“Car manufacturers that fail to properly certify their cars and that defeat emission control systems breach the public trust, endanger public health and disadvantage competitors.” John C. Cruden, the attorney general for the department’s Environment and Natural Resources Division [i]
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The environmental movement, through both government regulation and consumer demand, has been shifting the way automakers design and create their cars. The pressure to be more fuel efficient and less harmful to the environment has been exponentially increasing. Given these circumstances, the scandal revolving around Volkswagen could not have been that unforeseen.
In late 2015, Volkswagen, a German automaker that had been, up until this point, a well-regarded and respected company within the auto industry, found itself in very hot water. “In September, the Environmental Protection Agency (EPA) found that many VW cars being sold in America had a ‘defeat device’ – or software – in diesel engines that could detect when they were being tested, changing the performance accordingly to improve results.” [ii] While the EPA’s findings covered nearly half a million cars in the U.S., Volkswagen admitted the “defeat device” was fitted on roughly 11 million cars worldwide. [iii] The software inserted in the engines essentially sensed “test scenarios by monitoring speed, engine operation, air pressure and even the position of the steering wheel.”[iv] The results were that when the cars were being tested for emissions standards, the VW vehicles changed the way the engine ran to operate below normal power and performance.[v] Without this technology, “[t]he engines emitted nitrogen oxide pollutants up to 40 times above what is allowed in the US.” [vi]
Once word got out that Volkswagen lied and purposely cheated on their vehicles’ emissions tests, there was nothing the company could do but apologize and wait for the sanctions to start rolling in. “’We’ve totally screwed up,’” were the words of Michael Horn, head of VW America. [vii] Shortly after the scandal was revealed, Martin Winterkorn, the CEO of the company, resigned and was replaced by Matthias Mueller, formerly part of Porche. [viii]
The company recalled millions of cars worldwide and set aside roughly $7.34 billion to cover those costs alone. [ix] The result was the company posting its first quarterly loss for 15 years in October 2015. [x] In addition, “[t]he EPA has the power to fine a company up to $37,500 for each vehicle that breaches standards – a maximum fine of about $18bn.” [xi]
As to the current status on the investigations around VW, “[r]egulators across the globe are conducting investigations,” as are individual states within the US.[xii] On January 4 of 2016, the United States Justice Department filed a civil lawsuit against the company for its deceptive practice, this joins the many private lawsuits brought by individual car owners seeking remedial action from the decreased resale values of their VW vehicles. [xiii]
The world will need to stayed tuned to determine the total damage VW will incur as a result of costs of recalls and litigation. Aside from the obvious financial burden, it is hard to say whether VW’s reputation will ever rebound.
The question remains, though, how should VW be sanctioned? This incident is significantly different from other recent scandals, such as GM’s omission of a small device causing certain vehicles to be inherently unsafe. [xiv] Here, VW created a sophisticated device to not only bypass regulation, but to bypass detection as well. This plan was well thought-out and implemented; receiving approval at various levels of management for the sole purpose of deceiving and cheating. It almost seems as if monetary sanctions may not be enough to keep this type of illegal activity at bay. As technology becomes more advanced, ways to hide and deceive violations may become more readily available to automakers. Perhaps there are many automakers that are doing the same thing at this very moment; they just haven’t been discovered yet. Hopefully this event, and the eventual sanctions, will be a lesson to the entire auto industry so that this sort of thing never happens again.
[i] Joby Warrick, Volkswagen Slapped with Federal Lawsuit in Emissions-Cheating Scandal, Wash. Post (Jan. 4, 2016) https://www.washingtonpost.com/news/energy-environment/wp/2016/01/04/volkswagen-slapped-with-federal-lawsuit-in-emissions-cheating-scandal/.
[ii] Russell Hotten, Volkswagen: The scandal explained, BBC News (Dec. 10, 2015) http://www.bbc.com/news/business-34324772.
[xii] Karl Russel, How Volkswagen Got Away With Diesel Deception, NY Times (Jan. 5, 2016) http://www.nytimes.com/interactive/2015/business/international/vw-diesel-emissions-scandal-explained.html?_r=0.
[xiv] See Max Blau, No Accident: Inside GM’s Deadly Ignition Switch Scandal, The Atlantic (Jan. 6, 2016) http://www.atlantamagazine.com/great-reads/no-accident-inside-gms-deadly-ignition-switch-scandal/.