Roadside

http://www.bbc.com/news/business-34324772

What is Volkswagen accused of?

It’s been dubbed the “diesel dupe”. The Environmental Protection Agency (EPA) found that many VW cars being sold in America had devices in diesel engines that could detect when they were being tested, changing the performance accordingly to improve results. The German car giant has since admitted cheating emissions tests in the US.

VW has had a major push to sell diesel cars in the US, backed by a huge marketing campaign trumpeting its cars’ low emissions. The EPA’s findings cover 482,000 cars in the US only, including the VW-manufactured Audi A3, and the VW brands Jetta, Beetle, Golf and Passat. But VW has admitted that about 11 million cars worldwide, including eight million in Europe, are fitted with the so-called “defeat device”.

The device sounds like a sophisticated piece of kit.

Full details of how it worked are sketchy, although the EPA has said that 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.

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

The result? The engines emitted nitrogen oxide pollutants up to 40 times above what is allowed in the US.

What has been VW’s response?

“We’ve totally screwed up,” said VW America boss Michael Horn, while the group’s chief executive at the time, Martin Winterkorn, said his company had “broken the trust of our customers and the public”. Mr Winterkorn has now left the company as a direct result of the scandal and has been replaced by Matthias Mueller, the former boss of Porsche.

“My most urgent task is to win back trust for the Volkswagen Group – by leaving no stone unturned,” Mr Mueller said on taking up his new post.

VW has also launched an internal inquiry.

With VW recalling almost 500,000 cars in the US alone, it has set aside €6.5bn (£4.7bn) to cover costs. The carmaker has said it will begin recalling cars in January.

But that’s unlikely to 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.

Legal action from consumers and shareholders may follow, and there is speculation that the US Justice Department will launch a criminal probe. Then, or course, there is the cost of fixing all the cars.

How widespread are VW’s problems?

What started in the US has spread to a growing number of countries. The UK, Italy, France, South Korea, Canada and, of course, Germany, are opening investigations. Throughout the world, politicians, regulators and environmental groups 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.

At this time, only cars in the US named by the EPA are being recalled, so owners elsewhere need take no action. However, with about 11 million VW diesel cars potentially affected – 2.8 million cars in Germany itself – further costly recalls and refits are likely. Half of the company’s sales in Europe – VW’s biggest market – are for diesel cars. No wonder the carmaker’s shares are down 30% since the scandal broke – with other carmakers also seeing big falls in their stock prices.

Will more heads roll?

It’s still unclear who knew what and when, although VW must have had a chain of management command that approved fitting cheating devices to its engines, so further departures are likely.

Christian Klingler, a management board member and head of sales and marketing is leaving the company, although VW said this was part of long-term planned structural changes and was not related to recent events.

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 (or their own VW superiors) it’s difficult to see them surviving.

Are other carmakers implicated?

That’s for the various regulatory and government inquiries to determine. California’s Air Resources Board is now looking into other manufacturers’ testing results. Ford, BMW and Renault-Nissan have said they did not use “defeat devices”, while other firms have either not commented or simply stated that they comply with the law.

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.”

That sounds like EU testing rules need tightening, too.

Environmental campaigners have long argued that emissions rules are being flouted. “Diesel cars in Europe operate with worse technology on average than the US,” said Jos Dings, from the pressure group Transport & Environment. “Our latest report demonstrated that almost 90% of diesel vehicles didn’t meet emission limits when they drive on the road. We are talking millions of vehicles.”

Car analysts at the financial research firm Bernstein agree that European standards are not as strict as those in the US. However, the analysts said in a report that there was, therefore, “less need to cheat”. So, if other European carmakers’ results are suspect, Bernstein says the “consequences are likely to be a change in the test cycle rather than legal action and fines”.

It’s all another blow for the diesel market.

Certainly is. Over the past 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 scientific evidence suggests that’s not the case, and there are even moves to limit diesel cars in some cities.

Diesel sales were already slowing, so the VW scandal came at a bad time. “The revelations are likely to lead to a sharp fall in demand for diesel engine cars,” said Richard Gane, automotive expert at consultants Vendigital.

“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.”

http://www.bbc.com/news/business-34390369

Seat has said about 700,000 of its cars are fitted with the software that allowed parent company Volkswagen to cheat US emissions tests.

A spokesman said they are currently trying to work out how many were sold in each national market.

In Spain slightly over 3,000 new cars are affected but showrooms have been told to put them aside.

VW has said a total of 11m diesel engines are involved in the emission’s scandal.

Broken down brand-by-brand they are:

VW – 5m
Audi – 2.1m
Skoda – 1.2m
Seat – 700,000
Vans – 1.8m

Seat said it planned to contact owners so their cars can undergo tests.

