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Fahrvergnugen

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1938 ad for the "KDF-Wagen," the Beetle's first incarnation

COMMENT: In the 1990’s, Volkswagen crafted an American advertising campaign that featured the German word “Fahrvergnugen” to entice people to buy its cars.

Now, VW has found a potent legal strat­egy for shield­ing its exec­u­tives from poten­tial lia­bil­ity in the diesel emis­sions scan­dal: just cite Germany’s pri­vacy laws to avoid pro­vid­ing emails or any other com­mu­ni­ca­tions to US inves­ti­ga­tors.

We also note that VW executives have long conducted their business affairs in such a way as to avoid mobile phones being used for surveillance. When the issue of mass data collection by NSA and GCHQ became at the end of the 1990’s, industrial espionage was the focal point of investigation and Germany’s apparent pique. 

Volkswagen’s behavior suggests that the company was aware of the NSA’s activities long before Eddie the Friendly Spook (Snowden) embarked on his “op.”

Martin Bormann (right) with Himmler

We note that Ferdinand Piech, the chairman of the board of VW, resigned in April of last year, perhaps knowing of the emissions scandal that was about to emerge.

Volkswagen evolved from the first “beetle” car, termed the KDF-Wagen–“strength through joy” car. Designed by Ferdinand Porsche, whose grandson-in-law headed the firm until recently, the beetle was a major propaganda tool for the Reich.

As is the case with the other German “core corporations,” Volkswagen is controlled by the Bormann capital network. Representatives of the firm were present at the August, 1944 meeting in Strasbourg (France), where plans for the Bormann directed flight-capital program and subsequent postwar “German economic miracle.”

“VW Refuses to Give Amer­i­can States Doc­u­ments in Emis­sions Inquiries” by Danny Hakim and Jack Ewing; The New York Times; 1/9/2016.

Cit­ing Ger­man pri­vacy laws, Volk­swa­gen has refused to pro­vide emails or other com­mu­ni­ca­tions among its exec­u­tives to attor­neys gen­eral in the United States, imped­ing Amer­i­can inves­ti­ga­tions into the company’s emissions-cheating scan­dal, accord­ing to offi­cials in sev­eral states.

The rev­e­la­tion sig­nals a turn­ing point in the now openly frac­tious rela­tions between Volk­swa­gen and Amer­i­can inves­ti­ga­tors, after claims by the Jus­tice Depart­ment, in its own inquiry this week, that the com­pany had recently “impeded and obstructed” reg­u­la­tors and pro­vided “mis­lead­ing information.”

Sig­nif­i­cantly, inves­ti­ga­tors say, Volkswagen’s actions limit their abil­ity to iden­tify which employ­ees knew about or sanc­tioned the decep­tions. Find­ing the peo­ple respon­si­ble for the cheat­ing is impor­tant to the law­suits: Penal­ties would be greater if the states and oth­ers pur­su­ing Volk­swa­gen in court could prove that top exec­u­tives were aware of or directed the activity.

Our patience with Volk­swa­gen is wear­ing thin,” New York’s attor­ney gen­eral, Eric T. Schnei­der­man, said. “Volkswagen’s coop­er­a­tion with the states’ inves­ti­ga­tion has been spotty — and frankly, more of the kind one expects from a com­pany in denial than one seek­ing to leave behind a cul­ture of admit­ted deception.”

He was one of sev­eral attor­neys gen­eral to express dis­sat­is­fac­tion in response to inquiries from The New York Times.

“I find it frus­trat­ing that, despite pub­lic state­ments pro­fess­ing coop­er­a­tion and an expressed desire to resolve the var­i­ous inves­ti­ga­tions that it faces fol­low­ing its cal­cu­lated decep­tion, Volk­swa­gen is, in fact, resist­ing coop­er­a­tion by cit­ing Ger­man law,” said Connecticut’s attor­ney gen­eral, George Jepsen. “We will seek to use any means avail­able to us to con­duct a thor­ough investigation.”

When he was named chief exec­u­tive shortly after the scan­dal broke, Matthias Müller said “My most urgent task is to win back trust” and promised “max­i­mum trans­parency.” But open­ing up a com­pany known for its par­tic­u­larly insu­lar cul­ture has been a tall order.

Ger­man inves­ti­ga­tors are not mak­ing sim­i­lar com­plaints about Volk­swa­gen. Klaus Ziehe, a spokesman for pros­e­cu­tors in Braun­schweig, a city close to Volkswagen’s head­quar­ters in Wolfs­burg, said that under Ger­man law, pros­e­cu­tors were allowed to carry out raids of Volkswagen’s Wolfs­burg offices to gather pos­si­ble evi­dence that could include email exchanges. He did not elab­o­rate on what they had found.

“We are not and do not want to be depen­dent on that which Volk­swa­gen gives us,” Mr. Ziehe said in a writ­ten response to ques­tions. At the same time, he said, the com­pany had been work­ing with Ger­man investigators.

“We can’t com­plain about our coop­er­a­tion with the com­pany,” Mr. Ziehe said. “We have the impres­sion that we have received every­thing that we have specif­i­cally requested.”

Volk­swa­gen, in a state­ment, said it could not com­ment on con­tin­u­ing proceedings.

Ger­many, a close ally of Amer­ica, is known for strict pri­vacy laws like its Fed­eral Data Pro­tec­tion Act, which lim­its access to data, par­tic­u­larly out­side the Euro­pean Union. And it is not the only Euro­pean coun­try with pri­vacy laws; sim­i­lar issues with Swiss laws have also ham­pered Amer­i­can inves­ti­ga­tors in their pur­suit of FIFA, soccer’s world gov­ern­ing body. Strains over data-sharing between the United States and Europe also emerged after the spy­ing rev­e­la­tions linked to Edward J. Snow­den, the for­mer National Secu­rity Agency contractor.

Ger­many also has a his­tory of refus­ing to extra­dite its cit­i­zens to the United States. Still, Amer­i­can inves­ti­ga­tors have dealt with Ger­man cor­po­ra­tions for many years and often reach ami­ca­ble settlements.

The United States, where the scan­dal orig­i­nated, is seen as poten­tially con­duct­ing tougher inves­ti­ga­tions of Volk­swa­gen than Ger­many, where the car­maker is one of the nation’s largest employ­ers. Pros­e­cu­tors in Braun­schweig ini­tially said they would con­duct a for­mal inves­ti­ga­tion of Mar­tin Win­terkorn, V.W.’s for­mer chief exec­u­tive, but quickly back­tracked.

The Jus­tice Depart­ment, which filed a civil suit against Volk­swa­gen this week, has not ruled out fil­ing a crim­i­nal charge or tar­get­ing spe­cific exec­u­tives. A Jus­tice Depart­ment spokesman declined to say whether it was fac­ing obsta­cles in its own inquiry.

Lack­ing access to offi­cials at Volk­swa­gen head­quar­ters makes it more dif­fi­cult to deter­mine who was respon­si­ble for the wrong­do­ing, William H. Sor­rell, the Ver­mont attor­ney gen­eral, said in a recent inter­view in Burling­ton. “One of the things that’s impor­tant to the state and oth­ers in terms of look­ing at the egre­gious­ness or seri­ous­ness of the con­duct is who at Volk­swa­gen knew what and when,” Mr. Sor­rell said.

“It doesn’t make this attor­ney gen­eral feel all warm and fuzzy,” he said, that infor­ma­tion “has been com­ing out as grad­u­ally as it has been.”

Mr. Schneiderman’s office declined to com­ment on whether Amer­i­can inves­ti­ga­tors were col­lab­o­rat­ing with Ger­man pros­e­cu­tors. In declin­ing to turn over evi­dence to Amer­i­can inves­ti­ga­tors, Volk­swa­gen has prin­ci­pally cited the Ger­man Fed­eral Data Pro­tec­tion Act, an aide said in an email, as well as the Ger­man Con­sti­tu­tion, the Euro­pean Con­ven­tion on Human Rights, deci­sions of the Ger­man Con­sti­tu­tional Court and the Euro­pean Court of Human Rights, “and (for good mea­sure) pro­vi­sions of the Ger­man Crim­i­nal Code.”

Volk­swa­gen has main­tained that a rel­a­tively small num­ber of engi­neers and man­agers were respon­si­ble for the cheat­ing. None of the nine Volk­swa­gen exec­u­tives who have been sus­pended in con­nec­tion with the scan­dal were mem­bers of the man­age­ment board. But sev­eral, like Wolf­gang Hatz, who headed engine and trans­mis­sion devel­op­ment, reported directly to mem­bers of the board.

The rev­e­la­tions may raise ques­tions about the com­mit­ment of Mr. Müller to clean­ing house. He was a pro­tégé of Mr. Win­terkorn and has close ties to a num­ber of the cen­tral fig­ures in the inves­ti­ga­tion. He was V.W.’s head of prod­uct plan­ning when the cheat­ing took place.

In a tacit admis­sion by Volk­swa­gen that it needs to smooth tense rela­tions with Amer­i­can offi­cials, Mr. Müller will meet with Gina McCarthy, the E.P.A. admin­is­tra­tor, on Wednes­day at the company’s request, a spokes­woman for the agency said.

Offi­cials at the office of the Texas attor­ney gen­eral had no imme­di­ate com­ment. The Cal­i­for­nia attor­ney general’s office declined to comment.

The Envi­ron­men­tal Pro­tec­tion Agency, along with reg­u­la­tors in Canada and Cal­i­for­nia, have also accused Volk­swa­gen of installing devices to cheat on emis­sions tests on more vehi­cles than acknowl­edged, a claim Volk­swa­gen disputes.

Ger­many has faced crit­i­cism in the past for laws that place a higher value on per­sonal pri­vacy than pub­lic inter­est. Ger­man con­fi­den­tial­ity laws may have pre­vented doc­tors from inform­ing the Ger­man air­line Lufthansa that one of its pilots, Andreas Lub­itz, was under­go­ing treat­ment for depres­sion. In March, Mr. Lub­itz delib­er­ately crashed a pas­sen­ger jet oper­ated by the Lufthansa sub­sidiary Ger­man­wings into a moun­tain in France, killing him­self and 149 oth­ers who were aboard.

