There’s quite a bit of turmoil attendant to the revelations about Volkswagen’s having faked its emissions tests. Its stock has plummeted by 20%. Think about it this way. The affair will end up costing the company something in the vicinity of $30 billion (yes, that’s billion with a “b”) or three times its annual profits.
$18 billion will come right off the top in fines. It will be the largest auto industry fine by an order of magnitude. Then there’s the cost of the recall. It’s not a trivial fix. There may be no way for the company to make the customers who bought the vehicles in question whole other than by refunding the purchase price of the half million vehicles in question. They can’t leave things the way they are—it doesn’t meet emissions standards. If they adjust the emissions, the vehicles will lose power which means the customers won’t have the vehicles they paid for. VW doesn’t really have a solution for the problem. They’ll probably try to cut some soft of deal with their customers.
And then there’s the lost business. What did the Edsel flap cost Ford in lost sales? Maybe nothing or they may have reduced sales for a decade. Companies have exited the U. S. market over less.
And then there are the potential criminal charges. As I see it Volkswagen makes such a great target it will be a test for the Obama Administration’s willingness to enforce the law, particularly Sarbanes-Oxley.
- It’s not a U. S. company.
- IIRC its two U. S. plants are not unionized so they won’t have pushback over that.
- Its plants are in purple Pennsylvania and deep red Tennessee.
If not VW, then who?
I’m pretty shocked by the allegations here. Deliberate, intentional, systematic deception of the government, which certainly must have involved a broad conspiracy to implement. Also, the audacity of engaging in deception by installing a device that could readily be analyzed. Certainly sounds like criminal conduct, but I wonder if the offenders are within the reach of U.S. jurisdiction.
I’m wondering how VW can recover from not only the fiscal damage but also what has been done to it’s reputation. We’ve had some kind of VW vehicle in our garage ever since we’ve been married — from bug convertibles, vans, to eurovans, and have loved each and every one of them.
This cannot be correct. Business people are infallible. The free-market would never do anything that is bad for their business or their customers. the Volkswagen CEO, like all CEO’s, is one the smartest people in the whole wide world.
Yeah, I’m with PD on this.
Jan, I can only assume that they thought nobody would bother to check. Still haven’t read much, is there a short version of how they got caught?
Oh, and da-da-da, I don’t love you you don’t love me, aha aha aha…..
I think there is a strong suggestion that this issue was a widely known secret, at least in Europe:
“The problem with “clean diesels” that weren’t really all that clean has been known for years in Europe, where diesel cars routinely account for more than 50 percent of new vehicle registrations. Janez Potocnik, then the European Union’s environment commissioner, called in 2013 for a compliance crackdown on diesel fuel cars, noting that required a reduction in “real world emissions from diesel cars.” Last year, the International Council on Clean Transportation put out a white paper on diesel cars’ “real-world” NOx emissions and concluded that the technology for their reduction was already in existence; only carmakers were slow to adopt it. The tests run for the white paper showed, for example, that cars equipped with so-called “selective catalytic reduction” were the best at reducing NOx, while “a lean NOx trap,” used in the first version of the BlueTDI engines, was insufficient. VW only started using SCR technology in 2012.”
In turn, the International Council on Clean Transportation is cited as the source of the concern in the EPA press release:
“EPA and [California Air Resources Board] uncovered the defeat device software after independent analysis by researchers at West Virginia University, working with the International Council on Clean Transportation, a non-governmental organization, raised questions about emissions levels, and the agencies began further investigations into the issue. In September, after EPA and CARB demanded an explanation for the identified emission problems, Volkswagen admitted that the cars contained defeat devices.”
One gets the sense that European environmentalists ratted VW (or perhaps diesel cars in general) to the U.S. because European countries wouldn’t enforce the standard.
So in short, Europeans have been snooty about their emission reductions w/o actually reducing their emissions.
There’s a reason I don’t believe people when they tell me how morally superior they are to me.
And thanks for the info, PD. I’m too flummoxed by #piggate to delve into anything else today.
We have a German mechanic who knows everything about German-made vehicles. I’m curious what he will have to say about VW’s manipulation of diesel emission tests, as well as collaborating what PD suggested regarding Europe’s open knowledge of this so-called deceptive practice.
VW clearly doesn’t know how to play the game. Had they used their impressive technical skills to develop a nuke program, rather than be fined $18B they could have gotten a $150B bonus from the administration.
VW has announced that an internal audit revealed 11 _million_ vehicles have the problem worldwide. That’s 22 times worse than the initial reports. Has a company this large ever vanished before?
Lehman Brothers was a $691 billion company. I don’t know VW’s market cap.
Financial companies are largely paper – actually electrons held in various states, these days. VW makes stuff – big, heavy stuff. VW is much more weighty whatever the financial numbers.