Volkswagen: The scandal explained

[EnterpriseSovereign]

What is Volkswagen accused of?

It's been dubbed the "diesel dupe". The German car giant has admitted cheating emissions tests in the US. According to the Environmental Protection Agency (EPA), some 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.

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 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 involved 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 from 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?

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.

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

Are VW's problems confined to the US?

Certainly not. Other countries, including Italy, France and South Korea, 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, further costly recalls and refits are possible. Half of the company's sales in Europe - VW's biggest market - are for diesel cars. No wonder the carmaker's shares plunged around 30% in the first couple of days after the scandal broke - with other carmakers also seeing big falls in their stock prices.
Will more heads roll?

Chief executive Martin Winterkorn has resigned, although he denies wrongdoing. 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 would seem likely, although that may not be until after VW has finished its internal inquiry. 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 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."

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, of 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 say in a report that there is 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 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 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 comes 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."

Source

[Napoleon the Clown]

VW's problems go beyond just the fines they're likely to face. This is going to hurt the resale value of TDI cars, and the fix is likely to result in reduced fuel-efficiency and power output. Which means VW promised consumers one thing, didn't deliver it, and as a result will be open to lawsuits. This is going to hurt VW both in the short-term, medium-term, and long-term. Customer confidence is going to be shot, the fine alone will be painful, the lawsuits that will settle over the next few years will cost VW a lot in defense fees as well as in payouts...

And right now dealers cannot sell the TDI line of cars, with VW compensating the dealers for the time these cars have to sit on the lot without being test-driven or sold. VW will likely pull through, but this is definitely going to give them some rough years. It's certainly possible they're going to end up in the red for a while, considering the probably payout in fines, lawsuits, and the recall costs. Their press event for the "new" version of the Passat was, from the account I read, a very somber affair. It was obvious nobody was really excited for the launch, and employees would only answer "no comment" if asked about the diesel situation.

Sucks to be VW, and they fucked things up in a stupid way. They might be able to weather this storm a bit better if more companies get caught having done something similar. It's probable other companies have cheated, too, so VW just has to hope that they get caught while this is still fresh in everyone's minds.

[salm]

Apparently they could have reached the emission goals with a bigger filter that would have cost 100 bucks more per car.

Fucking assholes. They deserve every inch of this rusty sword driven up their coorporate ass.

[Thanas]

Yep. Screw them.

[K. A. Pital]

They actually did it to have better torque and fuel economy, which are selling points. Profit-hungry liars, just as expected from a capitalist transnational megacorp. Winners of Dow Jones sustainable investment.

[Alferd Packer]

Huh. Maybe I should go to a VW dealership and see if I can buy a diesel on the cheap. I was very close to buying one for my wife when this current generation was first rolled out in 2008-ish, but we bought a house instead.

[Borgholio]

Huh. Maybe I should go to a VW dealership and see if I can buy a diesel on the cheap. I was very close to buying one for my wife when this current generation was first rolled out in 2008-ish, but we bought a house instead.

"Hey, I heard about that diesel scandal on the news the other day and that your profits are dropping like a rock. Would you be able to make me a deal on this 2015 Jetta over here? I'm ready to buy today..."

Worth a shot.

[Tribble]

Huh. Maybe I should go to a VW dealership and see if I can buy a diesel on the cheap. I was very close to buying one for my wife when this current generation was first rolled out in 2008-ish, but we bought a house instead.

"Hey, I heard about that diesel scandal on the news the other day and that your profits are dropping like a rock. Would you be able to make me a deal on this 2015 Jetta over here? I'm ready to buy today..."

Worth a shot.

Would you be allowed to drive it though, seeing as it fails the emissions tests? Is it possible to replace that filter with an appropriate one? Or would that require a total redesign of the vehicles?

[Borgholio]

Would you be allowed to drive it though, seeing as it fails the emissions tests? Is it possible to replace that filter with an appropriate one? Or would that require a total redesign of the vehicles?

It may be on immediate recall, but they'll fix it. I suspect they will re-flash the ECU to use non-cheating software. That may mean they won't need a filter upgrade.

[Tsyroc]

Would you be allowed to drive it though, seeing as it fails the emissions tests? Is it possible to replace that filter with an appropriate one? Or would that require a total redesign of the vehicles?

I wonder. Does it fail basic "you can sell that in the US emissions tests", or does it fail the emissions test that California and the "urban" areas of Arizona require vehicles to pass?

I live in Tucson and my truck was made after 1965 so I have to take it to have its emissions tested once a year as part of keeping it registered. Newer vehicles are exempt for the first couple of years and then they only have to go every other year. So, if the basic emissions of those VW vehicles is good enough for the US they likely can be sold in quite a number of states. My truck is an 1989 Mazda so when I go to get it tested they stick a sensor in the exhaust pipe and then it is test at idle and under load. Newer vehicles they just plug something into the automobile's computer and it either passes or fails based on those readings. A friend of mine had to go put miles on his car because the battery had been dead for a few months before he took the car to get tested so there wasn't enough data stored in the computer to give him a pass or fail.