“In the E.U., data pro­tec­tion is a fun­da­men­tal right that is in the Euro­pean char­ter,” said Paul M. Schwartz, a law pro­fes­sor at the Uni­ver­sity of Cal­i­for­nia, Berke­ley and co-director of its Cen­ter for Law & Tech­nol­ogy. The Ger­man fed­eral con­sti­tu­tional court has also iden­ti­fied a right to “infor­ma­tional self-determination,” he said. Such laws are “real obsta­cles,” he said, adding, “Euro­peans really take pri­vacy seriously.”

Still, while Amer­i­can reg­u­la­tors have faced chal­lenges before from Euro­pean cor­po­ra­tions, the level of frus­tra­tion in the Volk­swa­gen case is strik­ing. Philip Urof­sky, a part­ner at Shear­man & Ster­ling and for­mer assis­tant chief of the Jus­tice Department’s fraud sec­tion, said, “Obvi­ously, a Euro­pean com­pany ought to first and fore­most fol­low its own domes­tic laws.”

That said, pri­vacy laws have the poten­tial to be mis­used by com­pa­nies. “They frankly tie U.S. inves­ti­ga­tors’ hands, or even law firms doing inter­nal inves­ti­ga­tions, in ways that, in my per­sonal opin­ion, were not antic­i­pated or expected,” Mr. Urof­sky said.

Such issues as the invok­ing of pri­vacy laws are “not fre­quent, but they’re also not unusual,” said Ben­jamin M. Lawskyfor­mer super­in­ten­dent of the New York Depart­ment of Finan­cial Ser­vices and a for­mer top offi­cial in the state attor­ney general’s office. But, he said, “it is the rare case that it ends up being a total obstruction.”

Mr. Lawsky left the depart­ment last year, shortly after it was involved in a a $2.5 bil­lion set­tle­ment with Deutsche Bank over alle­ga­tions that it had manip­u­lated inter­est rates.

While he did not want to draw analo­gies to his own pre­vi­ous cases, Mr. Lawsky called such issues frus­trat­ing. Still, he said, inves­ti­ga­tors some­times even­tu­ally find ways to get what they want — whether by get­ting the infor­ma­tion from Amer­i­can com­puter servers, through nego­ti­a­tions with com­pa­nies or in coop­er­a­tion with for­eign law enforcement.

“Often when you start dig­ging down, those rules are sub­ject to inter­pre­ta­tion,” he said. “If you really push at how those rules have been inter­preted, you some­times can find ways to get around them.”

“Merkel’s Mobile Habit” by Chris Bryant; Financial Times [Blogs]; 10/24/2013.

. . . . German corporate executives have long assumed that their mobile phone calls could be monitored.

At companies such as carmaker Volkswagen and chemical company Evonik, it is standard practice for mobile phones to be left outside prior to boardroom discussions or when in sensitive meetings on foreign trips.

“Our security people collect up the mobile phones and put them to one side” Audi board member Ulrich Hackenberg told the FT last month. . . . 

“Designing Cars for Hitler: Volkswagen and Porsche’s Nazi Roots” by Dietmar Hawranek; Der Spiegel; 7/21/2009.

. . . . Porsche’s son-in-law, Anton Piëch, began managing the plant in 1941. In his study “The Volkswagen Plant and Its Workers in the Third Reich,” the German historian Hans Mommsen writes: “In the summer of 1943, Anton Piëch bluntly declared that he had to use cheap Eastern workers in order to fulfill the Führer’s wish that the Volkswagen be produced for 990 Reichsmark.”

In the early 1990s, this part of the history of the VW Group caught up with Ferdinand Piëch, the son of the former plant director Anton Piëch. Ferdinand Piëch, the head of Audi, was trying to rise to the top of the Volkswagen Group.

Piëch, who had pushed aside a number of executives along his career path, had his share of enemies. Some of them spread the rumor that Piëch was incapable of being the head of VW, hinting at the headlines it would produce in the important US market if the son of the former Wolfsburg plant director, who had used forced laborers, became the head of the modern-day VW Group.

Ferdinand Porsche himself served Hitler during the war as the head of his tank commission. He supported Hitler’s power and profited from the regime. . . . An Allied investigative commission later declined to file charges against Porsche, although he, his son Ferry and his son-in-law Anton were imprisoned in France for several months. . . .

Martin Bormann: Nazi in Exile; Paul Manning; Copyright 1981 [HC]; Lyle Stuart Inc.; ISBN 0-8184-0309-8; p. 25.

. . . . Present were Dr. Kaspar representing Krupp, Dr. Tolle representing Rochling, Dr. Sinceren representing Messerschmitt, Drs. Kopp, Vier, and Beerwanger representing Rheinmetall, Captain Haberkorn and Dr. Ruhe representing Bussing, Drs. Ellenmayer and Kardos representing Volkswagenwerk, engineers Drose, Yanchew, and Koppshem representing various factories in Posen, Poland (Drose, Yanchew, & Co., Brown-Boveri, Herkuleswerke, Buschwerke, and Stadtwerke); Dr. Meyer, an official of the German Naval Ministry in Paris; and Dr. Strossner of the Ministry of Armament, Paris. . . .

Martin Bormann: Nazi in Exile; Paul Manning; Copyright 1981 [HC]; Lyle Stuart Inc.; ISBN 0-8184-0309-8; p. 281.

. . . . But it is just as true that the river of wealth back into West Germany from assets sequestered by Martin Bormann and the corporations that participated in his brilliantly conceived program of flight capital was a major force in the recovery of the nation–and the best-kept secret in all of German history. The return of capital started slowly. As factories were rebuilt and revved up for production, money from Swiss bank accounts representing their secret accounts flowed into the Rhineland. It was termed investment money, and the first companies to enjoy its impact were those with demand products: automobiles, steel and chemicals. Ferdinand Porsche, who designed the famed “Tiger” tank, redisigned Hitler’s “people’s car,” the Volkswagen, and a new factory was erected to turn it out. . . .

Discussion

14 comments for “Fahrvergnugen”

  1. Auto industry lobbyists are probably burning the midnight diesel right now: The EU’s ‘no cheating required‘ emissions-testing dream regime for the manufacturers might finally require cheating:

    The Verge
    EU proposes stricter emissions testing after VW scandal

    New framework would give EU more power over the testing process

    By James Vincent on January 27, 2016 09:00 am

    The European Union has announced plans for a “major overhaul” of car emissions testing following the Volkswagen scandal, with new laws that would give it more control across the EU. The newly-proposed framework aims to ensure that vehicles meet standards by making testing centers more independent. Previously, centers competed for work from manufacturers who paid them directly. Under the new protocol, fees would instead be collected by EU member states and disbursed. This, says EU lawmakers, will help “avoid financial links” between manufacturers and the companies responsible for approving their cars for the market.

    The plan would complement a separate proposal to introduce “real driving emissions” tests — tests that occur when the car is on the road, not in a center. Voting on the proposal is set to go ahead next week, although the European Parliament’s environmental committee has recommended that lawmakers reject the bill for being too easy on manufacturers. The law originally allowed a maximum overshoot of 60 percent of the EU emissions limit, but this was later raised to 110 percent. (Tests suggest on-road emissions are actually 400 to 500 percent higher than the limit.) The US Environmental Protection Agency began expanding its own real world emissions testing last year.

    The newly-proposed EU testing framework would also include more surveillance of cars already on the market, including spot-checks “to detect non-compliance at an early stage.” To enforce standards, the EU would have powers to “suspend, restrict, or withdraw” licenses given to car testing centers, and the ability to fine manufacturers as much as €30,000 per vehicle if they’re caught breaking emissions standards. The new framework still requires approval from EU member states and the European Parliament if it is to become law.

    “The plan would complement a separate proposal to introduce “real driving emissions” tests — tests that occur when the car is on the road, not in a center. Voting on the proposal is set to go ahead next week, although the European Parliament’s environmental committee has recommended that lawmakers reject the bill for being too easy on manufacturers. The law originally allowed a maximum overshoot of 60 percent of the EU emissions limit, but this was later raised to 110 percent. (Tests suggest on-road emissions are actually 400 to 500 percent higher than the limit.)”
    Yep, the EU now has a chance to show that it’s serious about actually regulated auto emissions. Or, rather, had a chance:

    AFP
    EU lawmakers back diesel test loopholes despite VW scandal

    February 3, 2016 9:37 AM

    Strasbourg (France) (AFP) – EU lawmakers on Wednesday waved through plans to allow diesel car makers to exceed pollution limits, in a big victory for the auto industry after the Volkswagen scandal.

    The European Commission, the executive arm of the EU’s 28 member states, announced the new limits in October as the VW scandal raged, part of plans to adopt more realistic pollution monitoring based on real road conditions instead of laboratory tests.

    But the proposals contained major loopholes for car-makers that were negotiated secretly by experts from member states, angering environmentalists who reacted with a major push to block the new limits at the European Parliament.

    MEPs voted 323 in favour of leaving the loopholes — known as “conformity factors” — with 317 MEPS voting against them. There were 60 abstentions.

    The commission has been accused of ignoring evidence that Germany’s Volkswagen was massively cheating to pass pollution tests, a revelation made by US regulators.

    It said in an email that it welcomed parliament’s green light, hailing it as a much needed transition to tougher “real-driving” pollution tests.

    “By better reflecting the actual level of emissions in real driving conditions, these tests will reduce the net amount of air pollution emitted by diesel cars,” commission spokeswoman Lucia Caudet said in an email.

    The commission said Wednesday that a raft of reforms announced last week would tighten the screws on pollution.

    Europe’s auto industry, which employs 12 million people, insisted the new limits were unprecedented.

    “This regulation will be a major challenge for the industry, with new and more stringent testing standards that will be extremely difficult to reach in a short space of time,” said Erik Jonnaert, head of the Brussels-based car lobby ACEA .

    “However automobile manufacturers welcome the much-needed clarity, and are eager to move forward by implementing the new testing conditions as soon the regulation is adopted,” he said.

    Under the commission’s plan, from September 2017 new diesel models would be allowed to exceed the EU’s official nitrogen oxide limit by more than double.

    From 2020, the discrepancy would fall to 50 percent more than the limit, indefinitely.

    “From 2020, the discrepancy would fall to 50 percent more than the limit, indefinitely.”
    Well, the eventual 50 percent waiver is indeed better than the 500 percent over the safety guidelines that these cars are currently routinely exceeding. Still, for a continent where half the cars run on diesel, capitulating to industry lobbying in the wake of this scandal and giving an indefinite waiver to exceed limits that are seemed to be “safe” by 50 percent isn’t the breath of fresh air the EU needs.

