Volkswagen crisis explained in six questions and answers

Volkswagen crisis explained in six questions and answers

24 September 2015, 11:29
Alice F
0
701

What is Volkswagen blamed for?

It's been named the "diesel dupe". The German car producer has admitted cheating emissions tests in the United States. According to the Environmental Protection Agency (EPA), some vehicles being sold in America had devices in diesel engines that could detect when they were being tested, and changed the performance accordingly to make result better.

VW has had a great incentive to sell diesel cars in the U.S., backed by a large marketing campaign trumpeting its cars' low emissions. The EPA's findings cover 482,000 cars in the U.S. only, including the VW-manufactured Audi A3, and the VW brands Jetta, Beetle, Golf and Passat. But VW has said that about 11 million cars worldwide are fitted with the so-called "defeat device".

The engines had computer software that could sense test scenarios by monitoring speed, engine operation, air pressure and even the position of the steering wheel, the EPA found.

When the cars were operating under controlled laboratory conditions - which typically involved putting them on a stationary test rig - the device appears to have put the vehicle into a kind of safety mode in which the engine ran below normal power and performance. Once on the road, the engines switched from this test mode.

The result? The engines emitted nitrogen oxide pollutants up to 40 times above what the U.S. laws allow.

What has been VW's response?

The case against VW appears cast-iron. "We've totally screwed up," said VW America boss Michael Horn, while group chief executive Martin Winterkorn said his company had "broken the trust of our customers and the public". An internal inquiry has been launched.

Michael Horn

Martin Winterkorn

The company has set aside €6.5bn to cover costs, recalling almost 500,000 only in the U.S. And this will hardly be the end of the financial impact. The EPA has the power to fine a company up to $37,500 for each vehicle that breaches standards - a maximum fine of about $18bn.

Consumers and shareholders may initiate a legal action, and there is gossip that the U.S. Justice Department will launch a criminal probe.

VW heads will roll?

It's still not quite clear who knew what and when. In 2014, in the US, regulators raised concerns about VW emissions levels, but these were dismissed by the company as "technical issues" and "unexpected" real-world conditions. If executives and managers wilfully misled officials, it's difficult to see them surviving.

Inevitably, attention will focus on Mr Winterkorn, who recently saw off a bitter power struggle with former VW's chairman Ferdinand Piech. The engine rigging scandal could re-open old wounds. What's more, Mr Winterkorn ran the core Volkswagen brands between 2007 and 2015.

"Winterkorn either knew of proceedings in the US or it was not reported to him," car analyst at Evercore ISI Arndt Ellinghorst said.

Are VW's problems limited to the U.S.?

No. Other countries, including Italy, France and South Korea, are starting their own investigations. Politicians, regulators and environmental groups all over the world are questioning the legitimacy of VW's emissions testing. France's finance minister Michel Sapin said a "Europe-wide" probe was needed in order to "reassure" the public.

Right now, only cars in the U.S. named by the EPA are being recalled, but with about 11 million VW diesel cars potentially affected, further costly recalls and refits are possible. Half of the company's sales in Europe - VW's biggest market - are for diesel cars.

Volkswagen AG headquarters in Wolfsburg, Germany

Are other producers involved?

That's for the various regulators and governments to determine. California's Air Resources Board is now looking into other manufacturers' testing results. Ford, BMW, and Renault-Nissan said they did not use "defeat devices", while other firms had yet to respond or simply stated that they complied with the laws.

The UK trade body for the car industry, the SMMT, said: "The EU operates a fundamentally different system to the US - with all European tests performed in strict conditions as required by EU law and witnessed by a government-appointed independent approval agency."

But it added: "The industry acknowledges that the current test method is outdated and is seeking agreement from the European Commission for a new emissions test that embraces new testing technologies and is more representative of on-road conditions."

It's another pain for the diesel market

Certainly is. Over the last decade and more, carmakers have poured a fortune into the production of diesel vehicles - with the support of many governments - believing that they are better for the environment. Latest research data suggests that's not the case, and there are even intentions to limit diesel cars in some cities.

Diesel sales were already declining, so the VW scandal comes at a bad time. Richard Gane, automotive expert at consultants Vendigital, said that the revelations will likely lead to steep declines in demand for diesel engine cars.

"In the US, the diesel car market currently represents around 1% of all new car sales and this is unlikely to increase in the short to medium term."

"However, in Europe the impact could be much more significant, leading to a large tranche of the market switching to petrol engine cars virtually overnight."

Share it with friends: