The Scope of the Volkswagen Problem

CNN puts it into perspective:

Here are seven key facts that show what’s at stake:
1. The Volkswagen group accounts for roughly one in 10 vehicles sold globally*.
2. The auto industry is the largest industrial sector in Germany, contributing about 2.7% to gross domestic product.
3. Some 20% of Germany’s exports are made up of vehicles and parts.
4. Domestic auto sales and exports were worth 368 billion euros ($411 billion) in 2014.
5. Most German auto sales came from the Volkswagen group, which reported just over 202 billion euros in revenue in 2014.
6. Roughly 70% of Volkswagen vehicles are sold outside German borders.
7. Volkswagen employs nearly 600,000 people around the world, and more than a third of the 775,000 people who work in the auto industry in Germany.

The CEO of Volkswagen US just admitted that the company “screwed up”. If it were only ein Fehler—a mistake—it would be bad enough. It’s ein Verbrechen—a crime. He’s acting as though somebody inadvertently didn’t tighten a lug nut enough.

20 comments… add one
  • PD Shaw

    With deep regret I read what Zero Hedge has posted on this issue, which is to mischaracterize what happened (or more precisely “is happening”) to GM with VW. GM admitted to failing to disclose to U.S. regulators and the public “a potentially lethal safety defect that caused airbag nondeployment in certain GM model cars.”

    A “defect” indicates that equipment is not operating as it should because of a flaw or imperfection. In contrast, the “defeat devise” installed by VW is working perfectly as designed. The EPA assures owners that these devises are working. The analogy would be if GM was having a problem with the air-bag deployment system, so it decided to “fix it” by creating a devise that would always show the air-bag system working.

  • Andy

    I don’t know, I guess I don’t think this is that big of a deal in the grand scheme of things. Yes, VW needs to be punished for cheating (to send a message if nothing else), but unlike the airbag defects (among many others), this cheating kill anyone and is not a safety concern. Compare to the CEO of the peanut butter company (forget the name) who was just sentenced for 40+ years for knowingly distributing salmonella-infected peanut butter which actually killed people. Killing people is something worth destroying a company for, skirting dubious regulations and tests isn’t. That said, this should, rightly, cost VW a pretty penny in terms of fixes and punitive fines.

  • ...

    We had an advertising slogan down here that sums nothing up: “If you don’t get your nuts lugged by Allied Discount Tires, your nuts just might fall off!”

  • I think it’s a pretty big deal, Andy. Europe, generally, is teetering on the edge of a recession with no ready tools for countering it. This could push it over the edge.

  • Andy

    Dave,

    Oh, I agree the effects are a big deal, I don’t think the crime itself is a big deal.

  • PD Shaw

    @Andy, it doesn’t have to be worth a forty year sentence to be criminal. Peanut butter is vile stuff, so caveat emptor, but would it still be a criminal matter if all the facts were the same but nobody died?

    This is the gravity of the offense according to the EPA press release:

    “NOx pollution contributes to nitrogen dioxide, ground-level ozone, and fine particulate matter. Exposure to these pollutants has been linked with a range of serious health effects, including increased asthma attacks and other respiratory illnesses that can be serious enough to send people to the hospital. Exposure to ozone and particulate matter have also been associated with premature death due to respiratory-related or cardiovascular-related effects. Children, the elderly, and people with pre-existing respiratory disease are particularly at risk for health effects of these pollutants.”

  • Andy

    PD,

    There’s no doubt in my mind it’s criminal, but for me it’s a question of scale. I grew up in Denver, which competed with LA for the worst air pollution in the country for many years. The smog got so bad that to get a building permit to do anything on your house you are forced to replace any wood-burning stove/fireplace with a natural gas appliance or remove it.

    Vehicle emissions were tightly controlled. Smog in Denver still sucks but it’s not like it was. That’s a good thing, but VW’s violations aren’t killing people which, IMO, matters quite a lot when it comes to determining their punishment.

  • TastyBits

    It turns out that the Germans are able to “play to the rules” because they rig the game. I wonder what the Greeks think. Perhaps: what goes around, comes around.

  • I guess that’s what I find so shocking about Volkswagen’s actions. My experience has been that Germans are rule-oriented in the extreme. Either they’ve changed or there are rules and then there are rules.

  • TastyBits

    The rules are always applied equally, but they are applied more equally to some than to others. It usually turns out that the ones calling for the equal application are the same ones who need more equality.

    I have no doubt that the Germans, generally, and VW, specifically, believe that they have “pulled themselves up by their bootstraps”, and therefore, they get to play by the rules of those who have “pulled themselves up by their bootstraps”. This is not considered a separate set of rules because it applies to anybody who has “pulled themselves up by their bootstraps” not just Germans.

    Would have the Germans been in the position to violate the emission rules if there never were any rules? Did the rules initially give the German automakers an unfair advantage, and once successful, they had to bend the rules to remain successful?

  • ...

    My experience has been that Germans are rule-oriented in the extreme. Either they’ve changed or there are rules and then there are rules.

    They’re only kinda sorta Germans now. They’re more European, if you take my meaning.

  • If “being European” means imposing voluminous rules on every conceivable subject and adhering to none of them, it does not bode well for the present let alone the future. Additional evidence: the Hungarians are getting lambasted for conforming to the rules (which say that refugees should present themselves to the authorities in the EU country in which they arrive).

  • PD Shaw

    Maybe there are not enough rules. In addition to lower NOx standards and a different testing mechanism, apparently there is widespread flexibility exercised in how the tests are performed and evaluated:

    “Over the past three years, Transport & Environment (T&E), with the support of the International Council on Clean Transportation (that alerted US authorities to its concerns over VW), has exposed countless ways carmakers manipulate emissions tests for both air pollution and CO2 emissions (fuel economy). For example, carmakers charge the car’s battery before a test, deduct 4% from each test result, and use incorrect laboratory settings for the inertia of the vehicle. The companies admit these tricks but claim they are “legitimate flexibilities” in the obsolete test used in Europe. Governments and the European Commission have been unwilling to challenge the industry and close the loopholes, instead focusing on introducing new testing systems that are scheduled to begin in three years’ time for all new vehicles.”

    Link

    Does the EU have a rule that specifically prevents a manufacturer from deducting 4% from the test? Sounds crazy, but I assume the overall purpose is to make alterations to the testing process that produce optimal conditions, legitimized by broad perception that the test is outdated. If the results are computed by a bogus testing system, then it may not seem so awful to introduce a mechanical bypass to more efficiently reach the same outcome — German ingenuity.

  • 4%, maybe. 1500% (which is what they’re saying is the discrepancy)? I doubt it.

  • TastyBits

    A few of the northern European countries may not have figured it out yet, but the Greeks have been made painfully aware of who is the European paymaster. The paymaster calls the shots, and France and a few others may think they are independent, they will soon learn who is in control.

    The German financial sector figured out how to screw over the rest of the EU, and it seems that the German automotive sector figured out how to screw over the rest of the EU.

    It turns out that the German whore was really the EU pimp. If you are going to play the game, you really should know your position.

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