Inside the Volkswagen diesel scandal

#hashtags: #Volkswagen #October 2015

As the VW scandal enters its third week, why has it taken so long for the company to respond? Inside the Volkswagen diesel scandal 3 October 2015 by Joshua Dowling · CarsGuide The threat of millions in fines isn't enough to get answers from Volkswagen about the cheating software in its diesel cars. So where to from here?AS the Volkswagen diesel scandal enters its third week, Australian owners are still in the dark about which cars may be affected. Many other questions remain unanswered.Will this cripple the once proud German company to the point of extinction? Are other car brands fudging their figures?To understand the scale of the disaster we need only look at Volkswagen's lacklustre response so far.It was so unprepared for a crisis like this that the inaction is astounding and the silence is deafening.Now the company says it could take "several months" to complete its investigations.If it looks like Volkswagen doesn't know what it's doing, that's because it is still trying to grapple with what has happened -- and how on earth it will fix 11 million cars across the planet.Now the company says it could take "several months" to complete its investigations.The slow response has even prompted Australia's consumer watchdog to threaten to use its powers to compel VW to come clean with the list of affected cars.To make sure VW got the message, the Australian Competition and Consumer Commission revealed the fines could be in the tens of millions -- starting at $1.1 million per offence.For example, one misleading claim about fuel economy on one car is one offence that can attract a $1.1 fine. One misleading claim about a vehicle's emissions on the same car is another $1.1 million fine.With at least 10 vehicles sold in Australia across the VW, Audi and Skoda brands with the affected diesel engines from 2009 to 2015, that's at least $22 million in fines for starters.Then there is the risk of fines up to $108,000 per vehicle sold if their approval to be on Australian roads was based on paperwork with false claims.With an estimated 70,000 diesel cars across the VW, Audi and Skoda brands sold over that period in Australia, that particular fine could stretch into the billions -- if it were imposed.Aside from the initial statements from CEO Martin Winterkorn -- before he stepped down by the end of the first week -- there has been little communication from the troubled car maker.Volkswagen appeared to be making the right noises initially when Winterkorn said, or was obliged to say: "I am shocked by the events of the past few days. Above all, I am stunned that misconduct on such a scale was possible in the Volkswagen Group."Winterkorn, who walked away with a $46 million package to ease the pain of his sudden departure, added: "I am doing this in the interests of the company even though I am not aware of any wrongdoing on my part. Volkswagen needs a fresh start. I am clearing the way for this fresh start with my resignation."However, this week German authorities began investigating Winterkorn and other high ranking executives to find out who knew what and when.Three other top level VW brass have also left the building: Ulrich Hackenberg, who was most recently the head of Audi research and development, Wolfgang Hatz, Porsche's engine chief, and Heinz-Jakob Neusser, VW brand manager.VW alleges all three knew of or allowed the computer program that can cheat diesel emissions tests in their current or former roles.Overnight, Julia Kuhn-Piëch -- the daughter of former ousted chairman Ferdinand Piëch's younger brother Hans-Michel Piëch -- stepped down from her position as a Member of the VW Supervisory Board. More heads are set to roll.In the meantime, the only person of authority to speak publicly about the crisis since Winterkorn is the unfortunately named Olaf Lies -- after the BBC agreed to fly to Berlin and interview him for 10 minutes at the airport.Lies is a VW board member and also the economy minister of the government of Lower Saxony, which owns the single largest share of Volkswagen, 20 per cent.When asked if the crisis could put Volkswagen out of business, Lies told the BBC: "This is a massive problem, we can't yet estimate the cost that VW is going to have to shoulder. But it's a really strong company that builds really fantastic cars. It made a huge mistake that we're going to have to correct." Lies is not in any doubt about the seriousness of the wrongdoing, bluntly describing it as criminal."Those people who allowed this to happen … they acted criminally. Now it's about finding out who was responsible, who knew about it and when they found out," he said.Lies also revealed VW executives knew about the unfolding drama more than a year ago but failed to notify the board.He said VW workers were now fearing for their jobs.VW employs 600,000 people worldwide and more than 270,000 in Germany alone; it is the fourth largest employer in the country after the three oil companies Shell, BP and Total.But the impact of the VW scandal is likely to be felt across borders. VW makes engines in Hungary and owns the Czech-based Skoda brand."The employees are anxious, they don't know what the future holds," said Lies.VW is Germany's largest car maker and the automotive industry as whole contributes 2.7 per cent to the country's Gross Domestic Product.However, the crisis is unlikely to grind the rest of the country to a halt. More than half the cars VW sells are petrol-powered vehicles.RELATED: VW Australia facing $20m finesMORE: ACCC launches investigation into VW diesel scandalALSO: Emissions cheating nothing new | opinionThe impact in VW's hometown of Wolfsburg may be more significant: more than half of Wolfsburg's 125,000 residents work for VW.The city is bracing for a slowdown in tax revenue as the historic Golf factory -- which once made the Beetle and still has bullet holes in the roof and pillars from World War II -- faces a drop in demand for the cars it produces."Even if our city is debt free, significant tax losses are to be expected," Wolfsburg Mayor Klaus Mohr told German media.Fearing a loss of tax revenue in the wake of the VW diesel scandal, the city of Wolfsburg announced a spending and hiring freeze.Meanwhile, German financial analysts suggest Volkswagen is facing an imminent credit downgrade, despite cash reserves estimated at 21 billion Euro.Have other brands cheated the system?The drama will most definitely put a handbrake on VW's rapid growth. It had been in a close race with Toyota to become the world's largest car maker and overtook the Japanese giant in July. But now it seems VW cut corners to achieve its goal.Have other brands cheated the system? Despite widespread expectation Volkswagen is not alone, there is little evidence it will be joined by other brands anytime soon, although authorities in the US, the UK and Europe are in the process of checking VW's rivals.Fellow German car makers BMW and Mercedes-Benz have come out and publicly stated their cars are legit and don't have cheating software. It's unlikely they would taunt regulators if they couldn't back up the claim.Indeed, in the initial test by a couple of clean air campaigners and the West Virginia University that exposed the VW scandal, BMW cars also part of that experiment made the grade.World number one Toyota has historically shunned diesel engines for passenger cars, instead embracing hybrid technology because, it believes, that is the most efficient way to cut toxic emissions.The other question people are asking: does it really matter that VW cheated the system?If the American Lung Association claim is to be believed, the extra toxic emissions from VW diesel cars since 2008 -- 46,000 tonnes of NOx -- equates to 106 deaths there.Aside from the fact that 11 million Volkswagens are belching out up to 35 times more emissions than they're supposed to, it begs the question: what else don't we know about our cars?The good news is that the whole debacle has shone a spotlight on the severe flaws in self-regulation in the car industry and, until now, how weak governments have been in enforcing the law.If there is any good to come from the scandal is that we will all eventually end up with truly more efficient cars -- and government agencies around the world now have the courage to hold Big Business accountable for its actions.Or, in the case of VW for now, its inaction.What else don't we know about our cars? Let us know in the comments below. 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