Sean Gallup, Getty Images
Industryweek 11918 091616 Vw Logo Seangallup

One Year On, Can VW Leave 'Dieselgate' Behind?

Sept. 16, 2016
The last 366 days have been rough for Volkswagen, of course, and both the number of cars and dollars lost are staggering (the total cost from the emissions-cheating scandal could come close to $40 billion). Will VW come through intact?

FRANKFURT, Germany — One year ago, Volkswagen’s cheating on emissions tests for millions of its diesel cars erupted into public view, leaving the mammoth carmaker battling an unprecedented crisis. The German company has sought to make amends with mass recalls and a fresh focus on building cleaner cars, but a mountain of legal complaints and ever-louder demands for compensation have made it difficult to turn the corner.

Just on Friday, two legal claims landed on Volkswagen’s doorstep with Blackrock — the world’s largest investment manager — saying it would join a legal action accusing the car giant of misleading shareholders, echoed by the German federal state of Hesse.

The scandal “has had huge effects on Volkswagen and the whole sector,” said industry expert Stefan Bratzel of Germany’s Center for Automotive Management.

VW built itself over decades into Europe’s car champion and now sells vehicles under 12 separate brands — from Seat, Skoda and Volkswagen to luxury brands Audi and Porsche. The firm rakes in 200 billion euros ($223.33 billion) in sales each year and employs 600,000 people globally.

But the Wolfsburg-based group was rocked to its core on September 18, 2015, when U.S. regulators accused it of deliberately skewing emissions data.

VW then publicly admitted it had installed so-called “defeat devices” in 11 million diesel-powered vehicles around the world. The software is able to detect when cars are undergoing regulatory tests and lowers their emissions accordingly, giving them the appearance of being less polluting than they really are.

In response to the revelations, Martin Winterkorn resigned as chief executive while insisting he had known nothing of the scheme, leaving then-Porsche boss Matthias Mueller to take over the whole group.

So far, VW has put aside 18 billion euros ($20.10 billion) in legal provisions, which pushed the company last year into its first annual loss in more than 20 years.

When the crisis broke, investors watched in horror as VW stock lost 40% of its value in just two days — burning up 30 billion euros ($33.50 billion) of market capitalization. One year on, VW remains valued around 20% lower than it was before last September.

Beyond stock markets, the scandal triggered no collapse in business for the Volkswagen brand, which on Friday reported that sales fell by just 0.2% worldwide in January-August 2016 compared with the same period last year. That period, though, saw 30,000 fewer cars with the circular VW badge drive off the dealers’ lots in the United States — a drop of 13%.

“One year after ‘dieselgate’, Volkswagen has maybe gone 50-60% of the way, but there’s still a lot to do,” Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen told AFP.

In the United States, the firm was able to reach a deal settling some of the claims, agreeing to pay almost $15 billion in fines and in compensation to some 480,000 car owners.

At home in Germany, VW lawsuits from hundreds of investors claiming at least 4.0 billion euros ($4.47 billion). In the suit joined by Blackrock, the plaintiffs accuse VW of failing to disclose the looming scandal to investors in a timely fashion. And VW still faces other legal claims in the United States as well as lawsuits and probes around the world, including in Australia, South Korea, France and Italy.

Meanwhile, European authorities are stirring in Brussels, animated by the charge that American VW customers are being treated better than EU citizens affected by the scandal.

So far, VW has refused to compensate Europeans or buy back their vehicles. Instead, it plans to retrofit the 8.5 million vehicles concerned to meet emissions standards. Experts predict the total bill for Volkswagen could reach between 25 and 35 billion euros ($27.92 billion to $39.08 billion), leaving the firm once again raiding its piggy bank but not threatening its survival.

Dudenhoeffer suggests that ‘dieselgate’ could, in the end, be a “boon for Volkswagen.” New CEO Mueller has adopted a bold strategy, promising dozens of new electric vehicles in coming years as well as pushing into fields like car-sharing services and self-driving cars. VW’s cheating has also seen regulators step up scrutiny of the whole industry, shining a spotlight on the harmful effects of polluting engines.

The scandal has been a “turning point for diesel,” said Bratzel of Germany’s Center for Automotive Management.

From September 2017, carmakers will submit vehicles for on-road testing as well as laboratory probes, forcing them to invest in more effective anti-pollution systems.

By Estelle Peard

Copyright Agence France-Presse, 2016

Popular Sponsored Recommendations

Global Supply Chain Readiness Report: The Pandemic and Beyond

Sept. 23, 2022
Jabil and IndustryWeek look into how manufacturers are responding to supply chain woes.

Empowering the Modern Workforce: The Power of Connected Worker Technologies

March 1, 2024
Explore real-world strategies to boost worker safety, collaboration, training, and productivity in manufacturing. Emphasizing Industry 4.0, we'll discuss digitalization and automation...

How Manufacturers Can Optimize Operations with Weather Intelligence

Nov. 2, 2023
The bad news? Severe weather has emerged as one of the biggest threats to continuity and safety in manufacturing. The good news? The intelligence solutions that build weather ...

How Organizations Connect and Engage with Frontline Workers

June 14, 2023
Nearly 80% of the 2.7 billion workers across manufacturing, construction, healthcare, transportation, agriculture, hospitality, and education are frontline. Learn best practices...

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!