Volkswagen Scandal - $77 billion dollar mess

[toOZ2012]

http://www.news.com.au/technology/innovation/the-who-what-and-why-of-volkswagens-diesel-scandal/story-fnjwucvh-1227542137162

 

THE Volkswagen Group is the world’s largest automaker but four university researchers may have brought it to the edge of collapse.

 

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.

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.

Reports have now emerged suggesting the German government was warned months ago about the existence of the “defeat device” software but turned a blind eye.

A written parliamentary answer published by The Telegraph appears to show the German transport ministry admitting as far back as July 28 that “The federal government is aware of [defeat devices], which have the goal of [test] cycle detection.”

Meanwhile, recall letters sent to VW owners in California in April also warned of an “emissions glitch”.

The Environmental Protection Agency and the California Air Resources Board agreed in December 2014 to allow a voluntary recall of Volkswagen’s diesel models to fix what the company said was a just a technical and easily fixable glitch, Reuters reports.

The revelations have already claimed the career of the Volkswagen Group’s CEO Martin Winterkorn who stepped down yesteray. More high profile executives are expected to be sacked or step down in the near future, while the whole German economy is about to take a huge hit.

HOW DID IT COME TO THIS?

It all started with a road trip.

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. The team consisted of two university professors, Gregory Thompson and Dan Carder as well as two students, Marc Besch and Arvind Thiruvengadam. All four were over the moon that they were able to study vehicles, with the aim to collect as much data as technically possible. Little did they know, they were about to unearth the biggest cover-up in automotive history.

The device they used to test the car.Source:

 

 

 

They tested three cars: a BMW X5, Volkswagen Jetta and Volkswagen Passat, while travelling over 2400kms on each car to get their results.

After driving from Los Angeles to Seattle and back they noticed something odd about their Passat. 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. The nitrogen oxide that came out of the Passat was in fact 20 times more than the baseline levels permitted by the California Air Resources Board.

The Volkswagen Passat was one of the vehicles tested.Source:Supplied

 

 

 

The team was puzzled. There was no way it could be wrong. They triple-checked the accuracy of their equipment after the Volkswagen Jetta they tested showed readings 30 times more than the claimed pollution rating.

The BMW, though, gave off the exact results they expected.

At the time, the team had no idea why the cars were emitting so much pollution, assuming Volkswagen had reached some kind of deal with the EPA.

“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. We didn’t point and say, ‘Volkswagen has a defeat device’,” Thiruvengadam told Autoblog.

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. 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. It didn’t fix it, and the EPA was starting to get frustrated and investigated further.

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.

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.

WHY DID VOLKSWAGEN CHEAT THE TESTS?

To understand this, you have to understand that there are two types of combustion engines in our cars. These run on either unleaded petrol or diesel, with both having their advantages.

The engine type causing problems here is diesel. 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. It also emits fewer carbon-dioxide emissions than standard petrol.

Sounds amazing, right? 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.

More efficient — but at what cost?Source:AFP

 

 

 

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. In fact, almost 29,000 people die each year in the UK due to air pollution.

But in 2009 two things happened that would make diesel appealing in the USA.

Increasingly, drivers wanted to get better fuel economy, while at the same time diesel technology had supposedly become cleaner. 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.

There was just one problem — their cars couldn’t actually do that.

The car maker cheated by installing software that could detect when its emissions were being tested and turned pollution controls on. The rest of the time, the controls were turned off. They could have kept these controls on the entire time, but it would have defeated the purpose of a diesel engine and deliver lesser performance.

WHAT’S NEXT?

Everything Volkswagen did in the USA was hugely illegal, so they will have to face the consequences. In the US alone, it’s expected that up to $25 billion in fines will be dealt for all the diesel vehicles sold there since 2009. It would also be very surprising not to see other countries with stricter emissions standards slap fines on Volkswagen, too.

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. This could jump even more when you include the group’s other brands — Audi and Skoda.

It’s not just Australia’s emissions standards that Volkswagen needs to worry about either. The ACCC today announced that they would be investigating whether the company misled customers with their “clean diesel” claims also.

Martin Winterkorn has already stepped down from his position of CEO.Source:AP

 

 

 

On top of giant fines, the company has set aside a staggering $10 billion for rectification work and compensation claims, but that figure could rise and economic experts warn the catastrophe could be bigger than Greece. In total, it may cost the company $77 billion.

The Volkswagen Group is Germany’s biggest employer, with 270,000 people directly employed, but up to a million people in the Germany auto-industry could be affected.

[flybyknight]

no problem in Australia, the emission standards here are so low VW are fine.

hey it could mean we all get a cheap euro cast off.

 

[toOZ2012]

no problem in Australia, the emission standards here are so low VW are fine.

hey it could mean we all get a cheap euro cast off.

 

Apparently, these are the worst kind of pollutants.

 

VW is in deep ****. It'll probably ask for a bail out. Would be interesting to see how EU handles this, VW being German and all.

[bristolman]

No sympathy, they played with fire and got burned badly. It could be seen as typical German arrogance thinking they could just ignore the rules. It will be interesting to see just how far they fall.

[Guest]

I think they'll make it through though it will cost them a fair chunk of change.

[toOZ2012]

270,000 directly employed - scary prospect. It's all the genuine hard working employees that get booted during crisis times and the management takes extra bonuses for "handling" what they created in the first place. Disgusting.

[Freckleface]

The impact of this could be disastrous for more than just the company and its employees. I'm stunned at the stupidity of everyone involved.

[bristolman]

270,000 directly employed - scary prospect. It's all the genuine hard working employees that get booted during crisis times and the management takes extra bonuses for "handling" what they created in the first place. Disgusting.

 

I wonder what sort of golden handshake Winterborne received for falling on his sword ?

[toOZ2012]

I wonder what sort of golden handshake Winterborne received for falling on his sword ?

 

Probably enough to never have to work again

[flag of convenience]

This as to be expected is massive news on/in the German language media. There is a lot of anger but also a sense of disbelieve in why they felt the need to do that. They will certainly have a lot to live down as the feeling seems to be this has brought disrespect not only to the brand but to the nation

[bristolman]

There will be a massive class action in America. If I had bought a car believing it to be as clean as I could expect only to be told it was no better than a Model T Ford I would want compensation.

[JockinTas]

:laugh:

 

 

 

[Paul1Perth]

I think most people who bought these cars aren't really going to be bothered. Is the car still running, yes, is it reliable, yes, does it still put out less pollutants than a model a couple of years older, yes.

 

No doubt VW are going to suffer monumentally for this and get fines that are going to just about cripple them and probably lead to massive layoffs. It's only the tip of the iceberg though, if one car maker is cheating like this then word gets around in the car and software industries and I'm surprised it hasn't come to light before this. Do you really think that one of the software guys that dreampt up this scam hasn't moved or been poached by another company and taken the idea and code with him. Wait for a couple of weeks, there will be a few car makers trying to cover their tracks and making scapegoats out of their CEO's.

[toOZ2012]

I doubt it's just the software engineers though. Surely, a lot more people are involved.

[Paul1Perth]

I doubt it's just the software engineers though. Surely, a lot more people are involved.

Sure there are. The managers of the software Engineers, their managers and right to the top probably. VW think they have got of light though by letting go of the CEO (paying him off to keep his mouth shut) and bringing in someone else who promises to put things right.