VW CEO Martin Winterkorn

VW has served itself up on a platter to the US EPA. Who's next?

The VW emissions scandal has provided the US regulator with a superbly juicy target with no domestic downside.

by Andrew Saunders
Last Updated: 08 Oct 2015

UPDATE 1400: According to German magazine Der Taggespeigel, VW CEO Martin Winterkorn is to resign 'by the end of the week', to be replaced by current Porsche CEO Matthias Mueller. A VW spokesman has called the rumour 'ridiculous'.

Oh dear. Things are really not looking good for VW. Following on from yesterday’s Mea Culpa by CEO Martin Winterkorn - and the ongoing collapse in its share price, dowm 20% yesterday and more today - the diesel pollution story is now officially out of control. The firm has admitted that as many as 11 million vehcies could be affected, and if 'fessing up and saying sorry was supposed to help draw a line under the crisis, it has backfired more spectacularly than one of VW’s dodgy diesels on the test rig.

The reality is that VW - which earlier this year finally overtook Toyota to be the world largest carmaker - has scored a truly epic own goal. It would hardly be possible to design a scandal more perfectly suited to making the EPA look tough whilst having absolutely minimal downside in terms of potential harm to the US industry.

‘VW-Audi is pretty small in the States anyway. This will kill them in the USA, and it could affect consumers real-world view of diesel vehicles around the world’ says automotive journalist and blogger Hilton Holloway.  

In the same way that another European transgressor, BP, was relentlessly pursued by the EPA after Deepwater Horizon (eventually paying fines totalling $18bn, remember), VW can now expect to become public enemy number one in America. And worst of all, no-one can say that it doesn’t deserve it - installing software to deliberately falsify test results is not any kind of accident. Even if it turns out to have been a rogue US-only operation, plenty of people at VW must have know what was going on. The EPA is quite right to take it very seriously, indeed.

The final nail in the regulatory coffin VW has built for itself is the fact that no major US manufacturer produces significant numbers of diesel-engined road cars. So the domestic consequences of pursuing VW hard are minimal. A management clearout at the German firm is now almost certain to happen, but is unlikely to make the EPA so much as miss a step.

The question in terms of consequences for VW now is not ‘If?’ but ‘When, and how bad?’ It has made a €6.5bn (£4.6bn) allowance for fines in its Q3 accounts, so let’s hope that is enough.

How did it come to this? There have been concerns within the industry for some time. ‘The 2015 VW Golf produces 10% higher fuel consumption in real world testing than it does on official tests,’ says Nick Molden, founder and CEO of Emissions Analytics, whose TrueMPG tests cars by driving them on the road and measuring the results rather than by going though the motions on a rolling road like the official industry tests. ‘We thought that was suspicious’.

Diesel has always been unpopular in the US, due to smog laws that are much more concerned with pollutants harmful to human health (particulates and NOx) rather than those involved in climate change (CO2). Petrol engines produce much more CO2 than diesels, but much less in the way of NOx and particulates. Hence the popularity of petrol-electric hybrids there, and the fact so many European manufacturers with their big diesel bias have always struggled in the US market.

So what probably begun as another attempt to break into the US market by an increasingly desperate VW, now looks set to end in a regulatory snarl up that will cost billions and could signal the end of diesel-engined cars even on this side of the pond.

Because if diesels are too dirty for American lungs, people will ask, why are they clean enough for European ones?

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