If I'm reading the information correctly the computer is basically what VW was cheating on. I'm guessing that more than a few someone's must have physically tested these vehicles and at some point found out that what the computer was saying and what the actual readings were did not match up.

[Sea Skimmer]

Apparently they could have reached the emission goals with a bigger filter that would have cost 100 bucks more per car.

Fucking assholes. They deserve every inch of this rusty sword driven up their coorporate ass.

Its not a filter. They need urea injection from a separate tank, used by every other diesel car on the US market, including other bigger VW engines. VW wanted to expand its US marketplace by magically having the only vehicles that didn't need the urea injection to comply, and made a huge propaganda push about its 'Clean Diesel' space magic.

Now they may need to spend ~3,000 USD a car to completely change the emissions control system hardware, if they can find space to do so.

Would you be allowed to drive it though, seeing as it fails the emissions tests? Is it possible to replace that filter with an appropriate one? Or would that require a total redesign of the vehicles?

It may be on immediate recall, but they'll fix it. I suspect they will re-flash the ECU to use non-cheating software. That may mean they won't need a filter upgrade.

NOPE. Non cheating software is not possible. VW actually already tried twice earlier this year and in 2014 to put out software that would let it actually comply because they knew the US authorities had figured out what was going on and were moving in to get them. Neither change worked. This is why all the other diesels went to using urea injection in the first place.

Customers are allowed to drive these cars until VW announces a recall, which will take some real time to engineer and is not likely to be announced before 2016. They should also keep passing emissions tests because they'll just keep automatically cheating them. You can also sell the car as a used car, if you find a good enough sucker, but dealers are banned from selling any more of them new.

After the recall, or utter worse case, vehicle buyback, is announced though customers may have a limited timeframe in which they can have it applied. Normally recalls are voluntary; but their isn't much precedence for this kind of thing and criminal legal actions to force VW to buy back the cars isn't impossible. It will be possible to change the emissions tests themselves such that the cheat software no longer works. We can be sure Californian at the least will be doing that to rid the roads of post recall vehicles.

[Napoleon the Clown]

Huh. Maybe I should go to a VW dealership and see if I can buy a diesel on the cheap. I was very close to buying one for my wife when this current generation was first rolled out in 2008-ish, but we bought a house instead.

I already stated that the affected vehicles cannot be sold. Legally, they can't be sold to anyone. VW is compensating their dealerships over this, because it's a lot of lost sales.

So if you went to buy a diesel from them, it would have to be from an era that is known to have not cheated on the tests. Any of the TDI line you'd get a response along the lines of "We can't sell or test drive any of those until they've been made compliant with emissions standards." Compliance may be a long way off. You can hope that a private seller is going to panic and part with theirs, but that may still run into issues with registering it.

If people see big losses in efficiency or performance after whatever the fix is, it will hurt VW a lot. If a urea system can be installed, VW may be subject to a class-action that forces them to pay for everything about that system for life. If the fix hits the $3k a car figure Sea Skimmer mentioned, between that and other possible financial hits VW might be financially better off doing a buyback on all of the TDI vehicles.

Poking around on the internet results in the fluid used by most companies being a gallon or two every 7k miles or so. The fluid itself is pretty cheap, but potentially looking at paying to keep filling up nearly 500,000 cars every 7,000 miles would add up. And then if people lose fuel efficiency, there's precedent linky for people getting compensated on that. So... yeah. VW isn't in a good position right now. Best case scenario is that they find an ECM flash instead of adding on an entirely new system, and the power and fuel efficiency loss would likely be rather large. Which would still result in massive lawsuits... VW is in an awful position right now. If the fix is a big one, they're likely to be giving people rental cars while their TDI is in the shop.

Government fines alone are going to be painful, having to fix all of these and potentially pay for depreciation of the vehicles, lost performance, additional fuel costs... Just speculating here, but the $7.2 billion they say they've set aside to deal with this may not be enough.

[Gaidin]

Fair's fair. Everything I had read noted the 7.2B financial response as just this quarter's response and said nothing of guessing a total.

[Me2005]

Whoever came up with this system must have swindled management or been under significant pressure to come up with something to get around using the urea injection system. How on earth do you knowingly approve something with the disclaimer "Well, we could just do this, but if we get caught we have to undo it and there won't be a good way to do that for less than a significant portion of the vehicle's cost" for a car manufacturer making millions of units? I mean, there have been cars with problems, but you can argue for most of those they didn't know they would work that way until production. This is deliberate.

It's also shocking to me that they got away with it this long. The real innovation is a computer that can successfully detect when a device it's connected to is being tested 100% of the time over a myriad of testing conditions. Unless it just cheats when anyone plugs a reader into it, but I didn't think all emissions testing happened that way or was guaranteed to be in that order (plug in computer, test exhaust).

[Gaidin]

Define "management" for who you think got swindled if you don't mind. Because some levels make high enough level decisions I'm willing to bet they never even knew about this much less saw a design diagram and are resigning and/or getting sacked for saving face.