    Posted by Pterrafractyl | February 4, 2016, 11:35 am
  2. Ever since it became clear that VW might be unable to actually fix many of its diesel-fuel cars to get them into compliance with US regulations, one of the big questions how been whether or not the fines and costs of doing business in the US would be so significant that the company would just pull out of the US market altogether. Well, EPA found a possible compromise solution and it’s going to be interesting to hear the response from German policy-makers who are understandably concerned about what the VW scandal will do to German jobs: The EPA wants VW to “make up” for what it did by producing electric vehicles in the US:

    Reuters

    EPA asks Volkswagen to make electric cars in U.S.: Welt am Sonntag

    Sun Feb 21, 2016 7:27am EST

    FRANKFURT

    U.S. authorities have asked the German carmaker Volkswagen (VOWG_p.DE) to produce electric vehicles in the United States as a way of making up for its rigging of emission tests, the German newspaper Welt am Sonntag reported.

    The U.S. Environmental Protection Agency is currently in talks with Volkswagen with the aim of agreeing on a fix for nearly 600,000 diesel vehicles that emit up to 40 times legal pollution limits.

    The paper, which gave no source for its report, said the EPA was asking VW to produce electric vehicles at its plant in Chattanooga, Tennessee, and to help build a network of charging stations for electric vehicles in the United States.

    Some of Volkswagen’s cars already feature electric or hybrid motors. It was not clear from Welt am Sonntag’s report whether the EPA was asking VW to produce new models or existing ones.

    Five months after the emissions scandal broke in the United States, Europe’s leading carmaker has yet to come up with a technical fix for almost 600,000 diesel cars, and is facing a growing number of legal claims.

    “Talks with the EPA are ongoing and we are not commenting on the contents and state of the negotiations,” a VW spokesman said. EPA declined to comment.

    Meanwhile, weekly tabloid Bild am Sonntag said Hans Dieter Poetsch, the chairman of Volkswagen’s supervisory board, was summoned by German transport minister Alexander Dobrindt on Feb. 16 to give an update on the carmaker’s progress in tackling the crisis.

    According to the article, Poetsch pledged Volkswagen would do everything to solve the crisis, regardless of how that might impact individuals and positions at the company.

    A spokesman for Volkswagen confirmed that Poetsch and Thomas Steg, head of group government relations at VW, updated Dobrindt on Feb. 16 on the status quo of its internal investigation, but declined to give details about the nature of discussions.

    “The paper, which gave no source for its report, said the EPA was asking VW to produce electric vehicles at its plant in Chattanooga, Tennessee, and to help build a network of charging stations for electric vehicles in the United States.”
    Well, manufacturing electric cars in the US and helping to build a network of charging stations would be a pretty slick public relations move. We’ll see if the US’s proposal, if real, includes a dramatic reduction in VW’s fines as part of the deal. While it would be absurd to completely eliminate a fine, it’s still a potentially useful precedent for dealing with massive corporate environmental crimes: if your company is caught with a business model that trashes the environment, it has to make a long-term commitment towards building the green infrastructure of tomorrow that would make its illegal pollution unnecessary in the first place. Too bad the EPA didn’t make BP agree to a similar plan. And while this proposal would no doubt generate concerns over potentially lost German jobs, it’s worth recalling that a large number of those future electric car manufacturing jobs are already lost no matter where the cars are built.

    So it will be interesting to see if anything comes from this proposal. Especially as the investigation drags on, because if it turns out that VW’s executives were all fully aware for years about what was going on and the scandal gets even worse, who knows, maybe VW really will just give up on the US market for now and pull out altogether. But if VW’s reputation is only partially damaged, but not so much that it’s worth pulling out of the US entirely, well, then something like a big ‘green’ makeover for VW by accepting the EPA’s deal could be exactly what the company needs. A lot depends on how deep the scandal goes:

    Reuters
    Volkswagen probe finds manipulation was open secret in department: newspaper

    FRANKFURT
    Sat Jan 23, 2016 6:29am EST

    Volkswagen’s (VOWG_p.DE) development of software to cheat diesel-emissions tests was an open secret in its engine development department, Germany’s Sueddeutsche Zeitung newspaper said on Friday, citing results from VW’s internal investigation.

    Many managers and staff dealing with emissions problems in the department knew of or were involved in developing the “defeat devices”, said the newspaper, which researched the matter with regional broadcasters NDR and WDR.

    A culture of collective secrecy prevailed within the department, where the installation of the defeat software that would cause the carmaker’s biggest ever corporate crisis was openly discussed as long ago as 2006, Sueddeutsche said.

    But it said there were exceptions: a whistleblower, who was himself involved in the deception and has been giving evidence to investigators hired by Volkswagen, alerted a senior manager outside the department in 2011.

    This manager, however, did not react, the newspaper said.

    Staff members in engine development felt pressure from the management board to find a cost effective solution to develop clean diesel engines for the U.S. market.

    Rather than telling Volkswagen’s management board the rules could not be adhered to, staff members in engine development decided to push ahead with manipulation, Sueddeutsche reported.

    “Within the company there was a culture of ‘we can do everything’, so to say something cannot be done, was not acceptable,” Sueddeutsche Zeitung said, quoting the VW internal report which included testimony from a staff member who took part in the fraud.

    “Instead of coming clean to the management board that it cannot be done, it was decided to commit fraud,” Sueddeutsche reported in its Saturday edition.

    Staff in engine development took comfort from the fact that regulators would not be able to detect the fraud using conventional examination techniques, the paper further said.

    Engine management software delivered by Bosch was then manipulated in Wolfsburg, where Volkswagen has its headquarters, Sueddeutsche Zeitung said.

    Manipulation started in November 2006, Sueddeutsche Zeitung said.

    Volkswagen has said that to the best of its knowledge only a small circle of people knew about the manipulation, which Europe’s biggest carmaker admitted to U.S. environmental authorities in September last year.

    It has said it is not aware of any involvement by top management or supervisory board members in the affair, which toppled its chief executive last year and is likely to cost billions of dollars for recalls, technical fixes and lawsuits.

    A Volkswagen spokesman declined to comment on Friday on what he called “speculation”, saying the investigation – for which Volkswagen has hired U.S. law firm Jones Day – was continuing.

    Volkswagen initiated an amnesty program last year for witnesses who could shed light on the scandal, promising not to fire employees who came forward with information by Nov. 30.

    The carmaker plans to give the first public results of its investigation at the annual shareholders’ meeting in April.

    “Many managers and staff dealing with emissions problems in the department knew of or were involved in developing the “defeat devices”, said the newspaper, which researched the matter with regional broadcasters NDR and WDR.”
    That sure doesn’t look good for VW, but note that the top management continues to be spared in this assessment:


    Volkswagen has said that to the best of its knowledge only a small circle of people knew about the manipulation, which Europe’s biggest carmaker admitted to U.S. environmental authorities in September last year.

    It has said it is not aware of any involvement by top management or supervisory board members in the affair, which toppled its chief executive last year and is likely to cost billions of dollars for recalls, technical fixes and lawsuits.

    “It has said it is not aware of any involvement by top management or supervisory board members in the affair.”
    At least that was official company policy as of that January report. And since it seems rather implausible that none of those executive knew considering that “many managers and staff dealing with emissions problems” knew or were involved with developing and installing the “defeat devices” since 2006, it’s going to be extra interesting to see if many more whistle-blowers emerge once names start getting names and individuals start getting thrown under the bus.

    Although, who knows, maybe VW’s top executives will manage to make it through the entire scandal successfully asserting their long-run ignorance:

    The Wall Street Journal
    VW Memo Warned of Emission Issues in 2014
    A memo refers to a defeat device in discussing the results of emissions tests from U.S. environmental authorities

    By William Boston
    Feb. 15, 2016 4:39 p.m. ET

    BERLIN—A senior Volkswagen AG executive commissioned with troubleshooting and known internally as “the fireman” warned the company’s top management in May 2014 about an impending investigation by U.S. environmental authorities into whether the German car maker was using “test recognition” on some of its diesel engines.

    The warning, communicated in a note to then-Chief Executive Martin Winterkorn, came from Bernd Gottweis, a quality-control executive who ran a team of product sleuths that Volkswagen management dispatched around the world to put out quality flare-ups before they grew into a full-fledged blaze.

    The memo makes the first known reference to a defeat device in the investigation into Volkswagen’s emissions-cheating scandal and might suggest that the company’s top executives knew more than they are saying now. It isn’t known whether Mr. Winterkorn saw the memo.

    “There was a short memo from Mr. Gottweis about this issue, but it would be a mistake to assume that it was clear back then that we knew it was cheating software. That was not clear,” a person familiar with the situation said. “We don’t know if Winterkorn read the memo or not.”

    Mr. Winterkorn couldn’t be reached through his attorney for comment.

    The existence of Mr. Gottweis’s memo was reported by the weekly Bild am Sonntag newspaper on Sunday. The newspaper claims to have internal Volkswagen documents that turned up during the investigation led by U.S. law firm Jones Day, and quotes from the memo, which it says Mr. Winterkorn received on May 23, 2014. Bild said the memo was part of a package of documents that Mr. Winterkorn took home over that weekend.

    Volkswagen became aware in April 2014 that a study conducted by emissions experts at West Virginia University discovered that Volkswagen diesel-powered Passat and Jetta models spewed more than 30 times the allowable levels of nitrogen oxide, or NOx, emissions during normal driving, even though the vehicles passed laboratory tests.

    The academics shared their data with the California Air Resources Board, which began trying to figure out why the NOx emissions were so high.

    In the memo, Mr. Gottweis discussed the emissions tests from U.S. environmental authorities and said Volkswagen engineers in the U.S. were at a loss to explain the problem.

    “No plausible explanation for the dramatically increased NOx emissions can be given to the authorities,” Mr. Gottweis wrote, according to Bild, which claims to have copies of the documents. “It is to be assumed that the authorities will subsequently examine VW systems to determine if Volkswagen has installed test recognition into the engine control software (a so-called defeat device).”

    The German car maker admitted in August that the NOx emissions were masked by software that shut down emissions control when the cars were on the road.