It will also set up a search engine on its website to allow customers to find out if their vehicles are affected.

The Spanish carmaker said it had temporarily suspended the sale and delivery of all new vehicles with the EA 189 engines which contain the software.

Scandal spilling over

The scandal is continuing to hit VW’s share price. On Tuesday it fell another 1.5% during morning trade in Frankfurt. The company has lost 35% of its market value since last Monday.

A survey of 62 institutional investors by the investment banking advisory firm Evercore, showed 66% of them would not invest in VW for 6 months or until it clarified what costs, fines, and legal proceedings it faced.

The effects are also spilling over into the local economy around VW’s headquarters in Wolfsburg. The city is expecting a fall in business tax revenue from VW and the mayor has announced a budget freeze and hiring ban on public sector workers.

The scandal was revealed after the US Environmental Protection Agency found that some VW diesel cars were fitted with devices that could detect when the engine was being tested, and could change the car’s performance to improve results.

The German company has apologised for breaching consumers’ trust, and on Friday announced that Matthias Mueller was replacing Martin Winterkorn as chief executive. Mr Mueller promised a “relentless” investigation to uncover what went wrong.

He said the group was “facing the severest test in its history.”

German prosecutors announced on Monday that it was conducting a criminal investigation of Volkswagen’s former chief executive.

http://www.huffingtonpost.com/entry/volkswagen-sustainability-report-from-last-year-is-a-joke_56040f1ae4b0fde8b0d17996

Now that we know Volkswagen purposefully rigged 11 million vehicles to circumvent environmental rules, releasing an enormous amount of pollutants into the atmosphere, the company’s Sustainability Report from 2014 comes off as a horrible joke.

“It’s a jaw-dropper. So unbelievable,” Linda Greer, a senior scientist at the Natural Resources Defense Council told The Huffington Post.

In the report, which was reviewed by consulting firm PricewaterhouseCoopers, the automaker details its commitment to the customer, its employees and, of course, to the environment. “Environment” is mentioned 335 times over 156-pages — an average of twice per page.

“The Volkswagen Group has a long tradition of resolute commitment to environmental protection.” — page 86.

“We intend to put our creative powers to good use for the benefit of people and the environment.” — page 14.

As we now know, Volkswagen put its creative powers to use in a far less noble way, devising software to purposefully cheat on emissions tests and secretly installing it its diesel vehicles. On Wednesday, chief executive Martin Winterkorn was forced to quit his job at the world’s largest automaker in the wake of the growing scandal and in anticipation of billions in fines, lawsuits and increasing customer rage. More firings are on deck.

VW’s report follows a long tradition of companies using self-reported data — sometimes certified by well-paid consulting firms — to make broad declarations of ethical commitment, used to reassure the public that companies aren’t just profit-seeking monsters. These are called “corporate social responsibility” reports, “CSR” is the biz lingo. This is a huge movement; most corporations produce these things. Here’s Coca-Cola’s. And Ikea’s. And Exxon-Mobil’s.

And, of course, not all of these efforts are mere publicity ploys. Some companies take this stuff very seriously, even tying environmental goals to executive pay — an extremely sigficant matter. But in the wake of the VW scandal, it’s going to be harder for anyone to believe a word in these reports.

“[Volkswagen] will probably severely tarnish this entire movement,” writes Greer in a blog post. She’s written before about the key danger of CSR programs: that they end up as merely shiny promotional efforts that allow businesses to sidestep true responsibility for their endeavors.

“There are some companies doing good things,” Greer told HuffPost. “Oftentimes they’re just doing it and not necessarily putting it in a report.”

Yet many efforts are sideshows. Companies give money to philanthropies, for example, but fail to examine the core parts of their businesses that need attention.
Volkswagen will probably severely tarnish this entire movement.Linda Greer, a senior scientist at the Natural Resources Defense Council.
Greer is working with Target now on cleaning up environmental issues in the retailer’s supply chain. She also commends Apple for dealing with pollution issues overseas. “They have a CSR report, but I think they are walking the walk more than just talking the talk,” she said of Apple.

VW’s absurd document follows a long tradition. BP is also notorious for the false promise of its environmental slogans. The oil company won plaudits for acknowledging the reality of global warming and for the slogan “Beyond Petroleum” back in 2000. Then, in 2010, BP caused one of the worst oil spills in history.

By contrast, Exxon Mobil after the Exxon Valdez disaster became “religious about safety standards,” writes Chrystia Freeland for the Washington Post in 2010. Getting the oil out of the ground and moving it around the world without killing anyone or destroying the ocean is a core social responsibility.

So is adhering to environmental regulations, which VW brazenly decided to forgo.

Companies need to start with those simple goals before moving on to marketing materials.