Volkswagen emissions scandal

Volkswagen emissions scandal

2010 VW Golf TDI with defeat device displaying "Clean Diesel" at a US auto show.
Date 2008–2015
Location Worldwide
Type Emissions violations
Cause Engaging full emissions control only during testing
Participants International Council on Clean Transportation, West Virginia University, Volkswagen Group, US EPA, other regulators
Footage http://www.vwdieselinfo.com
Timeline
1999 New US Tier 2 rules established to replace Tier 1. NOx limit decreasing from 1.0 g/mi to .07 g/mi
2004–2009 Phase in period of diesel emissions rules
2007 VW suspends sales of current diesel lines awaiting technology to meet new standards. Bosch allegedly warns VW not to use its software illegally[1][2]
2008 VW announces new Clean Diesel cars. Some cars are described in Europe as "EU4 emissions standard (EU5 compliant)".[3] Cars with the test-rigging software are sold in the UK.[4]
2009

US Tier 2 fully in effect,

VW TDI cars go on sale in US. In Europe, some models are now being described as Euro emission class 5, a change from class 4 in 2008.[3][5]
2009–2015 VW diesel sales in the US rebound, Clean Diesels win several environmental awards, receive tax breaks
2014 International Council on Clean Transportation asks WVU CAFEE to help demonstrate the benefits of US diesel technology, hoping to have Europe follow suit
May 2014 Instead, CAFEE finds discrepancies showing poor on-road emissions. Results presented at public forum and published, getting attention of EPA
2014–2015 EPA repeats tests, and contacts VW for explanation of poor real world NOx emissions
Dec 2014 VW orders voluntary recall of TDI cars but CARB and EPA not satisfied
3 Sep 2015 EPA threatens to not certify 2016 diesels, VW responds by admitting software was programmed to cheat testing
18 Sep 2015 Public announcement by EPA of order to recall 2009–2015 cars
20 Sep 2015 VW admits deception, issues public apology
21 Sep 2015 First business day after news, VW stock down 20%
22 Sep 2015 VW to spend $7.3B to cover costs of scandal; stock declines another 17%
23 Sep 2015 CEO Winterkorn resigns
29 Sep 2015 Volkswagen announces plans to refit up to 11 million vehicles affected by the emissions violations scandal
2 Oct 2015 Volkswagen sets up an online based service on which customers can check if their car is affected based on the vehicle identification number
8 Oct 2015 VW US CEO Michael Horn testifies before US Congress
3 Nov 2015 VW's investigation finds that CO2 emissions and fuel consumption figures are also affected by "irregularities".[6]
25 Nov 2015 The German Federal Motor Transport Authority (KBA) approves VW fixes for 1.2, 1.6 and 2.0 diesel engines in Europe.[7][8]
9 Dec 2015 VW revises previous estimates on CO2 emissions irregularities, saying that only around 36,000 vehicles are affected.[9]

On 18 September 2015, the United States Environmental Protection Agency (EPA) issued a notice of violation of the Clean Air Act to German automaker Volkswagen Group, after it was found that the car maker had intentionally programmed turbocharged direct injection (TDI) diesel engines to activate certain emissions controls only during laboratory emissions testing. The programming caused the vehicles' nitrogen oxide (NOx) output to meet US standards during regulatory testing, but emit up to 40 times more NOx in real-world driving.[10] Volkswagen put this programming in about eleven million cars worldwide, and in 500,000 in the United States, during model years 2009 through 2015.[11][12][13][14][15]

These findings stemmed from a study on emissions discrepancies between European and US models of vehicles commissioned in 2014 by the International Council on Clean Transportation (ICCT), summing up the data from three different sources on 15 vehicles. Among the research groups was a group of five scientists at West Virginia University, who detected additional emissions during live road tests on two out of three diesel cars. ICCT also purchased data from two other sources. They provided their findings to the California Air Resources Board (CARB) in May 2014.[16][17][18]

Volkswagen became the target of regulatory investigations in multiple countries,[19] and Volkswagen's stock price fell in value by a third in the days immediately after the news. Volkswagen Group CEO Martin Winterkorn resigned, and the head of brand development Heinz-Jakob Neusser, Audi research and development head Ulrich Hackenberg, and Porsche research and development head Wolfgang Hatz were suspended. Volkswagen announced plans to spend US$7.3 billion on rectifying the emissions issues, and planned to refit the affected vehicles as part of a recall campaign. The Volkswagen emissions scandal raised awareness over the higher levels of pollution being emitted by all vehicles built by a wide range of car makers, which under real world driving conditions are prone to exceed legal emission limits. A study conducted by ICCT and ADAC showed biggest deviations from Volvo, Renault, Jeep, Hyundai, Citroën and Fiat.[20][21][22] A discussion was sparked that software-controlled machinery will generally be prone to cheating, and a way out would be to make the software source code accessible to the public.[23][24][25]

Background

VW anti-pollution system

In 2005, parts of VW intended to purchase Mercedes' BlueTec system for reducing pollution, but other parts of VW rejected that and preferred to develop their own system.[26][27][28]

Starting in the 2009 model year cars with "electronically controlled common rail direct injection system with Bosch high pressure pump", Volkswagen Group began migrating its light-duty passenger vehicle turbocharged direct injection (TDI) diesel engines to a common-rail fuel injection system. This system allows for higher-precision fuel delivery using electronically controlled fuel injectors and higher injection pressure, theoretically leading to better fuel atomization, better air/fuel ratio control, and by extension, better control of emissions.[29][30] Model year 2009 Volkswagens began sales to the public in 2008.[3][4][31]

With the addition of a diesel particulate filter to capture soot, and on some vehicle models, a urea-based exhaust aftertreatment system, the engines were described by Volkswagen as being as clean as or cleaner than US and Californian requirements, while providing good performance.[32][33] In reality, the system failed to combine good fuel economy with compliant NOx emissions, and VW chose some time before 2010 to program the engine control to switch from good fuel economy and high NOx emissions to low-emission compliant mode when it detected an emissions test, particularly for the EA 189 engine. This caused the engine to emit NOx levels above limits in daily operation, but comply with US NOx standards only when being tested.[27][34] The newspaper Der Spiegel reported that at least 30 people at management level in VW knew about the deceit for years; VW denies this.[35]

As of 2014, VW is registered with a Corporate Average Fuel Economy (CAFE) of 34 mpg-US (6.9 L/100 km; 41 mpg-imp).[36] The low emissions levels of Volkswagen vehicles tested with the defeat device in operation enabled the company to receive green car subsidies and tax exemptions in the US.[37]

  1. ^ "VW's Clean Diesel Ads Now Make Us Feel Dirty". New York Mag. 23 September 2015. 
  2. ^ "VW Plays 'Truth & Dare' Online". AdWeek. 5 May 2009. 
  3. ^ "Volkswagen launches 'truth & dare' site to dispel diesel myths". Motor Authority. 4 May 2009. 
  4. ^ "VW launches TDI Truth & Dare with coffee filter test". AutoBlog Magazine. 3 May 2009. 