    In September, after the Environmental Protection Agency disclosed the emissions fraud, Volkswagen admitted installing the software on nearly 11 million vehicles world-wide.

    The company faces regulatory and criminal investigations and civil litigation in the U.S. and Europe, and up to $46 billion in potential fines.

    During his years of service, he was in charge of a group called the Committee for Product Security, a team known within Volkswagen as the “Fire Department” that included engineers, lawyers and other specialists who were called into action to put out product fires.

    “The memo makes the first known reference to a defeat device in the investigation into Volkswagen’s emissions-cheating scandal and might suggest that the company’s top executives knew more than they are saying now. It isn’t known whether Mr. Winterkorn saw the memo.”
    2014 is apparently when VW’s management found out about what was then an eight year old open secret. At least that’s the state of the investigation at this point and that’s probably about as far as the investigation is going to get unless some more whistle-blowers emerge. So it’s looking like we might see VW resolve this scandal by placing virtually all of the blame on lower-level employees, paying some big fines, and maybe opening an electrical car plant in the US. Of course, one complication with accepting the EPA’s proposal to open a plant is that other countries might say, “hey, we want a plant here too!” For instance, might South Korea want a VW auto plant? If so, they’re in a good position to request one:

    Reuters
    South Korean prosecutors raid Volkswagen office in emissions probe

    February 18, 2016 10:52 PM

    SEOUL (Reuters) – South Korean prosecutors on Friday searched the local office of Volkswagen AG (VOWG_p.DE) and sister firm Audi AG (NSUG.DE) as part of a probe into an emissions case, a spokesman for the German carmakers’ local unit said, confirming media reports.

    Volkswagen and Audi face a flurry of legal complaints globally after Volkswagen admitted in September to falsifying U.S. emissions tests on some of its diesel cars.

    Yonhap News Agency said investigators from the Seoul Supreme Prosecutors’ Office raided the office and the house of an unidentified senior company official on Friday. They seized emails exchanged with headquarters and documents on emissions verification and vehicle certification, the report said.

    The country’s environment ministry last month filed a criminal complaint against the South Korean unit of Volkswagen/Audi and two company officials, saying that their vehicles do not meet permissible emission levels required by law..

    Under South Korean environmental law, a guilty conviction could result in a prison term of up to seven years and a fine of up to 100 million won ($81,253), the ministry has said.

    Volkswagen and Audi top the imported car sales rankings in South Korea, the second-biggest Asian market for diesel cars after India.

    “Volkswagen and Audi top the imported car sales rankings in South Korea, the second-biggest Asian market for diesel cars after India.”
    It sounds like South Korea could use a shiny new VW plant.

    Posted by Pterrafractyl | February 22, 2016, 7:19 pm
  3. LOL!:

    Reuters

    German economy ministry says trusts VW to clear up emissions scandal

    Mon Mar 7, 2016 6:34am EST

    BERLIN

    Germany’s Economy Ministry is counting on an internal investigation at carmaker Volkswagen to get to the bottom of a scandal over the rigging of emissions tests, a spokeswoman for the ministry said.

    “We trust that the company is leaving no stone unturned,” Tanja Alemany Sanchez de León told a government news conference on Monday.

    German weekly Bild am Sonntag had reported on Sunday that the current chairman and the chief executive of Volkswagen were alerted by the former CEO to the use of illicit emissions-control software in the United States two weeks before the carmaker disclosed the scale of its manipulations.

    “Germany’s Economy Ministry is counting on an internal investigation at carmaker Volkswagen to get to the bottom of a scandal over the rigging of emissions tests, a spokeswoman for the ministry said.”
    Yep. At this point, the best shot at getting any sort of answer to the VW diesel mystery is for a group of meddling mystery-solving kids to show up. *fingers crossed!*

    Posted by Pterrafractyl | March 7, 2016, 8:43 am
  4. The chief prosecutor in Germany investigating VW over the diesel emissions fraud announced that the number of suspects under investigation increased from 6 to 17. If course, since none of 17 are actual board members (current or former), it’s probably more accurate to say that 11 more lower-level employees just got thrown under the VW Bus:

    International Business Times

    Volkswagen Emissions Scandal: More Employees Targeted In Probe; CEO Warns Of ‘Substantial And Painful’ Financial Damage

    By Suman Varandani On 03/08/16 AT 6:46 AM

    The number of suspects under investigation over the massive Volkswagen emissions scandal has increased from six to 17, German prosecutors said Tuesday. The news comes as Volkswagen CEO Matthias Mueller told employees gathered at the Wolfsburg headquarters that the emissions-cheating scandal will inflict “substantial and painful” financial damage on the carmaker.

    Chief prosecutor Klaus Ziehe told Agence France-Presse that “no former or current board members” were among the 17 employees under investigation. The automaker had admitted in September last year that it rigged emission tests by equipping diesel vehicles with “defeat device.” About 11 million cars have been globally affected by the emissions scandal, of which 8.5 million cars are in Europe.

    Prosecutors in Braunschweig are investigating the suspects as the automaker is based in Wolfsburg, in the regional state of Lower Saxony, which falls under Braunschweig’s jurisdiction, according to reports.

    Mueller said Tuesday that the emissions-cheating scandal will keep Volkswagen busy “for a long time,” adding that the German carmaker has made no attempts to conceal its wrongdoings.

    Meanwhile, as the probe into the Volkswagen scandal widens, the automaker’s second-largest shareholder said that more “unpleasant news” might emerge.

    “We will this year probably every now and then be confronted with unpleasant news related to dieselgate,” Stephan Weil, prime minister of Lower Saxony, which holds 20 percent of Volkswagen’s common shares, said Tuesday, according to Reuters. “The damage will, on balance, not be minor, as much as that can already be said today but Volkswagen luckily has a strong economic substance,” Weil told the gathering at the headquarters that was attended by thousands of workers.

    He also reportedly said that Lower Saxony has “no reason” to alter its commitment to Volkswagen.

    “Meanwhile, as the probe into the Volkswagen scandal widens, the automaker’s second-largest shareholder said that more “unpleasant news” might emerge.
    That’s definitely “unpleasant news” for VW’s employees. It’s going to be a bumpy ride.

    Posted by Pterrafractyl | March 8, 2016, 11:35 am
  5. The head of VW North America resigned last week. It was guaranteed to be at least somewhat ominous given the overall context of the VW crisis and ongoing investigation. But it was a little more ominous than necessary by the fact that it was immediate no reason was given for his departure:

    The Guardian

    Michael Horn, VW’s US president, resigns ‘effective immediately’

    Volkswagen did not explain why Horn was leaving the company now, six months after company was caught using software to cheat on regulators’ tests

    Rupert Neate in New York

    Wednesday 9 March 2016 18.11 EST

    The head of Volkswagen in the US resigned “effective immediately” on Wednesday night as the company struggles to agree on a settlement with the US government over its emissions cheating scandal.

    Michael Horn, who had served as VW’s US president and chief executive since 2014, was not quoted in the company’s three-paragraph statement announcing his immediate exit from the firm after more than 25 years of service.

    VW said Horn’s resignation was by “mutual agreement” and he would be “leaving to pursue other opportunities effective immediately”.

    The company did not explain why Horn was leaving the company now – six months after VW was caught using “default device” software to systematically cheat on US regulators’ tests.

    Martin Winterkorn, the global CEO of VW, resigned in September 2015 in the near-immediate aftermath of the scandal, which has wiped billions of euros of VW’s market value and left the company facing fines of as much as $20bn and a criminal investigation by the US Department of Justice.

    It was revealed last week that Winterkorn was told about the illegal emissions crisis more than a year before the company admitted it to regulators.

    Horn has at times appeared frustrated with the German company’s handling of the crisis. When he was called before the US Congress in October, he denied any prior knowledge of the software, and said its installation was not a corporate decision. “I agree it’s very hard to believe,” he told lawmakers. “Personally, I struggle too.”

    “The company did not explain why Horn was leaving the company now – six months after VW was caught using “default device” software to systematically cheat on US regulators’ tests.”
    Hmm…what could it be? Might the sudden unexplained resignation have something to do what the new whistleblower lawsuit from an employee in Michigan alleging the destruction of documents? It seems possible:

    Associated Press
    Ex-Worker Says VW Destroyed Documents, Obstructed Justice

    By tom krisher, ap auto writer

    DETROIT — Mar 14, 2016, 3:51 PM ET

    Volkswagen deleted documents and obstructed justice after the U.S. Environmental Protection accused the company of cheating on emissions tests, a former employee alleged in a lawsuit.

    Daniel Donovan says in a whistleblower case that he was wrongfully fired Dec. 6, 2015 after refusing to participate in the deletions and reporting them to a supervisor. The lawsuit says that the evidence deletion continued for three days after the Sept. 18 allegations from the EPA and despite a hold order from the Justice Department.

    VW has admitted that it programmed about 600,000 diesel-powered cars in the U.S. to turn on pollution controls during EPA treadmill tests and turn them off when the cars were on the road. The agency alleges that the cars emit as much as 40 times the allowable amount of nitrogen oxide, which can cause respiratory problems.

    The Justice Department is investigating potential criminal charges against VW, and the company has been negotiating with the EPA and California regulators to come up with repairs. VW faces a March 24 deadline from a federal judge to reach agreement on the fixes.

    Donovan worked as a technology employee with VW’s general counsel office who was responsible for electronic information management in injury and product liability cases. The lawsuit said he was fired “because of his refusal to participate in a course of action that would spoilate evidence and obstruct justice” in the EPA and Justice Department probes.

    But VW said Monday that Donovan’s departure from the company was not related to the diesel emissions issue. “We believe his claim of wrongful termination is without merit,” the company said Monday in a statement.

    Donovan, who worked in VW’s Michigan offices, alleges that the company’s information technology department did not stop deleting items until Sept. 21, so Donovan reported his concerns to his supervisor, according to the March 8 lawsuit filed with the Oakland County Circuit Court in Pontiac, Michigan. It also says the department was not preserving backup disks.

    Donovan was fired because VW of America believed he was about to report the deletions and obstruction of justice to the EPA, Justice Department or the FBI, according to the complaint. It was unclear whether Donovan, of suburban Detroit, spoke with federal investigators. His attorney, Sam Morgan, would not comment and said his client didn’t want to speak about it either. A message was left for the U.S. Attorney’s Office in Detroit.

