When a big car company lies

You cannot trust big corporations. 

On Wednesday, Sept. 23, 2015, Martin Winterkorn, the CEO of Volkswagen of Germany, was ousted because of a major scandal that has harmed considerably the once-solid reputation of Germany’s 11th largest company.

On Friday, Sept. 18, 2015, the US Federal government discovered that Volkswagen manipulated its software to get its so-called “clean diesel” cars pass emissions standards.  When being tested by the government, the Volks diesel cars seem to comply with America’s rigid pollution standards.  After testing, the cars go back to their merry ways —that is, guzzle gas or produce pollution up to 35 times allowable limits, but with better torque and acceleration.

The software manipulation happened during Winterkorn’s watch.

Some  482,000 diesel cars in the US, starting with the model year 2009, are affected.   On Tuesday, Sept. 22, Volkswagen finally admitted up to 11 million cars are involved—worldwide, most of them in Europe.  Accordingly, VW has set aside $7.3 billion to pay for the fines and the recalibration of the Volks diesel cars.

The US Justice Department is understood to be readying criminal charges—to teach Volkswagen a lesson.

VW claims the Type EA 189 engines have the cheating software.  Emissions from these engines, Volks  admits, showed “noticeable deviation between bench test results and actual road use.”   Amazingly, the US government found out, lab tests were markedly different from results from actual road driving.

Suspect cars include the: VW Beetle, Golf and Jetta, and the Audi A3, which were produced between 2009 and 2015, according to a Washington Post report. The popular mid-level VW Passat is also involved, in model years 2014 and 2015.  These cars are supposed to have turbo-charged diesel engines which are apparently very powerful even while emitting less pollution.   It was a lie.

Here is how explains the trick:

“Since 2009, Volkswagen had been inserting intricate code in its vehicle software that tracked steering and pedal movements. When  those movements suggested  that the car was being tested for nitrogen-oxide emissions in a lab, the car automatically turned its pollution controls on. The rest of the time, the pollution controls switched off.”

“Regulators didn’t notice this ruse for years. The problem  was only uncovered by an independent group, the International Council on Clean Transportation, which wanted to investigate why there was such a discrepancy between laboratory tests and real-road performance for several of VW’s diesel cars in Europe. So they worked with researchers at West Virginia University, who stuck a probe up the exhaust pipe of VW’s clean diesel cars and drove them from San Diego to Seattle.”

“What the researchers found was shocking. On the road, VW’s Jetta was emitting 15 to 35 times as much nitrogen oxide as the allowable limit. The VW Passat was emitting 5 to 20 times as much. These cars were emitting much more pollution than they had in the labs.”

The Environmental Protection Agency says these cars were emitting nitrogen oxides, or NOx, at 10 to 40 times the level allowed by federal law.  According to the Washington Post, nitrogen oxides contribute to ground-level ozone pollution and can aggravate respiratory diseases such as asthma.

Not all Volkswagen cars are involved.  Only one in every five—which is a diesel.

Still, if you own a Volkswagen, chances are the value of your car has just diminished.  You cannot probably sell it in the second-hand market.

That is a tragedy.  From my experience, a diesel car is one of the best cars you can own.   Diesel fuel is cheaper than gasoline, regular or premium.   Diesel engines are efficient, powerful and easy to maintain.  Not surprisingly, diesel cars command higher prices than gasoline-fed rivals.

I am familiar with Volkswagen’s quality and reputation.  My first car was a Volkswagen 1500 that ran on regular gasoline in the 1970s.  It served me well for more than 15 years until I gifted it to a friend who was fascinated with the Beetle.  At that time, a Volks sold better than a Toyota, at a premium.  Then I bought a Passat.  It too was great but it didn’t sell well in the local market and was outdistanced by the now more popular Toyota and Mitsubishi then.   I also tried a Brazilia, made in Brazil.  It was good but it did not have enough good reputation to catapult the local dealer, People’s Car/DMG into the top of the sales charts in the 1980s.

In the US, Volkswagen’s $7.3-billion estimate for damage control and fines may not be enough.  Fines could reach as high as $18 billion, at the rate of $37,000 fine per car for the 482,000 cars involved in the US.

If that rate of fine is applied on the remaining 10.5 million other cars involved worldwide, then Volks could potentially be liable for up to $400 billion—enough to bankrupt the company and remove itself from the face of the earth forever.  Australia has also started questioning VW on its claimed emissions.

California’s pollution regular and the EPA actually gave VW a chance to fix the problem —last May 2014.  VW claimed it did.  Still, real world performance was different from lab tests.  Aghast, the US government went hammer and thong on VW.  Cornered, VW admitted to the presence of the cheating devices.

From now on, who will trust Volkswagen?   If it lies on a something as incredibly nondescript as emissions, what other crimes could have it committed with higher bottomline stakes?

Already, Volkswagen has stopped the sale of its 2015 and 2016 model diesel cars.   VW has lost a third of its stock market value.  Its dealers are mad—they are stuck with inventory they cannot sell.  Their brand is ruined.  The moral of this story:  Don’t be greedy and too profit-oriented.

Volkswagen is represented in the Philippines by the Ayala group, President BS Aquino’s favorite conglomerate.  Needless to say, Ayala is a big corporation.


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