Early warnings

In 2011 the European Commission's Joint Research Centre published a report which found that all tested diesel vehicles emit 0.93 ± 0.39 g/km, the tested Euro 5 diesel vehicles emit 0.62 ± 0.19 g/km. This substantially exceeds the respective Euro 3-5 emission limit.[38] In 2013 the research center then warned:

Sensors and electronic components in modern light-duty vehicles are capable of 'detecting' the start of an emissions test in the laboratory (e.g., based on acceleration sensors or not-driven/not-rotating wheels). Some vehicle functions may only be operational in the laboratory, if a predefined test mode is activated. Detecting emissions tests is problematic from the perspective of emissions legislation, because it may enable the use of defeat devices that activate, modulate, delay, or deactivate emissions control systems with the purpose of either enhancing the effectiveness of these systems during emissions testing or reducing the effectiveness of these systems under normal vehicle operation and use. While the use of defeat devices is generally prohibited, exceptions exist in cases where it is necessary to protect the engine against damage and to ensure safe vehicle operation (EC, 2007). These exceptions leave room for interpretation and provide scope, together with the currently applied test procedure, for tailoring the emissions performance [...].[39]

The European commission and European governments could not agree who is responsible for taking action.[40] In the United Kingdom, the Department for Transport received a report from the ICCT in October 2014 which stated there was a "real world nitrogen oxides compliance issue" with diesel passenger cars.[41] The UK's DEFRA research indicates a significant reduction in NOx and particulate matter from 1983 to 2014. Respirable suspended particles with a diameter of 10 micrometres — also known as PM10 (including diesel particulates) — have halved since 1996 despite the increased number and size diesel cars in the UK.[42]

European discrepancies

The independent body International Council on Clean Transportation (ICCT) commissioned a study in 2014 and obtained data on 15 vehicles from three sources. John German, co-lead of the US branch of ICCT, said the idea for the "very ordinary" test came from Peter Mock, managing director ICCT in Europe. Mr. German said they chose to put US vehicles through on-the-road tests because their emissions regulations are more stringent than in the European Union. The ICCT expected the cars to pass, and thought they would be able to use the results to demonstrate to Europeans that it was possible to run diesels with cleaner emissions. The study found emissions discrepancies in the diesel VW Passat and VW Jetta, and no discrepancies in a BMW X5. They wanted to test a Mercedes as well, but could not get one.[18][43][44]

US testing conducted

A group of scientists at West Virginia University submitted a proposal to ICCT, and John German awarded them a US$50,000 grant for a study[16][45] to conduct tests on three diesel cars:[46] a VW Passat, a VW Jetta, and a BMW X5.[43] ICCT also purchased data from Emissions Analytics, a UK-based emissions consultancy, and from stakeholders in the Real Driving Emissions-Light Duty Vehicle working group in charge of amending Euro 6 regulations.[16]

Two professors and two students began testing emissions from the three vehicles under road conditions in early 2014, using a portable emissions measurement system, making it possible to collect real world driving emissions data, for comparison with laboratory dynamometer testing.[18] A process similar to the metamorphic testing approach was used, where the system under test is the car, the system's output is the emissions data, test case 1 is the laboratory environment, and test case 2 is real world driving. The expected relation is that the system's outputs for test cases 1 and 2 should be similar. A failure is detected when the two outputs are very different.

The three vehicles were all certified at a California Air Resources Board facility before the tests[18] as falling below the emissions limits when using the standard laboratory testing protocols.[17][47] They put 2,400 kilometres (1,500 mi) on the Jetta and BMW. For their final test, they wanted to put even more mileage on the Passat and drove it from Los Angeles to Seattle and back again, virtually the entire West Coast of the United States,[43] over 3,200 kilometres (2,000 mi).[18] The BMW was "at or below the standard … with exception of rural-up/downhill driving conditions."[17] But the researchers found that under real-world driving conditions the Jetta exceeded US emissions limits "by a factor of 15 to 35" while the Passat exceeded the limit "by a factor of 5 to 20."[17][46]

The emissions far exceeded legal limits set by both European and US standards. One of the testers, Research Assistant Professor Arvind Thiruvengadam said, "... we did so much testing that we couldn't repeatedly be doing the same mistake again and again."[48][49] German said the deceit required more effort than merely adding some code to the engine software, as the code would also have to be validated.[48]

The US test results confirmed the ICCT's findings in Europe.[17] The West Virginia scientists did not identify the defeat device, but they reported their findings in a study they presented directly to the EPA and CARB in May 2014.[50][51] Colorado's RapidScreen real-world emissions test data reinforced the suspected abnormally high emissions levels.[52]

Emission standards

The VW and Audi cars identified as violators had been certified to meet either the US EPA Tier 2 / Bin 5 emissions standard or the California LEV-II ULEV standard.[53] Either standard requires that nitrogen oxide emissions not exceed 0.043 grams per kilometre (0.07 g/mi) for engines at full useful life which is defined as either 190,000 kilometres (120,000 mi) or 240,000 kilometres (150,000 mi) depending on the vehicle and optional certification choices.[54][55]

This standard for nitrogen oxide emissions is among the most stringent in the world. For comparison, the contemporary European standards known as Euro 5 (2008 "EU5 compliant",[3] 2009[5]–2014 models) and Euro 6 (2015 models) only limit nitrogen oxide emissions to 0.18 grams per kilometre (0.29 g/mi) and 0.08 grams per kilometre (0.13 g/mi) respectively.[55][56] Defeat devices are forbidden in the EU.[57] The use of a defeat device is subject to a penalty.[56]

