VW Scandal to Hurt Its Financing Arm

28 Sep 2015 | Author: | No comments yet »

VW facing ‘tsunami’ of legal trouble in emissions scandal.

Volkswagen’s own staff and one of its suppliers warned years ago about software designed to thwart emissions tests, two German newspapers reported on Sunday, as the automaker tries to uncover whether its executives knew about the cheating.The global car giant Volkswagen was warned at least four years ago that the computer software at the heart of its diesel emissions scandal was illegal, but the company failed to act on the information and continued to use it, according to German media reports.Those are among questions that state and federal investigators want answered as they plunge into the emissions scandal at Volkswagen that has cost the chief executive his job, caused stock prices to plummet and could result in billions of dollars in fines.

Europe’s biggest automaker is adding up the cost of the biggest business scandal in its 78-year history, having acknowledged installing software in diesel engines designed to hide their emissions of toxic gasses. VW admitted a week ago that emissions tests it was conducting on its diesel vehicles sold in the United States were manipulated, after the practice was uncovered by US environmental authorities.

German authorities meanwhile heaped pressure on the embattled corporate titan, demanding it set out a timeline by October 7 on how it will ensure its diesel cars meet national emission standards without using the cheat technology. The Environmental Protection Agency has accused VW of installing sophisticated stealth software that enabled “clean diesel” versions of its Passat, Jetta, Golf and Beetle models to detect when they were being tested and emit less-polluting exhaust than in real-world driving conditions. VW’s ability to regain public and consumer respect may hinge on Mueller’s ability to tackle the company’s culture; specifically, the company’s willingness to look unflinchingly in the mirror and address what has long been seen as a culture of arrogance, epitomized most recently by the evident disregard for government clean-air standards. “There’s a measure of arrogance to this that I think people find appalling because they figured they can get away with it – we’re smarter than everyone else,” said former automotive marketing executive Peter De Lorenzo, Autoextremist.com blogger told USA Today in an interview. “That really casts this in a wildly negative light.” Even Bernd Osterloh, VW’s top labor executive and a member of the supervisory board, conceded at Friday’s press conference in Wolfsburg, Germany that “Volkswagen needs a fundamental cultural change.” The pride and self-regard of many VW managers for the automaker’s engineering prowess evidently led to the belief that U.S. government officials were too dim or too distracted to uncover the misleading emissions tests fabricated by VW engineers.

The agency says the “defeat devices” allowed those models to belch up to 40 times the allowed amounts of harmful fumes in order to improve driving performance. “If there is sufficient evidence to show that Volkswagen intentionally programmed its vehicles to override the emission control devices, the company and any individuals involved could face criminal charges under the Clean Air Act, and for conspiracy, fraud and false statements,” said David M. Indeed, the episode recalled another at VW a decade ago when a senior VW human resources executive was caught and convicted for bribing German union officials. The company’s internal investigation is likely to focus on how far up the chain of command were executives who were responsible for the cheating, and how long were they aware of it. Like Toyota, which was embroiled in a safety scandal of its own over allegations of unintended acceleration in 2009, VW immediately said it will decentralize decision making, putting more power in the hands of regional brands like Skoda and Seat in Europe.

Last Friday, after a marathon crisis session, the carmaker’s board tapped company insider Matthias Mueller — chief of its luxury sports car brand Porsche — to steer the world’s largest automaker out of the wreckage. The Frankfurter Allgemeine Sonntagszeitung, citing a source on VW’s supervisory board, said the board had received an internal report at its meeting on Friday showing VW technicians had warned about illegal emissions practices in 2011. The software senses when the car has been set up for emissions testing and then produces much lower levels of nitrogen oxides in the exhaust emissions than it would give off during normal road use. He called criminal charges “almost certain.” But Uhlmann cautioned that hauling the executives involved into a U.S. courtroom could be challenging because much of the conduct at issue probably occurred overseas.

Mueller, 62, who replaces Martin Winterkorn as CEO, pledged that “we will overcome this crisis” and vowed to restore confidence through “an unsparing investigation and maximum transparency”. While the U.S. has an extradition treaty with Germany, European regulators are also now investigating and could claim first dibs on prosecuting company officials.

Muller should consider acknowledging, however, that those who acted improperly may have done so from a misguided perception from senior executives of what VW views as acceptable or expected behavior – for which VW management bears responsibility and which VW will change. Separately, Bild am Sonntag newspaper said VW’s internal probe had turned up a letter from parts supplier Bosch written in 2007 that also warned against the possible illegal use of Bosch-supplied software technology.

