Pakistani automakers catch a lot of flak from Pakistanis about their malpractices, but once in a while, a global automaker is found of fraudulent activity that dwarfs the crap Pakistani automakers have done.
But companies survives though, there have been very few instances where a company had to take the fall. Toyota paid in billions out of the self-acceleration issue to safety, the recent Takata Airbag debacle didn’t impact Honda in anyway despite it owning the company in part, GM came out of the ignition fiasco by paying in billions, as it turns out, money does solve issues but to let these companies feel the heat, a combination of factors do play negative effects on them: losing customers through bad PR and, fines and recalls worth billions of US dollars.
So what’s the latest fuss surrounding Audi and VW?
Audi is owned by VW, and both of them have been found to have devised a software that shows incorrect emissions ratings to fool the tests in to showing that their cars produce legal emissions. What that software does is basically lower the ratings during Environment Protection Agency (EPA) tests or any test but on the road, the emissions are in 10 to 40% excess of the number the vehicles churn during test.
The vehicles lie.
“Put simply, these cars contained software that turns off emissions controls when driving normally and turns them on when the car is undergoing an emissions test,” Cynthia Giles, an enforcement officer at the EPA, told reporters in a teleconference.
The diesel VW and Audi cars, which came with the cheating software are about 482,000 sold since 2008 and VW may have to pay up to $37,500 for each vehicle if they are found to be not in compliance with federal clean air rules.
And VW has accepted that the cheating software is installed in 11 million cars worldwide and has set aside US $7.2 billion aside as reparation costs:
To cover the necessary service measures and other efforts to win back the trust of our customers, Volkswagen plans to set aside a provision of some 6.5 billion EUR recognized in the profit and loss statement in the third quarter of the current fiscal year. Due to the ongoing investigations the amounts estimated may be subject to revaluation.
Meanwhile, at launch of 2016 VW Passat, President and CEO of Volkswagen Group of America Michael Horn made a short statement on Volkswagen’s recent diesel cheating scandal: “Our company was dishonest; we screwed up.” He further added, “We were completely inconsistent with our core values,” and, “We need to make it right with all of you.” Horn finished his statement with “We will correct this TDI issue. We will straighten this out. We will pay what we have to pay.”
If you remember from a couple of months back, there was a huge power struggle at VW between Chairman VW, Ferdinand Piech, and CEO VW, Martin Winterkorn, where the former chairman criticized the CEO and wanted him to be replaced by Porsche’s CEO, Matthias Müeller, but VW’s CEO won that battle and eventually, Ferdinand Piech had to resign even though Ferdinand Piech was known to be one of the most powerful and influential people in Germany.
But this dieselgate has grown in such a big mess for VW that current VW CEO, Martin Winterkorn will be replaced this Friday and Porsche’s CEO, Matthias Müeller will take over in his stead. The CEO which even Ferdinand Piech couldn’t even get replaced.
VW has already issued notifications to dealerships to stop selling 2 liter TDI (Diesel) cars meanwhile, dealerships have reported losing customers due to this.
VW is such a big company that this whole fiasco will cost them billions of dollars in costs, and years in winning customers’ trusts back as VW was at the forefront of diesel engine technology, and Dieselgate, as journalists are coming to call it, will leave a massive scar on diesel engines and VW which will take a while to heal.