NOx numbers for VW Passat and Jetta[17] See note
Car EPA (USA) Euro5 Euro6 Comment
Limit Dyno WVU
measurement 		Limit Register Measurement
2011 		Limit Register Measurement
201x
Vehicle A

[Volkswagen Jetta[58]]

 0.043 g/km 0.022 g/km 0.61-1.5 g/km 0.18 g/km[56] 0.62 ± 0.19 g/km[38] 0.08 g/km[56] lean-NOx trap (LNT) (Vehicle A)
Vehicle B

[Volkswagen Passat[58]]

 0.043 g/km 0.016 g/km 0.34-0.67 g/km 0.62 ± 0.19 g/km urea-based selective catalytic reduction (SCR) system (Vehicle B)

20% of European city dwellers are exposed to unhealthy levels of nitrogen dioxide. In London, where diesel road traffic is responsible for 40% of NOx emissions, air pollution causes more than 3,000 deaths a year.[59] A Channel 4 documentary in January 2015 referred to the UK government moving to a CO2 emission band system for road tax, which favoured diesel power, as the "great car con", with Barry Gardiner MP, former member of the Blair government, stating that the policy, which lowered CO2 emissions yet increased NOx pollution, was a mistake.[60]

EPA Notice of Violation

On 18 September 2015 the US EPA served a Notice of Violation (NOV) on Volkswagen Group alleging that approximately 480,000 VW and Audi automobiles equipped with 2-litre TDI engines, and sold in the US between 2009 and 2015, had an emissions-compliance "defeat device" installed.[11][61] A Notice of Violation is a notification to the recipient that the EPA believes it has committed violations and is not a final determination of liability.[62][63]

Volkswagen's "defeat device" is specially written engine management unit firmware that detects "the position of the steering wheel, vehicle speed, the duration of the engine's operation, and barometric pressure"[64] when positioned on a dynamometer using the FTP-75 test schedule.[65] These criteria very closely match the EPA's required emissions testing protocol[64] which allowed the vehicle to comply with emissions regulations by properly activating all emissions control during testing. The EPA's NOV alleged that under normal driving conditions, the software suppressed the emissions controls, allowing better fuel economy, at the expense of emitting up to 40 times more nitrogen oxides than allowed by law.[11][66]

Volkswagen's response

Initial response

Former Volkswagen AG CEO Martin Winterkorn in March 2015

According to the EPA, Volkswagen had insisted for a year before the outbreak of the scandal that discrepancies were mere technical glitches.[67] Volkswagen only fully acknowledged that they had manipulated the vehicle emission tests after being confronted with evidence regarding the "defeat device".[68][69]

The first sign that Volkswagen was ready to come clean reportedly occurred on 21 August 2015 at a conference on green transportation in Pacific Grove, California, where an unnamed company representative approached Christopher Grundler, director of the EPA Office of Transportation and Air Quality, and surprised him by informally admitting that the company had been deceiving regulators.[70] A CARB official was standing next to Grundler at the time.[70]

Formal acknowledgement of the deception was made by Volkswagen executives in Germany and the United States to EPA and California officials during a 3 September conference call, during which Volkswagen executives discussed written materials provided to the participants demonstrating how Volkswagen's diesel engine software circumvented US emissions tests. That admission came after the EPA threatened to withhold approval for the company's 2016 Volkswagen and Audi diesel models.[12]

I am shocked by the events of the past few days. I am stunned that misconduct on such a scale was possible in the Volkswagen Group. As CEO I accept responsibility for the irregularities. I am doing this in the interests of the company even though I am not aware of any wrongdoing on my part.

“
”

Martin Winterkorn, resignation statement, September 23, 2015.[71]

Volkswagen's CEO Martin Winterkorn said: "I personally am deeply sorry that we have broken the trust of our customers and the public." Winterkorn was in charge at Volkswagen from the start of 2008 to September 2015.[72] He attributed the admitted wrongdoing to "the terrible mistakes of a few people". Winterkorn initially resisted calls to step down from his leadership role at VW,[73][74] but then resigned as CEO on 23 September 2015.[75][76][77]

Volkswagen Group of America CEO Michael Horn was more direct, saying, "We've totally screwed up."[73] Horn added, "Our company was dishonest with the EPA, and the California Air Resources Board and with all of you."[74] Olaf Lies, a Volkswagen board member and economy minister of Lower Saxony, later told the BBC that the people "who allowed this to happen, or who made the decision to install this software" acted criminally, and must be held personally accountable. He also said the board only found out about the problems "shortly before the media did", and expressed concerns over "why the board wasn't informed earlier about the problems when they were known about over a year ago in the United States".[78]

Volkswagen announced that 11 million cars were involved in the falsified emission reports, and that over seven billion dollars would be earmarked to deal with the costs of rectifying the software at the heart of the pollution statements.[15] The newly appointed CEO of VW Mathias Müller stated that the software was only activated in a part of those 11 million cars, which has yet to be determined.[14] The German tabloid Bild claimed that top management had been aware of the software's use to manipulate exhaust settings as early as 2007. Bosch provided the software for testing purposes and warned VW that it would be illegal to use the software to avoid emissions compliance during normal driving.[79] Der Spiegel followed Bild with an article dated 30 September 2015 to state that some groups of people were aware of this in 2005 or 2006.[80] Süddeutsche Zeitung had similarly reported, that Heinz-Jakob Neusser, one of VW's top executives, had ignored at least one engineer's warnings over "possibly illegal" practices in 2011.[81]

On 28 September 2015, it was reported that VW had suspended Heinz-Jakob Neusser, head of brand development at its core VW brand; Ulrich Hackenberg, the head of research and development at its brand Audi who oversees technical development across the VW group; and Wolfgang Hatz, research and development chief at its sports-car brand Porsche who also heads engine and transmissions development of the VW group.[82]

On the same day it was reported that in addition to the internal revision process to investigate the incidents, the supervisory board of VW hired American law firm Jones Day to carry out an independent external investigation.[83] A software audit trail is one possible way of investigating what took place when; test logs are another way.[84]

For the European market, VW has stated unequivocally that EA288-engined cars (which conform to Euro 6 standards) are not affected, even though MY2015 TDIs in the US (which all use the EA288) are part of the EPA allegation and VW's admission. VW announcements to the German press make no mention of any EA288-equipped cars being part of the scandal in any country.