    The lawsuit alleges that the company violated the Michigan Whistleblowers’ protection act.

    Obstruction of justice by destroying evidence can have serious consequences for companies, but also can be difficult to prosecute. In 2002, accounting firm Arthur Andersen was found guilty of shredding documents involving its auditing of defunct energy firm Enron Corp. in order to thwart a federal accounting probe. The firm, which withered after the Enron case, was placed on five years of probation and fined $500,000. But its conviction was overturned by the Supreme Court in 2005, which ruled the judge’s instructions to the jury were too vague for jurors to determine correctly whether Andersen obstructed justice.

    The scandal already has cost Volkswagen’s CEO his job, and last week, VW ousted its top U.S. executive.

    “Donovan worked as a technology employee with VW’s general counsel office who was responsible for electronic information management in injury and product liability cases. The lawsuit said he was fired “because of his refusal to participate in a course of action that would spoilate evidence and obstruct justice” in the EPA and Justice Department probes.”
    Keep in mind that VW declared amnesty for any employees that came forward with information on the emissions scandal. So it would appear that the amnesty only applies to the actual emissions scandal. Not the cover up of the scandal. Good to know.

    Posted by Pterrafractyl | March 14, 2016, 12:55 pm
  6. It looks like VW and the US government are arriving at a fix for US owners caught in the dieselgate scandal. It’s probably not the fix VW was hoping for, but since it remains very unclear how the company might of fix the affected vehicles, and we’re hitting a deadline for coming up with an agreement, this fix might be the only solution left: VW is going to offer to buy back the vehicles:

    Reuters

    Exclusive: VW to offer to buy back nearly 500,000 U.S. diesel cars – sources

    WASHINGTON | By David Shepardson
    Wed Apr 20, 2016 6:37pm EDT

    Volkswagen AG (VOWG_p.DE) and U.S. officials have reached a framework deal under which the automaker would offer to buy back almost 500,000 diesel cars that used sophisticated software to evade U.S. emission rules, two people briefed on the matter said on Wednesday.

    The German automaker is expected to tell a federal judge in San Francisco Thursday that it has agreed to offer to buy back up to 500,000 2.0-liter diesel vehicles sold in the United States that exceeded legally allowable emission levels, the people said.

    That would include versions of the Jetta sedan, the Golf compact and the Audi A3 sold since 2009. The buyback offer does not apply to the bigger, 80,000 3.0-liter diesel vehicles also found to have exceeded U.S. pollution limits, including Audi and Porsche SUV models, the people said.

    As part of the settlement with U.S. authorities including the Environmental Protection Agency, Volkswagen has also agreed to a compensation fund for owners, a third person briefed on the terms said.

    The compensation fund is expected to represent more than $1 billion on top of the cost of buying back the vehicles, but it is not clear how much each owner might receive, the person said.

    Volkswagen may also offer to repair polluting diesel vehicles if U.S. regulators approve the proposed fix, the sources said..

    A VW spokeswoman, the EPA and the Justice Department declined to comment Wednesday.

    VW will pay cash compensation to owners who either sell their vehicles back or get them fixed, one of the people briefed on the matter said. Owners selling back their vehicles will get an additional cash payment on top of receiving the estimated value of the vehicles from before the emissions scandal became public in September 2015.

    Owners are expected to have around two years to decide whether to sell back vehicles or get them repaired. It is not clear whether VW will be allowed to resell vehicles they buy back, the source said.

    The framework deal with U.S. officials was reached after lengthy talks in recent days at the Washington law office of Robert Mueller. The former FBI director is the court appointed mediator named to help settle more than 500 civil suits filed against VW. The talks, which continued over the week, included all the government agencies and lead plaintiffs attorneys suing GM.

    Some elements of the settlement are still being worked out and details are not expected to be announced Thursday at a court hearing, the people briefed on the matter said. The final deal could still change before it is officially announced, they said.

    U.S. District Judge Charles Breyer in March gave VW until Thursday “to announce a concrete proposal for getting the polluting vehicles off the road.”

    Breyer said in March the “proposal may include a vehicle buy-back plan or a fix approved by the relevant regulators that allows the cars to remain on the road with certain modifications.”

    A final settlement is also expected to include an environmental remediation fund to address excess pollution emitted by the U.S. vehicles since 2009.

    It is not clear if the deal will resolve the U.S. Justice Department’s civil suit filed in January against VW or if VW will agree to pay a civil penalty. VW also faces ongoing criminal investigations by the Justice Department and other prosecutors around the world.

    Separately, Germany’s Die Welt newspaper reported Wednesday that the deal to settle the case would involve it paying each affected customer $5,000. But a person briefed on the matter told Reuters that no decisions on how individual compensation will be awarded have been made.

    “Owners are expected to have around two years to decide whether to sell back vehicles or get them repaired. It is not clear whether VW will be allowed to resell vehicles they buy back, the source said.
    Uh, let’s hope VW has to actually fix the vehicles if it’s going to resell them. Sure, if they can’t come up with a technical fix it’s possible that VW will just dump the used vehicles on the European market were emission standards are much weaker. It’s an option that wouldn’t be great for Europe’s air quality, but just throwing those cars away is also a pretty massive waste. Newer vehicles using modern eco-friendly technologies might have reduced emissions over their lifetimes, but there’s still quite a few emissions that comes from building them in the first place. And that’s part of why it’s going to be worth keeping in mind that it’s possible we could end up with a scenario where a technical fix that actually reduces the pollution from these vehicles is possible, but VW deems the fix to be too expensive for it to be worth it for them to profitably implement the fix. And yet, under that scenario where it’s financially too expensive to fix, it still might be worth it to humanity in general to have those cars fixed from an environmental standpoint because otherwise the resources that went into building all those those cars (500,000 in the US and potentially many more elsewhere) just gets wasted and new resources need to be invested into making replacement vehicles. VW doesn’t pay that broader environmental cost. We all do.

    It’s all a reminder that, with the fate of all those tainted vehicles still an open question, we should probably be on the lookout for situations where the paths forward that make the most sense for a large company’s bottom line may not make sense for society. It’s the kind of situation we should be familiar with at this point.

    Posted by Pterrafractyl | April 20, 2016, 5:30 pm
  7. Here’s a big ‘uh oh’ for VW’s executives, and possibly for a whole lot of other automotive industry execs: Investigators found a VW PowerPoint presentation that, amazingly, hasn’t been deleted in the last decade that’s basically a smoking gun. But if bad news for VW seems like it should be good news for the rest of the automotive industry, that sort of depends on whether or not VW has a good legal strategy. Because, as the article below also points out, the game plan for minimizing the massive punitive damages VW is facing from US regulators is to maximize the number of other culprits by arguing that the entire industry is doing the same thing:

    The New York Times

    VW Presentation in ’06 Showed How to Foil Emissions Tests

    By JACK EWING

    APRIL 26, 2016

    FRANKFURT — A PowerPoint presentation was prepared by a top technology executive at Volkswagen in 2006, laying out in detail how the automaker could cheat on emissions tests in the United States.

    The presentation has been discovered as part of the continuing investigations into Volkswagen, according to two people who have seen the document and who spoke on the condition of anonymity because of the legal action against the company. It provides the most direct link yet to the genesis of the deception at Volkswagen, which admitted late last year that 11 million vehicles worldwide were equipped with software to cheat on tests that measured pollution in emissions.

    It is not known how widely the presentation was distributed at Volkswagen. But its existence, and the proposal it made to install the software, highlight a series of flawed decisions at the embattled carmaker surrounding the emissions problem.

    Those decisions exposed the company to billions of dollars in fines as well as criminal investigations. Last Friday, Volkswagen reported a record $6.2 billion loss, after setting aside $18 billion to cover the costs of fines, legal claims and recalls. As a first step in a broader settlement under negotiation, Volkswagen agreed to fix or buy back 500,000 diesel vehicles in the United States, beginning with model year 2009.

    At various junctures over the last decade, executives at Volkswagen ignored or underplayed warning signs.

    As the PowerPoint underscored, people inside Volkswagen were aware that its diesel engines were polluting significantly more than allowed. Yet company executives repeatedly rejected proposals to improve the emissions equipment, according to two Volkswagen employees present at meetings where the proposals were discussed.

    Even when regulators started asking questions in 2014, Volkswagen continued to install the cheating software for more than a year. And the company further compounded its problems by underestimating the potential penalties and the risks to its reputation, according to court documents obtained by The New York Times.

    Volkswagen declined to comment, citing the continuing investigation. The company has said that top management was not aware of the cheating software, known as a defeat device. Ansgar Rempp, a partner at Jones Day, the law firm heading Volkswagen’s internal inquiry, also declined to comment.

    What is now clear is that the current crisis at Volkswagen traces back to the PowerPoint presentation a decade ago.

    Volkswagen engineers at the company’s research and development complex in Wolfsburg realized that the emissions equipment in their newest diesel engine would wear out too quickly if it were calibrated to meet American pollution standards. The emissions rules in the United States are more stringent than those in Europe.

    A technology expert at Volkswagen offered a solution in the PowerPoint presentation. Just a few pages long, the 2006 presentation included a graph that explained the process for testing the amount of pollution spewing from a car. In a laboratory, regulators would try to replicate a variety of conditions on the road.

    The pattern of those tests, the presentation said, was entirely predictable. And a piece of code embedded in the software that controlled the engine could recognize that pattern, activating equipment to reduce emissions just for testing purposes.

    Elements of the presentation were reported earlier by Süddeutsche Zeitung newspaper and several German broadcasters. Under German privacy law, the executive cannot be named.

    The software evolved over the years. It was later upgraded to detect other telltale signs of a regulatory test, like a steering wheel that was not moving, according to Felix Domke, a computer expert and self-described hacker who has analyzed the software.

    During regulators’ tests, the engine software would turn up the pollution controls. When it was on the road, equipment designed to neutralize harmful nitrogen oxides would turned down, resulting in emissions that were up to 40 times the legal limit.

    Volkswagen had a growing awareness of that emissions discrepancy in recent years.

    In a court filing, the company lawyers, as part of a defense in a shareholder lawsuit, suggest that the discrepancy was common knowledge within the industry. “The vehicles of all manufacturers exceed various emissions limits in normal street use,” Volkswagen lawyers said in a court filing, which was obtained by The Times. They further argued that the differences between road emissions and lab emissions were tolerated by regulators.