[Starglider]

The real innovation is a computer that can successfully detect when a device it's connected to is being tested 100% of the time over a myriad of testing conditions.

That isn't a significant innovation, because there aren't a 'myriad of testing conditions', there are a small set of tightly controlled testing conditions that differ quite severely from normal driving. The ECU has numerous sensors and certainly more than what it needs to identify test runs with a simple algorithm. Car companies have been cheating on these kind of tests since at least the mid 90s, but usually it's just MPG and that isn't illegal, in the sense that if you actually drove everywhere at 49 MPG with very carefully controlled throttle and brake inputs then you would see the rated MPG (and in fact hypermilers do so).

The difference here was that (a) the cheat was applied to emissions instead of MPG, (b) the difference was not a marginal 10-20% efficiency, it was several times more emissions and (c) it was blatantly illegal as opposed to just dishonest.

[InsaneTD]

Plus if it is just something plugged into the ECU, just have it look for a random string of numbers, not found, "oh, I'm being tested by a non dealer technician, this is what I supposed to tell them." With dealer equipment send the ECU those numbers.

[EnterpriseSovereign]

It gets worse:

Skoda have said 1.2m of its cars are fitted with emissions-cheating software that allowed parent company VW to cheat US emissions tests.

It comes after Audi, another parent company of VW, said 2.1m of its models are fitted with the software

VW has said a total of 11 million cars from the multi-brand group are affected.

Source

[Venator]

It gets worse:

Skoda have said 1.2m of its cars are fitted with emissions-cheating software that allowed parent company VW to cheat US emissions tests.

It comes after Audi, another parent company of VW, said 2.1m of its models are fitted with the software

VW has said a total of 11 million cars from the multi-brand group are affected.

Source

Expect SEAT to join the club. Given that Skoda and SEAT aren't sold (much) outside Europe, which has softer diesel emission targets, the EU-market cars may not be as much of a problem for VAG - with the right ECU flash they could probably meet Euro5 standards without the defeat system and without a noticeable performance penalty.

---

In another note, it looks like suppliers involved are coming out and distancing themselves too:

http://blog.caranddriver.com/report-bos ... g-in-2007/

“As is usual in the automotive supply industry, Bosch supplies these components to the automaker’s specifications,” the statement reads. “How these components are calibrated and integrated into complete vehicle systems is the responsibility of each automaker.”

[Thanas]

Harsh, but accurate

[Highlord Laan]

Um, I think that's a steam locomotive, Thanas.

But jesus. 11 million cars? Will VW even survive this?

[Gaidin]

Um, I think that's a steam locomotive, Thanas.

[Enigma]

Somewhere in the interwebs are jokes about piss injected cars.

[Napoleon the Clown]

Um, I think that's a steam locomotive, Thanas.

But jesus. 11 million cars? Will VW even survive this?

Oh, they'll survive. They have a lot of capital to rely on, and worst case scenario they sell off a subsidiary that another company would enjoy having. Volkswagen Auto Group includes Porsche, Audi, Volkswagen (obviously), and a few other things that most Americans aren't as familiar with. They have plenty of money, should they need it, and they have assets to liquidate if things get really bad.

The biggest threat they're facing now is the public trust damage. Even people who don't give a fuck about the environment are more likely to be paranoid about buying a VW because it might also be targeted by the Big Evil Gubmint. I've seen quite a few people who used to be loyal to VW swear the company off after this epic shitshow.

We're probably going to see more people throwing themselves on their swords. Meanwhile, a bunch of shareholders have been able to jump ship and make a killing. VW is big, they're going to survive. But they'll probably be less big for some time.

[Thanas]

Honda, Mitsubishi, Mercedes-Benz and Mazda have also fudged tests.

Mercedes-Benz’s diesel cars produced an average of 0.406g/km of NOx on the road, at least 2.2 times more than the official Euro 5 level and five times higher than the Euro 6 level. A spokesman for Mercedes-Benz said: “Since real-world driving conditions do not generally reflect those in the laboratory, the consumption figures may differ from the standardised figures.”
Honda’s diesel cars emitted 0.484g/km of NOx on average, between 2.6 and six times the official levels. A spokesman for Honda said: “Honda tests vehicles in accordance with European legislation.”
Mazda’s diesel cars had average NOx emissions of 0.293g/km in the real world, between 1.6 and 3.6 times the NEDC test levels. One Euro 6 model, the Mazda 6 2.2L 5DR, produced three times the official NOx emissions. A spokesman for Mazda said: “In compliance with the law, Mazda works hard to ensure that every petrol and diesel engine it makes fully complies with the regulations.”
Mitsubishi diesel cars produced an average of 0.274g/km of NOx, between 1.5 and 3.4 higher than in the lab. “The NEDC was never intended to represent real-world driving,” said a spokesman for Mitsubishi.

aka: "Quick, everybody hope they focus on Volkswagen only.