Other irregularities

CO2 emissions irregularities

On 3 November 2015, VW revealed that its internal investigation found that CO2 emissions and fuel consumption figures were also affected by "irregularities". These new issues, first estimated to cost up to €2 billion to repair, involved mainly diesel, but also some petrol models, with initial estimates suggesting that approximately 800,000 vehicles equipped with 1.4, 1.6 and 2.0 litre motors from VW, Skoda, Audi and Seat might be affected.[6] On 9 December 2015, VW revised these estimates, saying that only around 36,000 vehicles are affected by the irregularities, while also affirming that it had found no evidence of unlawful changing of CO2 emissions data.[9] The news prompted a 7.3 percent increase in VW preference shares on the same day.[9][85]

3.0 liter TDI emissions irregularities

On 20 November 2015, the EPA said that VW officials told the agency that all 3.0-liter TDI diesel engines sold in the US from 2009 through 2015 were also fitted with emissions-cheating software, in the form of "alternate exhaust control devices". These are prohibited in the United States, however the software is legal in Europe.[86] VW acknowledges these devices' existence, but maintains that they were not installed with a "forbidden purpose".[85] On 4 January 2016, the US department of justice filed a complaint in a federal court against VW, allegeing that the respective 3.0-liter diesel engines only meet the legal emission requirements in a “temperature conditioning” mode that is automatically switched on during testing conditions, while at "all other times, including during normal vehicle operation, the vehicles operate in a 'normal mode' that permits NOx emissions of up to nine times the federal standard".[87] The complaint covers around 85,000 3.0 liter diesel vehicles sold in the United States since 2009, including the Volkswagen Touareg, Porsche Cayenne, Audi A6 Quattro, Audi A7 Quattro, Audi A8, Audi A8L, Audi Q5, and Audi Q7 models.[87]

Vehicle recall and consequences

On 29 September 2015, Volkswagen announced plans to refit up to 11 million vehicles affected by the emissions violations scandal. The recall will affect models fitted with Volkswagen's EA 189 diesel engines, including 5 million at VW brand, 2.1 million at Audi, 1.2 million at Škoda and 1.8 million light commercial vehicles. SEAT said that 700,000 of its diesel models were affected. In Europe, a total of 8 million vehicles are affected.[88]

In Germany, 2.8 million vehicles will have to be recalled, followed by the UK, with 1.2 million. In France, 984,064 vehicles were affected, in Austria around 360,000, while in the Czech Republic 148,000 vehicles were involved (of which 101,000 were Škodas). In Portugal, VW said it had sold 94,400 vehicles with the software.[89][90] The repair may not require a formal recall; in the UK, for example, the company will simply offer to repair the cars free of charge; a recall is only required, "when a defect is identified that... could result in serious injury". As the rules violation involved enabling emission controls during testing, but turning it off under normal conditions to improve performance or fuel mileage, it has been speculated that the software update might make cars perform less efficiently and impair fuel economy; according to VW, however, its proposed solutions will be designed to achieve legal EU emissions compliance without impairing engine performance or consumption.[91]

It was unclear as of September 2015 whether the repair would also include hardware modifications, such as selective catalytic reduction upgrades.[92][93] The recall was scheduled to start in January 2016, with all affected cars projected to be fixed by the end of the year. The company also announced a review of all of its brands and models, including its supercar marque Bugatti.[94]

On 8 October 2015, Volkswagen US CEO Michael Horn said in testimony before the US Congress that it could nevertheless take years to repair all the cars, especially the older models, due to the complex hardware and software changes that will be required. He also said that the fixes will likely preserve fuel economy ratings but, "there might be a slight impact on performance".[95][96]

On 10 October 2015, Consumer Reports tested a 2015 Jetta TDI and a 2011 Jetta Sportwagen TDI in what they presumed was the special emissions testing, or cheat, mode. The 0 to 60 mph (0 to 97 km/h) acceleration time of the 2011 Jetta increased from 9.9 to 10.5 seconds, and the 2015 car's time went from 9.1 to 9.2 seconds. The fuel economy of the 2011 car decreased from 50 to 46 mpg-US (4.7 to 5.1 L/100 km; 60 to 55 mpg-imp) and the 2015 car's fuel economy decreased from 53 to 50 mpg-US (4.4 to 4.7 L/100 km; 64 to 60 mpg-imp). Consumer Reports's Director of Auto Testing said that while the added fuel costs, "may not be dramatic, these cars may no longer stand out among many very efficient competitors."[97] The method the magazine used to engage cheat mode while driving required making assumptions about the ECU's operations. Because disabling electronic stability control is a necessary step for running a car on a dynamometer, the magazine assumed that this would put the car in cheat mode.[97] In order to keep the electronic stability control from reactivating while driving, they disconnected the cars' rear wheel speed sensors, simulating the inputs the ECU receives while the car is on a stationary test rig, even though it was being driven on the road.[97] Besides front and rear wheel speeds, the EPA had said that steering wheel movement, barometric pressure and duration of engine operation were factors in triggering cheat mode.[11]

On 12 October 2015, Paul Willis, VW UK managing director told the Commons Transport Select Committee that about 400,000 Volkswagen cars in the UK will need fuel injectors altered as well as a software fix.[31] The vehicles requiring the hardware fix are the 1.6 litre diesel models. The 1.2 litre[98] and 2.0 litre diesel models will only require a software fix.[31]

On the same day, Volkswagen announced it would overhaul its entire diesel strategy, saying that in Europe and North America it will switch "as soon as possible" to the use of selective catalytic reduction technology to improve diesel emissions. It also announced plans to accelerate the development of electric cars and plug-in hybrids, as well as petrol, instead of diesel engines for smaller cars.[99]

On 12–13 October 2015, Volkswagen Group vehicle drivers in the UK started receiving notification letters, to "rectify the issue".[100][101] Volkswagen later announced a timeline for UK diesel recalls, citing March 2016 for 2.0 liter engines, June 2016 for 1.2. liter engines, and October 2016 for 1.6. litre engines.[102]

