Several years ago, Volkswagen became determined to surpass Toyota as the world’s largest automaker by the end of this decade. The German automaker succeeded earlier this year, but in the meantime had sacrificed profitability and, some have argued, quality.
Now the company is mired in the midst of a massive scandal. Over the weekend, Volkswagen halted the sales of many of its diesel-powered automobiles. That decision came after the Environmental Protection Agency (EPA) accused the company of rigging its vehicles with software that “cheated” mandated U.S. emissions testing.
According to the Wall Street Journal, the decision to suspend the sales of diesel cars was made after the EPA accused Volkswagen last Friday of installing “defeat devices” in four-cylinder Volkswagen and Audi automobiles from model years 2009 to 2015. The California Air Resources Board (CARB) also launched an investigation into Volkswagen’s practice of installing software to manipulate information transmitted during vehicle emissions testing.
The EPA’s investigation alleges that Volkswagen’s software algorithm could detect when an automobile was undergoing an emissions inspection. The software would turn on the vehicle’s full emissions controls only during such a test; otherwise, it would shut off such mechanisms when the car was driving in normal street or highway conditions. For drivers, the benefit would be greater performance, especially on torque and mileage. For the environment, however, the EPA charges that Volkswagen’s software trick resulted in nitrogen oxide (NOx) emissions spiking as much as 40 times more than acceptable EPA levels.
EPA and CARB were alerted to the defeat devices after a University of West Virginia research team, working with the NGO International Council on Clean Transportation, raised questions about some of the Volkswagen model’s emissions levels during an analysis of the cars’ performance. Their questions were funneled to the EPA and CARB, and after an inquiry Volkswagen admitted to the installation of the defeat devices on approximately 482,000 vehicles.
These allegations are a huge blow to Volkswagen’s hopes to continue its global leadership in automobile sales, especially as the company has struggled with U.S. sales while lagging behind its German competitors BMW and Mercedes-Benz. If the automaker launches a recall, Volkswagen could face fines of up to $37,500 per vehicle for violating the U.S. Clean Air Act — which in the most nightmarish scenario could set the company back $18 billion.
Meanwhile, the American division of Volkswagen has “committed to fixing this issue as soon as possible,” and says it is cooperating with the EPA investigation. Volkswagen’s CEO, Dr. Martin Winterkorn, apologized yesterday for what he described as “breaking the trust” of the general public and the company’s customers, and says an external investigation will soon begin.
Whether Winterkorn’s tenure at Volkswagen, and the company’s already sluggish performance in the U.S., will suffer as a result of these investigations remains to be seen. But the EPA’s investigation is also a blow to the reputation of diesel vehicles in the U.S., which had been enjoying a slow, but steady, acceptance in the marketplace.
Image credit: M 93