The VW emissions recall scandal that broke earlier this fall involved “cheat devices” (actually software in the engine’s main computer) installed on diesel models, including its luxury Porsche and Audi products. As it turns out, VW has been rigging some of its gasoline-powered vehicles as well. According to an article in this week’s edition of The Economist, Volkswagen executives have admitted to overstating claims over carbon dioxide (CO2) emissions – which has had the effect of exaggerating fuel economy figures as well. This affects 800,000 of the vehicles that have been rigged to cheat nitrous oxide emissions tests.
People at VW are not exactly forthcoming about “irregularities” in CO2 test results. However, the cars’ computers have apparently been programmed to suppress CO2 levels the same way they’ve been cheating on nitrous oxide (NOX) emissions tests. The software lowers CO2 levels under test conditions, then disables pollution controls when the vehicle is being driven under actual road conditions. In total, approximately 11 million vehicles worldwide have been affected by the NOX emissions issue, though VW won’t say how many of those cars are cheating CO2 tests as well. The majority of those vehicles are equipped with diesel engines, but VW has indicated that a significant number of them are gasoline powered as well. The CO2 emissions issue appears to affect vehicles in Europe more than ones in the U.S., as cars for the American market are measured for fuel consumption directly rather than by CO2 emissions as they are in the E.U.
Volkswagen is paying a heavy price for their shenanigans. On top of the € 6.7 billion ($7.3 billion USD) the company is shelling out to deal with cars equipped with NOX-cheating software, it will have to cough up an additional € 2 billion ($2.2 billion USD) to cover the repairs on vehicles found to be rigging CO2 tests as well.
At the same time, shareholders have been dumping their VW stock. Those shares have fallen by more than one-third since the scandal came out in September. Although sales of VW vehicles remain reasonably strong, the worst is yet to come. Plaintiffs are already contacting mass torts law firms, such as Levin Papantonio, as they’re signing on to join an impending class action lawsuit. Owners of Volkswagen products will be seeking damages and compensation for additional fuel costs and drops in the resale value of their automobiles as a result of the scandal. On top of civil actions, Volkswagen is also facing a criminal investigation by the U.S. Department of Justice, which is being carried out by its Environment and Natural Resources Division. That investigation started shortly after the emissions scandal was revealed in September. The German government has also been looking into the matter.
That’s not the worst of it. Because inaccurate CO2 emission test results gave false indications of the vehicles’ fuel economy, many owners of those cars received preferential tax treatment. Other governments may start demanding compensation from VW for tax revenues lost as a result. According to global equities firm Exane, after costs of recalls, repairs, fines and potential judgments against the company are figured in, total costs to VW could exceed € 31 billion (almost $34 billion USD).
According to Road and Track columnist Bob Lutz, responsibility for VW’s woes lies squarely on the shoulders of the former head of the company’s advisory board. In a recent article, Lutz wrote:
Ferdinand Piëch, the immensely powerful former chief of Volkswagen’s supervisory board, is more than likely the root cause of the VW diesel-emissions scandal…It’s what I call a reign of terror and a culture where performance was driven by fear and intimidation.
Lutz reports that Piëch threatened and intimidated members of VW’s engineering staff, demanding that their cars pass emissions tests while maintaining power fuel efficiency standards by any means – or lose their jobs. Engineers faced a virtually impossible task, but were forced to play along. Lutz wrote:
[The] choice was immediate dismissal or find a way to pass the test and pay the consequences later. Human nature being what it is – if it’s lose your job today for sure or lose your job maybe a year from now, we always pick maybe a year from now.
For better or worse, that “year from now” has arrived, and the proverbial chickens have come home to roost for the venerable German automaker.