A VW spokesman refused to confirm the claim. “We are investigating at all levels and we will supply the results as soon as we have them,” he told the newspaper. Since male, German engineers dominate VW’s upper echelons, the automaker should consider diversifying its talent pool and accelerate hiring from abroad, recruiting women and non-Germans and promoting them into positions of leadership. In July 1973, the agency found that VW had installed temperature-sensitive devices that turned off emissions controls on about 25,000 Fastback, Squareback and bus models.

Jason Vines, a former Ford vice president of public affairs during the Ford Explorer/Firestone tire affair, said “culture isn’t immediately changeable, only behaviors. New CEO Matthais Mueller sent a letter to staff promising “relentless” efforts to investigate the scandal and promote the “strongest compliance and governance standards in the industry”. For this difficult mission, he may need help from the German government: German chancellor Angela Merkel has an incentive to assist, for her political opponents are attacking her this week as being “in bed” with the nation’s car industry.

If Volkswagen fails to comply, the KBA warned in a two-page letter, the authority could withdraw approval for the affected models, meaning they could no longer be sold or even moved on German roads, the report said. However, VW was said to have responded by claiming that the problem was a minor issue which required only “re-calibration” of vehicle software to rectify it.

A Volkswagen spokesman told AFP the company would soon present an action plan in Germany and “announce when we expect to launch a recall” that would include a software update, adding that “we are working at full throttle”. The European Commission said Friday that a new testing procedure will come into force in January, because the current laboratory tests do “not reflect the emissions of vehicles in normal driving conditions”. In Volkswagen’s home market Germany, where 2.8 million of the 11 million affected diesel cars are on the road, the government watchdog KBA has set an Oct. 7 deadline for the company to present a plan to bring diesel emissions into line with the law, Bild reported. EU sources said the change aims to prevent the sort of rigging used by VW after research over several years had shown a difference between lab results and those found in real driving conditions.

The transport ministry said the KBA had written to VW demanding it “commit to concrete steps and a timetable” to ensure its cars in Germany meet requirements. Yesterday, the Die Welt newspaper said that it had gained access to an internal German government paper which showed that Ms Merkel’s coalition planned to try to delay EU plans to introduce tough new vehicle emissions tests by at least three years.

The German group has suffered its biggest crisis in the same year it had reached its long-time goal — overtaking the Japan’s Toyota as the world’s top car maker by sales. The EU aims to have the new tests enforced by the end of 2017, but Die Welt said the German government would aim to get their introduction postponed until 2021 and retain as many loopholes as possible.

Investigators will almost certainly look for any false statements made to the EPA and for signs that VW has tried to conceal wrongdoing or obstruct regulators. The German plan was criticised by the Dutch Green MEP Bas Eickhout. “Germany is always in front when it comes to environmental protection – unless the car industry is affected,” he said. And money laundering allegations will be explored if investigators suspect that VW sent illicit proceeds overseas. “If a software package such as this were intentionally designed to defeat the emissions testing, there may well be email traffic, meetings, records that would establish that intent,” said Gregory Linsin, a former environmental crimes prosecutor at the Justice Department. Volkswagen’s shareholders — dominated by the Porsche SE holding company, a separate entity to the luxury brand — are expected to hold emergency talks in Berlin on November 9. German Environment Minister Barbara Hendricks, speaking to the Handelsblatt daily, said the scandal “casts a pall on the environmental promises of German companies”.

The last two major criminal investigations against auto companies — Toyota and General Motors — yielded massive fines over car safety problems but has resulted in no prosecutions of executives. The chief of German luxury auto giant Daimler, Dieter Zetsche, told the FAS it was too early to assess the negative impact on Germany’s crucial car sector, adding: “I hope the damage isn’t permanent.” Volkswagen and other European manufacturers have promoted “clean diesel” technology, benefiting from diesel’s fuel economy but meeting stringent tests for emissions of toxins.

Those outcomes dismayed consumer watchdog groups and grieving victims’ relatives, who demanded better accountability for failure to disclose vehicle defects. But the suggestion that this was achieved by cheating on tests could affect the viability of the entire diesel sector and the fate of companies that have bet on it. (Reporting by Steve Scherer, Andreas Cremer, Jonathan Gould, Patricia Uhlig and Michael Nienaber; Writing by Jonathan Gould and Peter Graff; Editing by Jon Boyle) A memo this month by Deputy Attorney General Sally Yates sought to reaffirm the Justice Department’s commitment to prosecuting employees and executives, directing among other policy mandates that corporations pushing for credit for cooperating with the government must first turn over evidence against individuals. “Volkswagen has a fundamental choice to make,” said Uhlmann, the former prosecutor. “That is whether it intends to cooperate and seek leniency, or whether it wants to fight the charges.

Here you can write a commentary on the recording "VW Scandal to Hurt Its Financing Arm".

* Required fields
All the reviews are moderated.
Our partners
Follow us
Contact us
Our contacts


ICQ: 423360519

About this site