The story of Volkswagen’s strategy of cheating on vehicle emissions testing by programming some diesel-fueled cars to turn on emission controls when being tested continues to unfold quickly. As more details emerge, what remains uncertain is what the news really means to consumers, as well as what the long-term consequences—if any—will be for the auto industry.
Last week, the U.S. Environmental Protection Agency accused Volkswagen of installing the so-called “defeat device” in 482,000 cars sold in the U.S., which violates the Clean Air Act. VW, the world’s largest automaker by sales, later acknowledged that similar software exists in 11 million diesel cars worldwide. The vehicles in question include the Volkswagen Passat, Jetta, Golf and Beetle, as well as the Audi3.
“The vehicles [with this software] would run 10 to 40 times more emissions than show in the test,” says Andrew Lee, an automotive specialist at Frost & Sullivan, says in an article on CNN Money.
Regulators have ordered Volkswagen to recall the vehicles, and the company announced it is halting sales of some cars in the U.S. The automaker could face fines of up to $18 billion—or $37,500 for each car that did not comply with legal standards. Volkswagen also announced it is setting aside $7.3 billion in provisions for the third quarter to cover the potential costs of the scandal.
The growing scandal has led to France calling for a Europe-wide probe into the revelations, South Korea summoning Volkswagen officials, and the U.S. Justice Department reportedly launching a criminal investigation. What’s more, some law firms have already filed class-action suits on behalf of customers.
As would be expected, there was an immediate impact on company stock: VW’s stocks fell 20 percent on Monday—or more than 20 billion euros. However, other automobile stocks also suffered. In particular, Daimler shares were down 7.03 percent and BMW stock fell 7.17 percent on Tuesday. French carmakers Peugeot Citroen and Renault also suffered, down 2.6 percent and 2.3 percent respectively.
In a move that was surprising only in its quickness, Volkswagen CEO Martin Winterkorn resigned Wednesday. While he took responsibility for the “irregularities” found by U.S. inspectors in VW’s diesel engines, he insisted he had personally done nothing wrong.
“I am doing this in the interests of the company even though I am not aware of any wrongdoing on my part,” his statement said. “Volkswagen needs a fresh start ... I am clearing the way for this fresh start with my resignation.”
For Volkswagen, there remain more questions than answers. Matthias Mueller, CEO of German carmaker Porsche, is now expected to be named the new leader of Volkswagen. Nevertheless, all of the news does cast doubt on the integrity of Volkswagen, and the company has yet to reveal who developed, wrote and tested the code, under whose direction, and why.
In the meantime, consumer confidence is shaken. For instance, auto owners now worry how the emissions scandal will effect vehicles’ performance, resale value and compliance with clean-air standards.
A larger, unanswered question is whether Volkswagen was alone in trying to outwit emissions testers or whether wider malpractices are the norm. Shares in BMW fell sharply after Auto Bild reported that emissions from a BMW diesel model were 11 times higher than European Union norms. BMW officials said the company had not cheated in pollution tests.
In light of Volkswagen’s actions, one must wonder whether industry emissions testing protocols will ultimately change in Europe, the U.S., or perhaps worldwide. It will be interesting to watch the story continue to unfold, and to see what--if any--ramifications there are for other automakers.