VW suggested in the beginning of October 2015 to let car owners decide whether their cars would be recalled for handling.[103][104] However, the German Federal Motor Transport Authority (Kraftfahrt-Bundesamt, or KBA)[105] views the software as illegal,[106][107] and has ordered a full recall of all affected cars in Germany. VW then decided to recall around 8.5 million cars in Europe,[104] about a third of all its car deliveries since 2009.[108] KBA requires VW to send a recall plan to KBA before the end of October for 2.0 liter cars, and end of November for 1.2 and 1.6 liter cars.[107] If KBA approves a plan, VW can then start handling the cars. The German authorities require that VW removes the software and that VW ensures that emission rules are fulfilled.[103] Media estimates that the KBA procedure sets a precedence for how authorities in other countries handle the case.[108][109]

On 18 November 2015, Autoblog reported that a VW fix for the affected 1.6 diesel engine is under review by the KBA.[110] On 25 November 2015, VW said the fix involves a minor hardware modification to the car's air intake system, alongside a software update.[111] This low-cost solution contradicted earlier speculation regarding the possible fitting of new injection nozzles and catalytic converters.[110] VW also said that its affected 1.2 liter and 2.0 liter diesel engines only need a software update.[112][113] The fixes have been approved by the KBA, with the first recalls likely to begin in January 2016.[8] According to VW, the measures aim to achieve legal EU emissions compliance without impairing engine output, fuel consumption, or performance.[91] The simple fixes with inexpensive parts and software are now possible but were not available when the engines were developed, because engine technology understanding and intake flow simulation capabilities have matured in the interim time, allowing for a better understanding and options for addressing the burning of Diesel and air mixtures via intake flow shaping.[114] Due to stricter environmental legislation, fixes for US vehicles are expected to take longer to produce and be more technically complex.[91]

Communication actions

In France, the MediaCom media agency, which buys advertising for Volkswagen, warned the French newspapers on 22 September that it would cancel planned Volkswagen and Audi campaigns in case they would cover the emission violations.[115] Given the scale that the scandal had already taken by that time, the threat had little effect on its coverage.

On the occasion of German Unity Day, Volkswagen launched an ad campaign in German Sunday-newspapers. In the ad Volkswagen stated that actually at this point it wanted to express its joy about the 25th anniversary of German reunification, its pride about having shaped the country together with all people for the last 25 years, to give thanks for the confidence of the customers it had experienced during all this time and that it wanted to thank all its employees and trade partners in Germany, but concluded that it wants to express in one sentence, that it will do everything to win back the confidence of its customers.[116]

New orders

Volkswagen's Belgian importer, D'Ieteren, announced that it would offer free engine upgrades to 800 customers who had ordered a vehicle with a diesel engine that was likely to have been fitted with illegal software.[117][118]

Sales of vehicles with EA 189 engines were halted in some European countries, including Spain, Switzerland, Italy, the Netherlands, Belgium and the UK.[117][119]

In the United States, VW has withdrawn its application for emissions certification for its 2016 diesel models, leaving thousands of vehicles stranded at ports. The company said the vehicles contain software that should have been disclosed to and certified by the EPA.[120] EPA has quarantined some 2016-models until it becomes clear that their catalysts perform the same on the road as they do in tests.[121]

Compensation

On 9 November 2015, Volkswagen announced that 482,000 diesel Audi and VW owners in the United States would be eligible to receive US$1,000 in vouchers, in addition to the US$2,000 it is offering current VW owners for trade-ins.[122] On 18 November 2015, VW said that approximately one quarter of the affected vehicle owners had applied to the program, which was estimated to cost at least $120 million in benefits.[123] VW confirmed that it is offering vouchers including to customers in Canada.[124] VW America said that accepting the gift cards does not prevent owners from filing lawsuits.[125] VW also created a claims fund, managed by the the well-known mediation attorney Kenneth Feinberg, which will offer full compensation packages (in the form of cash, buy-backs, repairs or replacement cars) to the approximately 600,000 U.S. owners affected by the scandal. [126] Despite earlier hints to the contrary, in December 2015 VW CEO Matthias Müller said that customers outside the US and Canada should also expect some type of compensation package: "we are working on an attractive package, let’s call it compensation, for reduction in residual values in our cars”.[127][128] However, on 11 January 2016, a VW spokesman said “there won’t be compensation. All the indications are that residual values are unaffected”;[129] the company, which continued to face pressure from E.U. officials to compensate European drivers as well, [130] blamed the confusion on "a slight mistranslation”.[129] Accused by E.U. commissioner Elżbieta Bieńkowska that it is openly treating European consumers unfairly, VW asserted that the situation in US and Canadian markets, where confidence in diesel technology is "severely shaken" and clients need to wait longer for an engine fix due to tougher emissions standards, is not "automatically comparable" with other markets. [130]

Consequences

Health consequences

Main article: Diesel exhaust

Deaths

A peer-reviewed study published in Environmental Research Letters estimated that approximately 59 premature deaths will be caused by the excess pollution produced between 2008 and 2015 by vehicles equipped with the defeat device in the U.S., the majority due to particulate pollution (87%) with the remainder due to ozone (13%). The study also found that that making these vehicles emissions compliant by the end of 2016 would avert an additional 130 early deaths.[131][132]

Earlier studies published in media sources, that had not been subjected to peer review, provided point estimates ranging from approximately 10 to 350 excess deaths in the U.S. related to the defeat devices based on varying assumptions.[133]

Non-fatal health impacts

NO
2 is a precursor to ground-level ozone and may cause respiratory problems "including asthma, bronchitis and emphysema".[134][135][136] Nitrogen oxides also amplify the effect of fine particulate soot that causes heart problems, a form of air pollution estimated to kill 50,000 in the United States annually.[137]

A peer-reviewed study published in Environmental Pollution estimated that the fraudulent emissions are associated with 45 thousand disability-adjusted life years (DALYs) and a value of life lost of at least 39 billion US dollars.[138]

Environmental consequences

NOx are also regulated as a pollutant for their contribution to acid rain, and to formation of a visible brown cloud or smog due to both the visible nature of NO
2, and the tropospheric ozone created by NO. NO and NO
2 are not greenhouse gases, whereas N
2O is.[139] NO
2 is a precursor to ground-level ozone.