    The management board led by Martin Winterkorn, the chief executive who resigned in September after the admission of cheating, repeatedly rebuffed lower-ranking employees who submitted technical proposals for upgrading the emissions controls, according to the two people who attended meetings where the proposals were discussed. The management board rejected the proposals because of cost, the people said.

    Lawyers for Mr. Winterkorn did not respond to requests for comment.

    Court documents filed in Germany by lawyers for Volkswagen show how the company vastly underestimated the potential penalties.

    After American officials began asking questions about Volkswagen emissions, company executives, including Mr. Winterkorn, thought they could deal with the problem quietly at a relatively low cost, according to the court documents that were obtained by The Times.

    An American law firm hired by Volkswagen to examine regulatory issues, Kirkland & Ellis, told the carmaker in an August 2015 memo that the previous record penalty was $100 million. The fine was imposed on Hyundai-Kia in 2014 for violating the limits on greenhouse gas emissions involving 1.1 million vehicles, or nearly twice as many cars as in Volkswagen’s case.

    At that level, the penalties could have easily been absorbed by Volkswagen, which had sales of 213 billion euros last year, or around $240 billion. But the potential fine for Volkswagen is likely to dwarf the previous record, based on what the company has already set aside.

    Court documents filed by Volkswagen indicate that the technicians thought the chances of being caught cheating were slim when the deception began in 2006. While technology to test cars under road conditions was available, it was not widely used by regulators.

    “The seemingly small danger of discovery may have been a factor in tempting the VW engineers to make the impermissible software alteration,” Volkswagen lawyers said in the court documents.

    In recent years, the chances of discovery increased. It became easier to buy emissions testing equipment from suppliers, and numerous environmental groups or independent laboratories did so to show that many carmakers were understating diesel emissions.

    Signs of irregularities in Volkswagen cars were discovered in 2014 by a nonprofit group, the International Council on Clean Transportation, based on testing performed at West Virginia University. Still, Volkswagen continued to install defeat devices in its cars, including some Audi and Porsche models, until last year.

    Volkswagen also underplayed the potential threat of the diesel problems, as well as the wrath of American regulators. Mr. Winterkorn and other top managers were used to deferential treatment by government officials in Germany, where it is one of the largest employers.

    After the American regulators started looking into the emissions issue in 2014, the company didn’t give the problem much weight.

    Mr. Winterkorn received a two-page memo in November 2014 that summarized the technical problems with Volkswagen vehicles in various locations. Plans to recall about 500,000 diesel vehicles in the United States because of the emissions issue were granted a single terse paragraph at the bottom of the second page, according to the memo, which was obtained by The Times.

    The emissions problem was not corrected with the recall. And despite the regulators’ growing impatience, Volkswagen did not appear alarmed by the possible consequences.

    During a meeting in July 2015 of high-ranking Volkswagen managers to discuss regulatory issues around the world, diesel engines in the United States was one item out of six on the agenda. It was allocated 10 minutes, in a meeting that was set to last 1 hour and 45 minutes, according to a copy of the agenda obtained by The Times.

    On Sept. 3, 2015, Volkswagen finally admitted to American regulators that diesel vehicles had a defeat device. Still, executives were shocked at the response.

    Stuart Johnson, a Volkswagen executive responsible for relations with American regulators, said in a memo in January that the Environmental Protection Agency gave him half an hour’s notice before announcing on Sept. 18 that the carmaker had admitted installing defeat devices in diesels.

    Although more than a year had passed since the E.P.A. first raised suspicions about Volkswagen diesels, Mr. Johnson said in a Jan. 19 internal memo, which was obtained by The Times, that he believed that Volkswagen still had four months “where we could discuss the issue privately.”

    “I was very disappointed by this turn of events,” Mr. Johnson wrote. He did not reply to a request for comment. A spokeswoman for Volkswagen in the United States declined to comment.

    In a court filing, the company lawyers, as part of a defense in a shareholder lawsuit, suggest that the discrepancy was common knowledge within the industry. “The vehicles of all manufacturers exceed various emissions limits in normal street use,” Volkswagen lawyers said in a court filing, which was obtained by The Times. They further argued that the differences between road emissions and lab emissions were tolerated by regulators.”
    Now, keep in mind that VW’s clean diesel vehicles were emitting up to 40 times the NOx legal limits, so unless the other competitors in the diesel car markets are engaged in similar schemes, VW’s conspiracy scheme is probably the worst offender we’re going to find in today’s passenger vehicle “clean” diesel market. But also note the language VW’s lawyers are using in their defensive allegations which is that “all” manufacturers exceed “various emissions limits in normal street use”, and that means VW is trying to make their defense about diesel and gas emissions. Not all manufacturers are competing in the diesel vehicle market but everyone but Tesla is in the gas vehicle market. So when VW charges that everyone else is cheating too (and VW is probably correct on that account…especially when it comes to the diesel market), it’s doing everyone a favor. Everyone but the executives at the major automotive companies, although the non-nihilist execs will also be getting a net favor.

    So if VW is basically making “every is doing it” a key part of its defense strategy, it begs the question: How much is it worth to the public good, in terms of VW paying a compensation for all that hidden pollution, to drag the rest of the global automotive industry into this? Probably a lot more than the tens of billions of dollars VW faces right now. If the VW scandal can morph into a auto industry scandal that covers the full spectrum of hiding the environmental cost of cars and other vehicles, isn’t that kind of priceless? And since it’s almost certain that some sort of “deal” is going to be made at some point that significantly reduces the penalties, hopefully regulators are considering a deal that involves ratting out the rest of the industry. Like smoking PowerPoints and evidence like that. It’s win, win! VW’s wins at its mega-scandal gets subsumed by a mega-er-scandal and everyone else wins if the world cuts down on wasting precious resources on investments into outdated infrastructure like a fossil-fuel economy.

    The opportunity costs of not shifting to a green economy are growing by the day and that why it’s important to remember that the avoidable pollution of today’s fossil-fuel infrastructure a “waste” both in terms of being a harmful waste product and an incredibly important wasted opportunity. We could have had a green economy years ago if we actually tried. Why not do it now? There’s really no excuse. So let’s use VW’s “everyone is doing it” defense as an excuse to actually do it. Smoking PowerPoints get bonus points and non-nihilist executives at any company are welcome to contribute. And yes, the previously floated idea that VW should be required to help invest in the green transportation infrastructure of tomorrow in the US (like recharging stations for solar vehicles) as part of the settlement should still definitely be part of the final settlement regardless of how many Industry-wide PowerPoints VW helps turn up. It’s just that all the other manufacturers should help make the same investments at the same time, everywhere, so humanity can stops wasting resources on wasteful infrastructure that’s just going to have to get replaced ASAP. There’s no excuse for not doing that anyway, with or without this VW scandal, which is why we have no excuse for wasting this great excuse VW handed us to do that which we’ve had no excuse for not doing all along about all this waste.

    Posted by Pterrafractyl | April 30, 2016, 1:24 pm
  8. Here’s a fun look at one of the reasons why Volkswagen is having so much difficulty finding employees who will cooperate with internal investigators: because if the following anecdote of an unrelated past internal VW investigation is an accurate reflection of how these things go it would be foolish to cooperate since they’re barely going to try to investigate you anyway. Plus, there’s the whole ‘code of silence’ thing:

    Forbes

    Dieselgate: Why Volkswagen’s Internal Investigators Can’t Find Cooperative Witnesses

    Bertel Schmitt,
    Contributor

    May 23, 2016 @ 08:10 AM

    “Silence” is a smaller budget movie by Martin Scorsese, to be released by the end of this year, if all goes well. The movie might be preempted by a big budget reality show with the German title “Das Schweigen.” It’s the drama of Volkswagen’s fruitless search for the dieselgate truth. Half a year since the scandal broke, very little truth was found, or so they say. What makes it so hard?

    Soon after the scandal broke, Volkswagen decapitated its complete engineering leadership, from CEO Winterkorn, and rockstar über-engineer Hackenberg, on down. In the months thereafter, scores of managers were let go. The naïve observer would assume that Volkswagen found and fired the culprits. In reality, or at least officially, the sacked executives developed a sudden desire to retire, and they were sent off with such opulent severance packages that seeking further employment would be a silly idea. “Most of them probably didn’t leave for under 10 million Euro,” told me a Volkswagen executive who is familiar with the formulas used at the German automaker in such an instance.

    The diamond-studded platinum parachutes caused inquietude in the remaining ranks. “If you do your job well, you get nothing,” grumbled a high-ranking VW manager. “If I want the big money, I have to screw up real big.”

    Officially, none of the dismissed had anything to do with dieselgate. Anyone high up who might have signed off on defeat devices has left the company, but supposedly, he didn’t do it. Meanwhile, the search to find the allegedly guilty among the lower ranks continues. Hordes of lawyers have been hired for that search, terabytes of data have been sifted through, with little success, it seems. When Matthias Müller was installed as the new CEO of Volkswagen AG, he flamboyantly promised to “leave no stone unturned.” So far, save for a few hibernating toads, nothing was found under the rocks.

    One of the many reasons for why Volkswagen’s internal investigators have struck out so far is a “code of silence” that is repeatedly quoted in German media. The silence is not so much geared to keeping things under wraps – the cheating at Volkswagen and elsewhere has been an open secret for decades. Volkswagen’s usually gossipy managers and engineers only tend to clam up when questioned by the gumshoes of the company’s internal integrity inspectorate, the “Konzernrevision,” or Department K-GR for short. Among VW personnel, the popularity of Volkswagen in-house ethics detectives ranks several rungs lower than that of Internal Affairs in any cheap cop flick.

    The following story is unrelated to any dieselgate shenanigans, but it illustrates how VW’s Geheime Konzernpolizei works.

    A few years ago, someone must have taken a disliking to Volkswagen’s chief resident in Malaysia, one of the more, well, “interesting” spots in Volkswagen’s vast empire. Local media was tipped off that the manager might be involved in criminal activities. That would be easy in a country that ranks between Fiji and Slovakia on the worldwide corruption scale, and where you can’t make cars without heavy government involvement. The reporters contacted Volkswagen, where they were told that nothing untoward was known. Internally, the ball started to roll.

