Volkswagen emissions scandal hits share price, puts ‘clean diesel’ in doubt

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News that Volkswagen programmed its diesel cars to evade US pollution standards has hit the German auto maker’s shares hard, proving the value of ‘clean’ and ‘green’ to the market.

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Shares in German auto giant Volkswagen have suffered their biggest one-day fall, after plunging 20 per cent on the news that the car maker had been caught out fudging its emissions data in the US market.

News emerged in the US over the weekend that hundreds of thousands of VW diesel cars had been found to have software installed that was specially programmed to skirt American air-pollution controls.

That is, VW installed software in 482,000 cars exported to the US that turns off emissions controls when driving normally, but automatically turns them on again when it detects the car is undergoing an emissions test.

Volkswagen's Jetta turbo diesel, pictured in front of a wind farm
Volkswagen’s Jetta turbo diesel, pictured in front of a wind farm

Here’s how Vox explains it: “Since 2009, Volkswagen had been installing elaborate software in …”clean diesel” vehicles sold in the US, so that the cars’ pollution controls only worked when being tested by regulators. The rest of the time, the vehicles could freely spew hazardous, smog-forming nitrogen oxides.”

The discovery is nothing short of scandalous, and puts VW in violation of the Clean Air Act in America, and in “deep shit” in almost every other sense, as the company scrambles to explain why and how this could have happened.

The car maker has halted sales of all its diesel vehicles in the US while the probe continues – the Environmental Protection Agency (EPA) says it will also begin screening diesel vehicles produced by other automakers for the so-called “defeat devices.”

VW CEO Martin Winterkorn has apologised and pledged an external probe to find out what happened, while German authorities look into the company’s emissions data at the European end.

The US investigation alone could lead to fines of more than $US18 billion ($A25 billion). And the US government is reportedly considering laying criminal charges.

Meanwhile, the reputational fallout – for VW in particular, and for “clean diesel” cars in general – could be huge. This is already playing out on the market, with some €14 billion wiped off the value of Volkswagen’s stock in one day.

Screen Shot 2015-09-22 at 1.01.50 pm

Shares in Porsche SE, a holding company which controls 51 per cent of VW’s common stock, also plunged around 20 per cent, while the European autos index was down 4.1 per cent.

So how – and why – did this happen?

As Vox explains it, diesel cars – popular for their fuel economy, but unpopular for their smog-generating nitrogen oxides – have gradually been getting cleaner through a combination of lower-sulfur fuel, advanced engines, and new emission-control technology.

“So automakers have taken a renewed interest in ‘clean diesel’ cars that, in theory, don’t suffer from that trade-off between performance and pollution,” Vox says.

Except in the US market, where the Obama administration has been tightening fuel economy standards, “Volkswagen couldn’t balance performance with low pollution, so it cheated.”

 


And it cheated a lot. According to the tests of independent researchers, VW’s Jetta was emitting 15 to 35 times as much nitrogen oxide as the allowable US standard. The VW Passat was emitting 5 to 20 times as much – much more pollution than they had emitted in the labs.

When the discrepancy was first brought to Volkswagen’s attention, in May 2014, it was blamed on a software glitch. But when the problem didn’t go away, and regulators started grilling VW engineers about it, the company confessed to the use of the defeat devices, carefully hidden in the software code.

As to the why, Vox explains that the NOx emission controls installed by VW likely affected the diesel cars’ performance when switched on, perhaps even their torque and acceleration, making them less fun to drive.

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28 Comments
  1. tokenpom 4 years ago

    All the other manufacturers would routinely examining their competitors vehicles for new ideas, and so would know that Volkswagen were up to something . .

    So you have to conclude that all the other Manufacturers are up to something as well, or why wouldn’t they bring this cheating to the EPA’s attention, themselves ?

  2. phred01 4 years ago

    The Vee Vee Co isn’t the only 1 fudging figures So is Direct Action but the there isn’t a regulator the vet the claims

  3. BsrKr11 4 years ago

    Simply unbelievable

  4. Ken Dyer 4 years ago

    The recall appears to be based around a European report about real world
    emissions reports when three representative vehicles were tested under
    laboratory conditions. The tests apparently do not emulate or reflect
    real world vehicle use, and did not cover all diesel vehicles on the
    market.
    http://www.theicct.org/sites/default/files/publications/ICCT_PEMS-study_diesel-cars_20141010.pdf
    It seems therefore, that somehow the US EPA has got its hands on the
    report, identified the three vehicles tested under the US regulations,
    and revealed the results with some sort of spin. In other words,
    Volkswagen, the largest vehicle manufacturer in the world may have been
    unfairly targeted. It would be very surprising if other diesel powered
    vehicles also do not comply with nitrogen oxide emissions, but these may
    never have been tested. Nitrogen oxide emissions testing is an under
    tested greenhouse gas.

    One must therefore ask the question, what other vehicles have not
    been tested under US regulations, and perhaps are also covering up
    inadequate pollution controls?

    • Ron Horgan 4 years ago

      Vested interest of US auto makers to attack car imports?

      • Ken Dyer 4 years ago

        The article referenced below finishes with, “If the test cycles don’t reflect reality, then governments must adjust or change them.”
        http://www.greencarreports.com/news/1097698_are-clean-diesels-actually-not-nearly-as-clean-as-claimed
        Apparently real world driving and testing emissions results have been diverging for some time, with car manufacturers scrambling to catch up with often draconian emissions standards.
        Whilst it is a good thing to reduce emissions of motor vehicles, because of global warming, the method employed to expose Volkswagen is questionable. They have clearly been made an example of in the US.
        It is a pity that the same zeal is not brought to outing the coal industry and coal fired power stations and other polluting monstrosities such as coal seam gas.

      • Coley 4 years ago

        Never! How cynical;)
        But look at how the American courts treated Exxon ( after the Valdez spill) and then how they treated BP, one the (American company) had its wrist slapped, the other ( a British company) was driven to the edge of bankruptancy and is still being hit with judgements.

      • tokenpom 1 year ago
    • tokenpom 1 year ago
  5. MaxG 4 years ago

    Another example how corporations care about the environment on consumer… profit uber alles.

  6. Andy Boothroyd 4 years ago

    Clean diesel is like clean coal – its never going to happen. So carmakers, please stop messing around spending $$$$bn’s trying to marginally improve a dying technology and give us electric cars with ZERO emissions! Tesla has proved they work brilliantly, now we need you to step in an make them affordable to the masses.

    • Andy Boothroyd 4 years ago

      PS. “As to the why, Vox explains that the NOx emission controls installed by VW likely affected the diesel cars’ performance when switched on, perhaps even their torque and acceleration, making them less fun to drive” – if you want fun, try a Tesla!! Torque and acceleration are amazing without the emissions. I don’t work for Tesla by the way, just had a test drive and now really want one.

      • Peter Campbell 4 years ago

        Even my >6 year old home-converted car is a lot of fun while not in Tesla territory. Over 200Nm of torque from zero revs in a car that is under a tonne lets me take off very smartly in 3rd gear (electric motor bolted to the old gearbox) and staying in 3rd gear means no loss of acceleration while mucking about with gears.
        There is an electric version of the VW Golf available in other countries.

      • tokenpom 1 year ago
    • tokenpom 1 year ago
  7. Miles Harding 4 years ago

    Shades of LG, caught by Choice, cheating with their fridges!

    http://www.smh.com.au/technology/lg-fridges-lifes-not-so-good-20100316-qcu8.html

  8. Ron Horgan 4 years ago

    This should stimulate the Volkswagen to go electric.

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