Volkswagen: The
scandal explained
By BBC News
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.
Surely, VW heads will roll?
It's
still unclear who knew what and when. 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, it's difficult to see
them surviving.
Inevitably,
attention will focus on Mr Winterkorn, who recently saw off a bitter power
struggle with former VW's chairman Ferdinand Piech. The engine rigging scandal
could re-open old wounds. What's more, Mr Winterkorn ran the core Volkswagen
brands between 2007 and 2015. "Winterkorn either knew of proceedings in
the US or it was not reported to him," car analyst at Evercore ISI Arndt
Ellinghorst said.
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."