    A Konzernpolizei investigator embarked on the long and expensive trip to the exotic country. Once arrived and ensconced in quarters appropriate to his rank, the detective didn’t look into dealings with organized crime or the payoff of government officials, he pulled the manager’s expense reports instead. He then painstakingly contacted all people the manager had claimed to have treated to lunches and dinners, and asked them whether it was true.

    In the business, this is a tried, true, and usually surefire way to bring just about anybody down. I still remember being called into a meeting with the owner of an advertising agency where I worked. He praised us all for keeping the client happy and entertained, to the degree that “the same client was taken to dinner by four different people on the same evening – he must have been hungry.” We got the message, and henceforth made sure that there was no such duplication when we entertained our girlfriends.

    The dispatched detective failed even with that simple task. “Out of a hundred people he contacted, only two or three were not totally sure that they were treated to dinner,” told me a person close to the matter. By running the inquiries, the detective, however, succeeded in letting all decision makers in the exotic market know that our man was under investigation.

    Back home in Wolfsburg, the gumshoe typed up a confidential report that was so widely circulated in the company that even an outsider like me could see it. The target of the inquisition was not on the distribution list. In the report, the inquisitor stated that “personal enrichment” on part of the target “could not be confirmed.” Ominously, the report continued that there would be a separate report by Volkswagen’s Security Dept. concerning “accusations regarding external activities.” Despite having found no evidence, the report recommended to “evaluate and where appropriate initiate labor-law related steps.”

    Said my Volkswagen source: “Those ‘accusations regarding external activities’ are a Volkswagen euphemism for contacts with organized crime, drug running, gun running, trafficking of girls, that kind of thing. ‘Labor-law related steps’ translate into firing the guy.” Nothing was heard about the manager meddling with the mafia, but his reputation was sufficiently sullied. The manager left his post in the exotic locale, and he is still working for Volkswagen.

    One of the many reasons for why Volkswagen’s internal investigators have struck out so far is a “code of silence” that is repeatedly quoted in German media. The silence is not so much geared to keeping things under wraps – the cheating at Volkswagen and elsewhere has been an open secret for decades. Volkswagen’s usually gossipy managers and engineers only tend to clam up when questioned by the gumshoes of the company’s internal integrity inspectorate, the “Konzernrevision,” or Department K-GR for short. Among VW personnel, the popularity of Volkswagen in-house ethics detectives ranks several rungs lower than that of Internal Affairs in any cheap cop flick.
    So even when VW’s internal investigators are a bunch of Keystone Cops, everyone there still hates them. A ‘code of silence’ isn’t super surprising but why all the hate? Tough crowd.

    Posted by Pterrafractyl | May 23, 2016, 5:47 pm
  9. VW just rolled out its big mea culpa plan intended to put the diesel emissions scandal behind it: make VW a leading electric car manufacturer by 2025. While the plan has some critics, you have to admit that for a company that was caught in a massive emissions fraud scandal that could make consumers understandably wary of what’s coming out of their VW’s tailpipe, transitioning to cars without a tailpipe is probably not a bad plan:

    Ars Technica

    After emissions scandal, VW’s roadmap for the future is aggressive on electric
    The automaker is eager to push ahead after it was caught cheating on pollution tests.

    by Megan Geuss – Jun 16, 2016 12:45pm CDT

    On Thursday, Volkswagen Group CEO Matthias Müller put forth his vision for the company’s future into 2025. The plan is an aggressive one coming out of almost a year of intense public scrutiny and regulatory concerns following VW Group’s involvement in a high-profile emissions scandal.

    The company’s new strategy, which was approved by VW Group’s board of supervisors, calls for the German automaker to deliver 30 new electric vehicles across Volkswagen, Audi, Porsche, and its other brands by 2025. “The Volkswagen Group forecasts that its own BEV [battery-powered electric vehicle] sales will be between two and three million units in 2025, equivalent to some 20 to 25 percent of the total unit sales expected at that time,” the company wrote in a press release.

    Volkswagen’s corporate culture has been blamed in part for the diesel emissions scandal. An obsessive desire to push diesel forward as a clean alternative to gasoline, the story goes, caused engineers to get desperate trying to make cars that could pass the ever-tightening emissions standards in the US and abroad. To German investigators, Volkswagen Group’s chief executives have said that they had nothing to do with the illegal software planted on the fleet of diesels that began hitting the market in 2008. Instead, those execs blamed the software on “rogue engineers.” The investigation is still ongoing.

    With such ambitious goals for electric vehicle adoption, one might wonder if the same kind of corner-cutting that allegedly led to the diesel scandal could plague Volkswagen Group’s new goal. In a quote to The Wall Street Journal, Müller seemed confident that the company would achieve its 2025 goals, but he didn’t address claims that the company’s previous goals were easily met due to a secret competitive handicap. “The (diesel) crisis has partially altered the perspective on everything we have achieved in the past years,” the CEO said. “The fact is that we achieved the targets we set in 2007 ahead of schedule or were at least on the way to doing so when the diesel issue hit us.”

    Beyond commenting on the diesel issue, VW Group added that it would be investing in developing units to lead the company on battery technology, digitalization, and autonomous driving. “The aim is to license a competitive self-driving system (SDS) developed in-house by the end of the decade,” the company’s press release said. Volkswagen has already made a few steps toward autonomous vehicle testing, having registered for a special permit with the California DMV to test cars on its roads.

    With such ambitious goals for electric vehicle adoption, one might wonder if the same kind of corner-cutting that allegedly led to the diesel scandal could plague Volkswagen Group’s new goal. In a quote to The Wall Street Journal, Müller seemed confident that the company would achieve its 2025 goals, but he didn’t address claims that the company’s previous goals were easily met due to a secret competitive handicap. “The (diesel) crisis has partially altered the perspective on everything we have achieved in the past years,” the CEO said. “The fact is that we achieved the targets we set in 2007 ahead of schedule or were at least on the way to doing so when the diesel issue hit us.””
    That is a pretty good question: so how can car manufacturers profitably cheat in the electric vehicle market? Because you can be pretty sure at least someone has been thinking about that.

    Fake mileage that understates the amount of electricity consumed is one very possible option. But also note that cost of electricity will suddenly replace the price of gas or diesel in the minds of consumers as a key factor when deciding whether or not to purchase an electric vehicle. And that means that as the auto industry transitions towards electric vehicles, those electric vehicle manufacturers are going to have an incentive to ensure electricity prices are as cheap as possible.

    So if, for instance, a large number of electric cars were being produced in a developing country with a heavy reliance on coal-powered electricity, electric car manufacturers could effectively ‘cheat’ by lobbying to ensure that existing coal power-plants stay open for as long as possible to keep electricity prices low. Who knows if it will come to that, but considering that VW’s big electric vehicle announcement includes the fact that China is the electric vehicle market they’re planning on investing in the most, the tension between electricity prices and its potential to impact electric vehicle sales is going to be worth keeping in mind:

    Reuters

    VW bets on electric cars, services to recover from crisis

    Thu Jun 16, 2016 12:51pm EDT

    By Andreas Cremer

    WOLFSBURG, Germany (Reuters) – Volkswagen VOWG_p.DE will invest billions of euros in electric cars, ride-hailing and automated driving to become a world leader in green transport by 2025, it said on Thursday, as it reshapes its business following its diesel emissions scandal.

    Europe’s biggest carmaker said it would fund “the biggest change process in the company’s history” with an efficiency drive, including integrating components businesses that currently employ 67,000 people in 26 locations worldwide.

    But a lack of detail in the programme, dubbed “TOGETHER – Strategy 2025”, left some analysts cold, and Volkswagen (VW) shares fell as much as 4.3 percent.

    “The announcements by VW look great on paper but no one can say for sure how demand for electric mobility will develop,” said Commerzbank analyst Sascha Gommel.

    “There are worthy elements among the plans but it’s probably also a marketing exercise by VW to tell the public that they have gotten the message” to change after its scandal, said Gommel, who has a “hold” recommendation on the stock.

    Mueller reaffirmed VW’s expansion and investment plans for North America and China, adding he expected China would be the main market for its new electric cars.

    He also said VW was in talks with potential partners to bolster its position in China’s growing economy-car market, a current weak spot for the business.

    “Mueller reaffirmed VW’s expansion and investment plans for North America and China, adding he expected China would be the main market for its new electric cars.
    Ok, so China is going to be the main market for its new cars. Great! It was always insane for world not to help a nation as heavily populated as China to not industrialize with green, renewable technology in the first place. So if VW can assist in that transition to a green infrastructure, good. It’s a better way to make amends for the diesel scandal than simply paying a fine.

    But, again, this is only going to be a net ‘good’ deed as long as this flood of new Chinese electric vehicles doesn’t actually end up encouraging the use of China’s notoriously dirty coal-fired power-plants and end up making a bad situation worse. Because as the article below makes clear, while electric vehicles are indeed a critical part of the solution for making civilization sustainable, they could also become part of the problem if the rest of the required solutions, like clean electricity, aren’t implemented simultaneously:

    Reuters

    In coal-powered China, electric car surge fuels fear of worsening smog

    BEIJING | By Jake Spring

    Wed Jan 27, 2016 7:09am EST

    Automakers’ latest projections for rapid growth of China’s green car market have added to concerns of worsening smog as the uptake of electric vehicles powered by coal-fired grids races ahead of a switch to cleaner energy.

    Volkswagen AG (VOWG_p.DE) plans 15 new-energy models over 3-5 years, its China chief told a green car conference in Beijing on Saturday, predicting – like the government – that Chinese production of electric and plug-in hybrid vehicles would grow almost six times to 2 million annually by 2020.

    At the same event, BYD Co Ltd’s (002594.SZ) (1211.HK) chairman told media that the Chinese automaker’s electric vehicle sales would double in each of the next three years.

    The government has been promoting electric vehicles to cut the smog that frequently envelops Chinese cities, helping sales quadruple last year and making China the biggest market, the finance minister said at the conference. Less than 1 percent of passenger cars are now new energy, but the pace of growth raises their potential to worsen smog.

    A series of studies by Tsinghua University, whose alumni includes the incumbent president, showed electric vehicles charged in China produce two to five times as much particulate matter and chemicals that contribute to smog versus petrol-engine cars. Hybrid vehicles fare little better.

    “International experience shows that cleaning up the air doesn’t need to rely on electric vehicles,” said Los Angeles-based An Feng, director of the Innovation Center for Energy and Transportation. “Clean up the power plants.”

