There’ve been a slew of new developments in the VW scandal in the last 24 hours, so we’re rounding them up in a single post. Yesterday, VW announced that it would begin equipping all diesel vehicles in Europe and North America with the urea injection technology known as AdBlue in the United States. This announcement refers only to vehicles sold with diesel engines going forward; VW has yet to unveil a comprehensive plan for how it will fix all of the various US and European cars that have been cheating for the past six years.
In addition, some had speculated that the problem only impacted vehicles with the EA 189 engine. We now know that to be false, as VW’s 2016 models all included cheat devices, too. Meanwhile, the entire European market has been caught rampantly inflating real-world results thanks to regulatory capture on an epic scale.
The main thrust of VW’s announcement, however, wasn’t about its sudden need for AdBlue, a technology it has previously eschewed in many of its vehicles, but a “reorientation of the diesel strategy… and the development of a standardized electric architecture for passenger cars and light commercial vehicles.”
That’s right. VW is going electric. Surely this has nothing to do with the fact that the European Investment Bank (EIB) is investigating whether it can call due $2 billion in loans it granted VW to develop low-emission engines. The company wants to bring plug-in hybrids to market with greater range and develop high-volume electric vehicles that can drive up to 300km (180 miles) on a charge, and push forward into fuel types such as CNG. As part of this push, VW will bring a new high-end Phaeton to market, as a fully electric car with a new long-distance capability.
Call it the Tesla strategy: VW is going to introduce an all-electric luxury sedan as a way to defray the costs of development, while simultaneously trying to push the envelope on hybrids and vehicles with smaller range. It could even pose a threat to the upstart Tesla at some point in the future, assuming VW’s brand presence doesn’t go into a tailspin in the US market.
As for the cheating that kicked off this entire debacle, the scandal has spread in two different dimensions. First, new reports in the German magazine Spiegel claims that more than 30 managers have now been implicated in the development and management of the cheating scandal, with dozens to be suspended as the investigation continues. This blows holes in the incredibly dubious narrative VW advanced to Congress last week, in which it claimed that this work was done by a handful of rogue engineers. Such claims were always worthless — software engineers don’t, as a rule, just independently decide to write cheat code without being told to do so.
Speaking of software engineers, VW has revealed to the Associated Press that the 2016 models it pulled from certification from the US market contain more cheating software. In this case, the car contains an “auxiliary emissions control device” that operates differently than the defeat device present in 2009 – 2015 models. The 2016 cars contained software that would heat a pollution catalyst more quickly, improving its performance.
The problem here isn’t that VW wanted to improve the performance of its vehicles, but that the strategy could defeat the use of so-called “cold start” emissions tests, which is when diesel vehicles emit the most particulates. Devices that clean the exhaust at this stage are subject to regulatory approval, and VW apparently hadn’t bothered to get it. This raises serious questions about how the device is intended to work (and in which scenarios).
Finally, company veteran Winfried Vahland, the man intended to take over VW’s entire North American operation, resigned today. He’d been on the job less than three weeks. VW is reeling from its self-inflicted damage and planning significant cost cutting and layoffs. Reuters reports that the total cost of the recalls and repairs could top 35 billion euros, or just over $40 billion at current exchange rates. Auction values of diesel vehicles have reportedly already fallen as much as 13%.
If you’re not tired of VW after all this, Wired has an excellent piece on how VW’s corporate fraud and utter disregard for proper or ethical management could destroy its US dealers. Over the past few years, the company’s 650 US dealerships have spent millions on renovations and company-recommend luxuries. Now, that entire network is in jeopardy, with new car sales banned. VW vehicles have struggled in the US, but so-called “clean diesel” models were one of the bright spots. It’s no longer legal to sell those vehicles new and the 2016 lineup has been yanked completely, which means many dealerships have just lost their lifelines. The dealerships themselves have already bought the cars on the lot — cars they can’t sell.
I’m not particularly sympathetic to car dealerships. It’s an archaic system that exists to justify huge repair bills, and dealers have actively worked to prevent companies like Tesla from selling cars in new and innovative ways. There’s a difference, however, between thinking that the dealership system is archaic and outdated, and specifically attacking the individual businesses that people have built for decades. VW’s dealers had no way of knowing that their corporate partner was engaged in global fraud, but thus far, the company hasn’t taken much substantive action to make amends.