Legal and financial repercussions

Government actions

Private actions

By 27 September 2015 at least 34 class-action lawsuits had been filed in the U.S.[190][191] [192] and Canada[193][194] on behalf of Volkswagen and Audi owners, accusing VW of breach of contract, fraudulent concealment, false advertising, and violations of federal and state laws, and positing the "diminished value" of diesels that will be fixed to conform with pollution regulations, due to possible reductions in horsepower and fuel efficiency.[195] According to Reuters, one reason class action lawyers were able to mobilize so fast is that the company's marketing to upscale professionals, including jurists, had backfired.[196]

As of 30 September 2015 at least one investor lawsuit seeking class action status for holders of Volkswagen American Depositary Receipts had been filed in the United States seeking compensation for the drop in stock value due to the emissions scandal.[197]

On 7 October, the L.A. Times reported that the number of class-action lawsuits filed had grown to more than 230.[198]

As of 5 February 2016, 500 civil lawsuits had been consolidated before a federal judge in California. [188]

On 19 November 2015, ABC News Australia reported that more than 90,000 VW, Audi and Skoda diesel vehicle owners had filed a class action lawsuit against VW in the country's Federal Court.[125]

In November, Moody's Investors Service downgraded VW's bond credit rating from A2 to A3.[199] Fitch Ratings downgraded Volkswagen's Long-term Issuer Default Rating by two notches to BBB+, with a negative outlook.[122][200]

Models affected

Vehicle line-up at 2012 Volkswagen Great Canadian Clean Diesel Tour.

By 22 September 2015, Volkswagen had admitted that 11 million vehicles sold worldwide are affected in addition to the 480,000 vehicles with 2.0 L TDI engines sold in the US.[201] According to Volkswagen, vehicles sold in other countries with the 1.6 L and 2.0 L 4-cylinder TDI engine known as Type EA189 are also affected. This software is also said to affect EA188 and the 2015 EA288 generation of the four-cylinder.[202] Worldwide, around 1.2 million Skodas[203] and 2.1 million Audis may contain the software, including TTs and Qs.[204] VW states that Euro6 model in Germany are not affected, while 2015 US models with the same EA288 engines are affected. This suggests that normal-operation measurements that place the EA288 NOx emissions between the two standards' limits were readily available at VW headquarters in Germany. According to Müller, the 1.2 and 2.0 liter models may be updated by software, whereas the around 3 million 1.6 liter require various hardware solutions, and some cars may even be replaced. The cars are so diverse that many different solutions are required.[205]

Over one quarter of VW's sales in the US are diesel-powered vehicles. The corporation has chosen a market strategy that emphasizes clean diesel over electric cars or hybrid electric vehicles.[206]

The vehicles affected by the recall in the US include the following model years:[207][208][209][210][211]

  • 2009–2015 Audi A3 2.0 L TDI
  • 2009–2015 VW Beetle 2.0 L TDI
  • 2009–2015 Beetle Convertible 2.0 L TDI
  • 2009–2015 VW Golf 2.0 L TDI
  • 2015 VW Golf Sportwagen 2.0 L TDI
  • 2009–2015 VW Jetta 2.0 L TDI
  • 2009-2014 Jetta Sportwagen 2.0 L TDI
  • 2012–2015 VW Passat 2.0 L TDI.

The EPA revealed on 2 November 2015 that VW had shipped additional diesel models with defeat devices, including the 2014 VW Touareg and the 2015 Porsche Cayenne. Model year 2016 Audi Quattro diesels were also found affected, including several 2016 Audi Quattro models (the 2016 Audi Quattro A6, A7, A8, A8L, and Q5).[212] Cynthis Giles, the EPA Assistant Administrator for Office of Enforcement and Compliance Assurance, called out the company for further refusing to take responsibility for its failure to comply with the law. Under US federal Clean Air Act, VW could be liable for up to $375 million in fines.[213]

Resale value

As of 26 October 2015, the resale value of affected model cars in the US was down from 5 to nearly 16 percent depending on model as compiled by Black Book and Kelley Blue Book based on used car auction prices, the volume of which was also down.[214]

Stock value

Price of Volkswagen AG (VOW.DE) stock, Adjusted Close. Width of line shows Volume. Text in green is the percent difference from previous day's close. In red is the percent difference from the close on 17 September 2015[215]
Price of Volkswagen AG (VOW.DE) stock 17 September–5 October 2015[215]
Date Adj Close Volume % Diff from 17 Sep % Diff from Previous Day
17 September16760,6000.00%
18 September161112,700-3.61%-3.61%
21 September1341,496,700-20.13%-17.14%
22 September1113,058,700-33.57%-16.83%
23 September1192,381,300-28.97%6.92%
24 September1191,542,800-28.97%0.00%
25 September116880,700-30.97%-2.82%
28 September107865,400-36.02%-7.31%
29 September103513,700-38.29%-3.55%
30 September105416,500-37.31%1.60%
1 October105477,700-38.59%0.10%
2 October101588,700-39.58%-3.71%
5 October103754,400-38.59%1.63%

On 21 September 2015 the first day of trading after the EPA's Notice of Violation to Volkswagen became public, share prices of Volkswagen AG fell 20% on the Frankfurt Stock Exchange.[216] On 22 September, the stock fell another 12%. On 23 September, the stock quickly fell 10.5%, dropping below €100 to a record 4-year low before regaining some lost ground.[217][218] Share prices of other German automakers were also affected, with BMW down 4.9% and Daimler down 5.8%.[219]

Qatar, one of the biggest VW shareholders with a 17% stake in the company, lost nearly $5 billion as the company stock value fell.[220]

Sales

The US sale of Volkswagens was 23,882 vehicles in November 2015, a 24.7% decline from November 2014.[221][222] While in South Korea, sales in November rose 66% to 4,517 units from a year ago due to the Volkswagen's aggressive marketing efforts such as discount of up to ₩18 million (US$15,600 at December 2015 exchange rates) for some models.[223]

Media reaction

The Volkswagen TDI emissions scandal has received widespread negative media exposure,[224] with headlines fronting the websites of multiple news gathering and reporting organizations.[32][66][225] Reuters said that the crisis at Volkswagen could be a bigger threat to the German economy than the consequences of the 2015 Greek sovereign debt default.[226] Deutsche Welle, one of Germany's state broadcasters, said that a "lawsuit tsunami" was headed for Volkswagen and that the scandal had dealt a blow to the country's psyche and "Made in Germany" brand.[227] Popular Mechanics said that the scandal "is much worse than a recall", highlighting that Volkswagen had engaged in a pattern of "cynical deceit".[228]

