosting profit margins and maintaining strong ties to labor. U.S. regulators raised questions about VW’s diesel emissions in March 2014, and insisted on answers for another 18 months before the company finally acknowledged installing the stealth software.

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. This year, the South Korean authorities claimed that Audi and Toyota had inflated fuel economy claims on two models — the Audi A6 sedan and the Toyota Prius gas-electric hybrid — by over 10 percent. While the impact remains unclear, VW is “one of Germany’s most important global champions” and an “important growth driver for the German economy.” Another unanswered question is whether Volkswagen was alone in trying to dupe emissions testers. 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.

He is also well respected in financial circles. “We believe shareholders would welcome such a move,” said Arndt Ellinghorst, automotive analyst at Evercore ISI. 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.

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. Germany’s biggest bank, Deutsche Bank, has already lowered its forecast for the main German stock market index, the DAX, where carmakers account for 25 percent of its total value. 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).

General Motors paid $45 million in 1995 and recalled nearly half a million Cadillacs that were equipped with a chip that shut off emissions control systems while the air-conditioner was being used, to improve the car’s performance. 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. Volkswagen is Germany’s largest corporation, generating revenue of almost €203 billion ($227 billion) last year in a country where every seventh job is linked to the nation’s export-oriented auto industry.

Some vehicles from BMW and Opel emitted 10 times as much pollution on the road as in the lab. “We call it the tip of the iceberg,” said Jos Dings, the director of Transport and Environment. “We don’t think this will be limited to Volkswagen. Environmentalists have long complained that carmakers game the testing regime to exaggerate the fuel-efficiency and emissions readings of their vehicles. Also in attendance were three representatives of the company’s workforce and IG Metall trade union, including Bernd Osterloh, the powerful head of its works council. The company hasn’t offered a rationale, though outside experts speculate it was to ensure strong engine performance and boost fuel economy amid tough U.S. emissions standards.

It also asked prosecutors in Braunschweig, the county where VW is located, to investigate. “I’m pleased that Volkswagen is taking such an aggressive stance on admitting the problem and attacking it,” Gina McCarthy, EPA administrator, told The Wall Street Journal on Tuesday.

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