Public polling

Despite the scandal, one poll conducted for Bild suggested that the majority of Germans (55%) still have "great faith" in Volkswagen, with over three-quarters believing that other carmakers are equally guilty of manipulation.[229] Similarly, a poll conducted by the management consultancy Prophet in October 2015 indicated that two-thirds of Germans believe the scandal to be exaggerated and continue to regard VW as a builder of "excellent cars".[230] A survey by Northwestern University's Kellogg School of Management, Brand Imperatives and Survata said that nearly 50% of US consumers had either a positive or very positive impression of Volkswagen, while 7.5% had a "very negative" impression.[231] Another US survey by market researcher AutoPacific found that 64% of vehicle owners do not trust Volkswagen and only 25% of them have a positive view of Volkwagen following the scandal.[232][233]

Reactions

Political figures

German Chancellor Angela Merkel stated she hoped that all facts in the matter would be made known promptly, urging "complete transparency". She additionally noted that Germany's Transport Minister, Alexander Dobrindt, was in ongoing communication with Volkswagen.[234]

The German Green Party accused Merkel of knowing about the defeat devices with a "wink".[235]

Michel Sapin, the French Finance Minister, called for an investigation of diesel-powered cars that would encompass the entire continent of Europe.[236]

Catherine Bearder, MEP for South East England, commented on 27 October 2015 in the European Parliament that "we now have the political momentum for a radical overhaul that will ensure carmakers cannot dodge the rules", defending an EU resolution meant to specifically "cut deadly pollution from diesel vehicles".[149] However, when the European Commission proceeded with passing legislation that allowed the car industry more time to comply with the newer regulation, while also permitting cars, even under the more "realistic" tests, to emit more than twice the legal limit of nitrogen oxides (NOx) from 2019 and up to 50% more from 2021, Bearder denounced the legislation as "a disgraceful stitch-up by national governments, who are once again putting the interests of carmakers ahead of public health".[150]

London Assembly member Stephen Knight suggested on 1 November 2015 that diesel vehicles should either be banned in the future, or face stringent tests before being allowed to enter London's low-emissions zone. The city's deputy mayor for the environment, Matthew Pencharz, responded that such measures could lead to serious economic problems.[237]

Automotive industry and commentators

Major car manufacturers, including Toyota, GM, PSA Peugeot Citroen, Renault, Mazda, Daimler (Mercedes Benz), and Honda, issued press statements reaffirming their vehicles' compliance with all regulations and legislation for the markets in which they operate; The Society of Motor Manufacturers and Traders described the issue as affecting "just one company", with no evidence to suggest that the whole industry might be affected.[238]

Renault-Nissan CEO Carlos Ghosn said it would be difficult for an automaker to conceal internally an effort to falsify vehicle emissions data, such as has happened at Volkswagen AG: "I don't think you can do something like this hiding in the bushes."[239]

Jim Holder, the editorial director of Haymarket Automotive, which publishes WhatCar and AutoCar, opined that there had never been a scandal in the automotive industry of this size.[240]

A commentary in Spiegel Online argued that the VW scandal will affect the entire German industry, and that German companies operating abroad will face a decrease in competitiveness.[241]

Alan Brown, chairman of the Volkswagen National Dealer Advisory Council, commented on the scandal's negative impact on US dealers, who were already struggling with overpriced products and a deteriorating relationship between the company and the dealer body.[242] Car and Driver similarly emphasized VW's inability to efficiently operate in the US market, while also suggesting that the company had grossly underestimated the EPA's power, and inexplicably failed to go public before the story broke, despite receiving ample warning.[243]

Tesla Motors CEO Elon Musk was asked about his opinion whether the scandal will weaken the consumer's view on green technologies; he responded saying he expects the opposite to happen: "What Volkswagen is really showing is that we've reached the limit of what's possible with diesel and gasoline. The time has come to move to a new generation of technology."[244]

Similarly, analysts at Fitch suggested the VW diesel emissions crisis was likely to affect the entire automotive industry, with petrol cars potentially enjoying a revival in Europe and greater investment being poured into electric vehicles.[60] Other commentators argued that the diesel engine will nevertheless regain its footing in the market, due to its international indispensability, low CO2 emissions and strong presence in the US pickup– and commercial–truck segments.[243]

On 29 September 2015, S&P Dow Jones Indices and RobecoSAM stated that Volkswagen AG's stock will be de-listed from the Dow Jones Sustainability indexes after close of trading on 5 October 2015. Among the reasons for the de-listing, the statement issued by RobecoSAM cited social and ethical reasons, and confirmed that VW will no longer be identified as an Industry Group Leader in the "Automobiles & Components" industry group.[245]

In early October, Green Car Journal rescinded its Green Car of the Year awards, for models that "best raise the bar in environmental performance", that were given to the 2009 VW Jetta TDI and 2010 Audi A3 TDI models.[246]

The VW scandal more generally raised awareness over the high levels of pollution being emitted by diesel vehicles built by a wide range of carmakers, including Volvo, Renault, Mercedes, Jeep, Hyundai, Citroen, BMW, Mazda, Fiat, Ford and Peugeot.[21][22] Independent tests carried out by ADAC proved that, under normal driving conditions, diesel vehicles including the Volvo S60, Renault's Espace Energy and the Jeep Renegade, exceeded legal European emission limits for nitrogen oxide (NOx) by more than 10 times.[22] Researchers have criticized the inadequacy of current regulations and called for the use of a UN-sanctioned test that better reflects real-life driving conditions. The test is not due to come into force until 2017, with critics saying that car firms have lobbied fiercely to delay its implementation due to the high cost of meeting stricter environmental controls.[21] The Washington Post also reported that in the late 1990s, EPA engineers at Virginia Testing Laboratory had built a system called ROVER, designed to test a car's emissions on the road. The project was shut down in 2001, despite preliminary tests indicating gaps between emissions from lab tests and real world tests of about 10 to 20 percent.[247]

In December 2015, a group of business and environmental leaders, including Tesla CEO Elon Musk, addressed an open letter to CARB, urging the agency to absolve VW of recalling the 85,000 diesel vehicles affected by the scandal in the US, and argued that VW should instead be asked to allocate resources to an accelerated rollout of zero-emissions vehicles ("cure the air, not the cars"). The letter, which includes a 5-step legally enforcable plan, argues that this course of action could result in a "10 for 1 or greater reduction in pollutant emissions as compared to the pollution associated with the diesel fleet cheating", while suggesting that the affected vehicles on the road in California "represent an insignificant portion of total vehicles emissions in the State" and "do not, individually, present any emissions-related risk to their owners or occupants".[248][249]

Previous defeat device cases

Main article: Defeat device

The Volkswagen TDI diesel emissions case is not the first use of defeat devices, nor the first time automakers have taken advantage of their foreknowledge of the specific lab test conditions in order to engage emissions controls only during testing, but not during normal driving.[250]

In 1973 Chrysler, Ford Motor Company, General Motors, Toyota, and Volkswagen had to remove ambient temperature switches which affected emissions, though the companies denied intentional cheating and said that strategies like enriching fuel mixture during cold engine warm-up periods could reduce overall pollution.[251][252][253] The switches were ordered removed from production but cars already on the road did not have to be recalled, and fines were relatively modest.[252][253]

In 1996 General Motors had to pay a near-record fine of $11 million, and recall 470,000 vehicles, because of ECU software programmed to disengage emissions controls during conditions known to exist when the cars were not being lab tested by the EPA.[254] The model year 1991–1995 Cadillacs were programmed to simply enrich the engine's fuel mixture, increasing carbon monoxide (CO) and unburned hydrocarbon (HC) pollution, any time the car's air conditioning or heater was turned on, since the testing protocol specified they would be off.[254]

In 1998, Honda Motor Company had to spend $267 million to correct the disabling of the misfire monitoring device on 1.6 million 1996 and 1997 model year vehicles, and Ford Motor Company paid $7.8 million for programming 60,000 1997 Ford Econoline vans to keep emissions low during the 20-minute EPA test routine, and then disabling the emissions controls during normal highway cruising.[255]

Another timer-based strategy was used by seven heavy truck manufacturers, Caterpillar Inc., Cummins Engine Company, Detroit Diesel Corporation, Mack Trucks, Navistar International, Renault Vehicules Industriels, and Volvo Trucks, who in 1998 paid the largest ever fine to date, $83.4 million, for, in the same manner as Volkswagen, programming trucks to keep NOx emissions low during the test cycle, and then disabling the controls and emitting up to three times the maximum during normal highway driving.[256]

The goal of both the Ford and the heavy truck defeat devices was better fuel economy than could be achieved under pollution limits.[256] The major truck manufacturers also had to spend up to $1 billion to correct the problem, which affected 1.3 million heavy duty diesel trucks.[250][256]

While Volkswagen's actions have significant precedents, the Center for Auto Safety's Clarence Ditlow said that Volkswagen "took it to another level of sophisticated deception we've never seen before."[250]

See also

Notes

  1. ↑ "Abgas-Skandal bei VW – Techniker warnte schon 2011 vor Manipulationen". Bild.
  2. ↑ "VW scandal: Carmaker was warned by Bosch about test-rigging software in 2007". International Business Times UK.
  3. 1 2 3 4 http://www.volkswagen.co.uk/assets/common/pdf/brochures/old-brochure/Passat-Saloon/Passat-Saloon-August-2008.pdf
  4. 1 2 "VW says sold first UK vehicle with emission test rigging software in 2008". Reuters UK. Retrieved 27 October 2015.
  5. 1 2 http://www.volkswagen.co.uk/assets/common/pdf/brochures/old-brochure/Passat-Estate/Passat-Estate-July-2009.pdf
  6. 1 2 "Volkswagen says 800,000 cars may have false CO2 levels - BBC News", Bbc.com, 4 November 2015, retrieved 4 November 2015
  7. ↑ "Volkswagen European TDI repair for diesel cars", Autoweek.com, retrieved 27 December 2015
  8. 1 2 Bruce, Chris (25 November 2015). "VW explains fixes for 1.6, 2.0 diesels in Europe". Autoblog. Retrieved 29 November 2015.
  9. 1 2 3 Andreas Cremer (9 December 2015), "VW says CO2 emissions scandal not as bad as feared", Reuters.com, retrieved 9 December 2015
  10. ↑ "'It Was Installed For This Purpose,' VW's U.S. CEO Tells Congress About Defeat Device". NPR. 8 October 2015. Retrieved 19 October 2015.
  11. 1 2 3 4 Brooks, Phillip A. (18 September 2015). "VW Notice of Violation, Clean Air Act (September 18, 2015)" (PDF). US Environmental Protection Agency. Retrieved 20 September 2015.
  12. 1 2 Gardner, Timothy; Lienert, Paul; Morgan, David (24 September 2015), After year of stonewalling, VW stunned US regulators with confession, Reuters, retrieved 25 September 2015
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  14. 1 2 "Abgasaffäre: VW-Chef Müller spricht von historischer Krise". Spiegel. Reuters. 28 September 2015. Retrieved 28 September 2015.
  15. 1 2 Ewing, Jack (22 September 2015). "Volkswagen Says 11 Million Cars Worldwide Are Affected in Diesel Deception". The New York Times. Retrieved 22 September 2015.
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  46. 1 2 "WVU study found elevated levels of emissions from Volkswagen vehicles". West Virginia University. 24 September 2015.
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  48. 1 2 "How A Little Lab In West Virginia Caught Volkswagen's Big Cheat". NPR. 24 September 2015. Retrieved 16 September 2015.
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  55. 1 2 "US: Light-duty: Emissions". Transport Policy.
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  103. 1 2 Graham Ruddick. "VW to recall 8.5m diesel cars across Europe". The Guardian. Archived from the original on 16 October 2015. Retrieved 16 October 2015. VW had proposed a voluntary recall of the cars, which would have meant that motorists only took their car in for repairs if they wanted to remove the defeat device. VW has told motorists their cars remain legal to drive on the basis that they passed emissions tests, even if this was only due to the defeat device.
    Alexander Dobrindt, the German transport minister, confirmed there would be a compulsory recall. He said: "VW is ordered to remove the software from all vehicles and to take appropriate measures to ensure that the emissions rules are fulfilled."
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