    China plans to convert the grid to renewable fuel or clean-coal technology as part of efforts to cut carbon emissions by 60 percent by 2020.

    That will speed the green impact of electric vehicles, said environmental science professor Huo Hong at the elite Tsinghua university. But that goal will be “really difficult to achieve.”

    Tsinghua’s studies call into question the wisdom of aggressively promoting vehicles which the university said could not be considered environmentally friendly for at least a decade in many areas of China unless grid reform accelerates.

    China’s industry, environment and science ministries, which devise most new energy vehicle policies, did not respond to requests for comment. BYD and Volkswagen declined to immediately comment.

    POLICY MISMATCH

    To promote new-energy vehicles, the government has offered various incentives in recent years including tax breaks, and set targets such as having 5 million new-energy vehicles on the road by 2020 – more than 8 times the current number.

    Authorities in some cities particularly affected by smog have gone further. Beijing and Tianjin, for instance, have exempted new-energy vehicles from limits on the number of new cars granted license plates, and exempted them from driving restrictions that other cars face on certain days of the week.

    This month, the industrial Hebei province decreed that all new residential complexes must have car-charging facilities.

    But Beijing, Tianjin and Hebei are all more than 90 percent reliant on coal for energy, Tsinghua’s research showed.

    Huo and academics point out that, at the very least, the proliferation of electric vehicles pushes more sources of pollution away from heavily populated urban centers.

    Whatever the impact, Qin Lihong, president of startup electric automaker NextEV, said cleaning the grid would be the quickest route to clear skies.

    “It’s much easier for society to make hundreds of power plants better than change the hundreds of millions of cars in thousands of cities,” he said.

    “A series of studies by Tsinghua University, whose alumni includes the incumbent president, showed electric vehicles charged in China produce two to five times as much particulate matter and chemicals that contribute to smog versus petrol-engine cars. Hybrid vehicles fare little better.”
    Well, let’s hope China’s plans to convert the grid to renewable fuel or clean-coal technology as part of efforts to cut carbon emissions by 60 percent by 2020 go according to plan. Rapidly. But since there’s a good chance it won’t go to plan and take much longer to make that transition, it’s also going to be worth keeping in mind that if VW, and any other auto manufacturer, wants to tout electric vehicles as a sign of their eco-friendliness these manufacturers had better become major lobbyists for green electricity. And why not? It would be great branding. Plus, they could even push for government subsidies for green electricity and, sure, everyone would know they’re doing that in order to make their electric cars more cost efficient for consumers, but who cares. In the context of a global environmental crisis, being known as a lobbying for green electricity subsidies would be great branding too.

    So in addition to hoping China makes its green electricity goals in time, let’s also hope the auto industry, and not just VW, recognizes the incredible opportunity the whole industry has to rebrand itself as a major part of the solution to this global environmental crisis by turning itself into a global lobby for public and private investments in green electricity generation everywhere. Not just in China. Because China’s clean car conundrum isn’t limited to China.

    Posted by Pterrafractyl | June 17, 2016, 1:49 pm
  10. Is VW’s ‘dieselgate’ scandal about to become a much wider industry-wide scandal? It’s looking like it now that Germany has asked the EU to investigate diesel emissions cheating in Fiat Chrysler’s vehicles. And while this move is probably motivated, in part, on shoring up the reputation of Germany’s auto industry (relatively speaking), a big industry-wide crackdown on emissions cheating has always been one of the best possible outcomes once VW’s scandal emerged. So let’s hope this is just the beginning of a big round of mutual recriminations and there’s all sorts of other investigations into still-undiscovered emission cheating “devices” on the way. Fight! Fight! Fight!:

    Reuters

    Germany goes to EU with accusation of Fiat emissions cheating

    Thu Sep 1, 2016 2:35pm EDT

    Germany’s Transport Ministry has asked the European Commission to investigate exhaust emissions of Fiat Chrysler (FCHA.MI) vehicles for potential illegal manipulation devices, German government documents showed on Thursday.

    Germany’s motor vehicle authority KBA began testing the vehicles of several manufacturers, including Fiat, after Volkswagen’s (VOWG_p.DE) admission in September last year that it had cheated emissions tests with motor-management software.

    The direct approach to the European Union executive comes after the German transport ministry raised concerns over Fiat vehicles with Italian authorities earlier this year and a subsequent rejection by Italian authorities of claims that Fiat and Chrysler vehicles used illegal exhaust manipulation devices.

    This week’s letter to the European Commission, which was seen by Reuters, said that tests by German authorities on the Fiat 500X, Fiat Doblo and Jeep Renegade could prove the “illegal use of a device to switch off exhaust treatment systems” and urged the Commission to consult with Italian authorities to resolve the issue.

    A Fiat spokeswoman said on Thursday that the company’s cars conform to current emissions rules and do not contain defeat devices.

    The Commission, meanwhile, said that it is the responsibility of the Italian authorities to remedy wrongdoings.

    “It is first and foremost a dialogue between the two member states concerned, with an obligation to keep the Commission informed and the possibility for the Commission to facilitate a solution if no agreement can be found,” the Commission said in a statement.

    A source at the Italian infrastructure ministry, which includes the national motor vehicle authority, said Italy had not received any communication from the German government on the matter.

    The source said Italian tests had shown Fiat 500 cars conformed to emissions rules and did not contain defeat devices, adding that the KBA had never said it disagreed with Italy’s findings.

    As part of a widening clampdown on health-threatening nitrogen oxide (NOx) pollution levels in the wake of the VW scandal, the KBA tested 53 different vehicles and found that carmakers were making liberal use of what they described as a “thermal window”.

    “”It is first and foremost a dialogue between the two member states concerned, with an obligation to keep the Commission informed and the possibility for the Commission to facilitate a solution if no agreement can be found,” the Commission said in a statement.”

    So Germany brings charges to the EU Commissions, and the EU Commissions responds by telling Germany and Italy to work it out themselves and the EU Commission will only get involved if no common agreement can be found. And the Italian investigators claim they don’t see an emissions problem at all. Assuming they don’t arrive at an agreement it appears the next phased a dieselgate is going to center around Italy and Germany lobbying/pressuring the EU Commission. The same EU Commissions that knew about the cheating for years and did nothing due, in large part, to pressure from the auto industry, primarily the German auto industry. That should be interesting.

    And if Germany succeeds, it’s going to be a reminder to the whole EU that, given the very uneven nature of the EU’s power structure, one of the best ways to clean up corruption in the EU’s regulatory agencies is for a big German scandal to take place in some sector, at which point the mutual recriminations that will start happening and hopefully the rest of the national industries will get cleaned up too. It’s also a remind that the EU is a strange union.

    Posted by Pterrafractyl | September 2, 2016, 2:33 pm
  11. It’s official: VW is paying the largest auto-scandal settlement in US history:

    Los Angeles Times

    The biggest auto-scandal settlement in U.S. history was just approved. VW buybacks start soon

    James F. Peltz

    Octobe 25,2016, 2:45 PM

    A federal judge has approved a $14.7-billion settlement in the Volkswagen emissions-cheating case, the largest auto-scandal settlement in U.S. history.

    The deal, approved Tuesday, gives about 475,000 owners of Volkswagens and Audis with 2-liter diesel engines the opportunity to have their cars bought back or modified by Volkswagen and to seek additional cash compensation. It also provides billions of dollars to support environmental programs, reduce emissions and promote zero-emissions vehicles.

    U.S. District Judge Charles Breyer in San Francisco, who has overseen the litigation against the German automaker, approved the settlement that was proposed in July. He called the deal “fair, reasonable and adequate.”

    The VW scandal erupted a year ago when Volkswagen admitted that it had installed “cheat devices” on diesel-powered cars from 2009 through 2015. The devices enabled the vehicles’ engines to emit less pollutants during emissions tests than during normal road use.

    The scandal involved nearly 600,000 cars in the United States, including about 71,000 in California, and 11 million Volkswagen vehicles worldwide.

    Volkswagen said Tuesday that it would start to implement the U.S. settlement immediately and that it was hiring 900 people to help with the buybacks, including one employee to be stationed at each of its 652 U.S. dealerships.

    The automaker also has a website, vwcourtsettlement.com, with details about the settlement and instructions for people who own or lease affected cars. Terms of the settlement and a list of the vehicles involved also are available at on the court’s website.

    The settlement “is an important milestone in our journey to make things right in the United States,” Hinrich Woebcken, chief executive of Volkswagen Group of America Inc., said in a statement.

    Under the settlement, owners of certain 2-liter diesel cars made by Volkswagen in the model years 2009 through 2015 will receive between $12,500 and $44,000 from the automaker to buy back their cars. Leases of those vehicles may be terminated without penalty, and leaseholders also may seek cash payments.

    Instead of having their cars bought back, drivers can choose to have VW modify their vehicles to meet emissions standards — once that method is approved by the California Air Resources Board and the Environmental Protection Agency. Federal officials said such a modification does not yet exist, though the company is working on a fix.

    Regardless of whether they choose the buyback or modification option, owners also will receive a cash payment of at least $5,100 and as much as $10,000, depending on the model.

    The 475,000 cars affected by the agreement include Volkswagen’s popular Beetles, Golfs, Jettas and Passats. Some Audi A3s also are covered.

    The agreement does not cover about 90,000 cars with 3.0-liter engines that also had the cheating software. Volkswagen, regulators and consumers’ lawyers are still negotiating a possible settlement for those vehicles.

    Under the deal, Volkswagen will pay $2.7 billion into a trust to support environmental programs and reduce emissions, as well as shell out $2 billion over a 10-year period to invest in and promote zero-emissions vehicles.

    Volkswagen overall is to spend up to $10 billion to buy back or modify the VW and Audi 2.0-liter diesel vehicles in the United States and to give additional compensation to car owners and lessees. The final figure depends on how many people take advantage of the offer.

    “The funds won’t fully compensate owners who thought they were buying a better vehicle, but it is a strong step toward ensuring Volkswagen won’t try to cheat again,” Kathryn Phillips, director of Sierra Club in California, said in a statement. “Volkswagen chose to poison our families with dangerous pollution just to pad its pocketbook.”

    “Instead of having their cars bought back, drivers can choose to have VW modify their vehicles to meet emissions standards — once that method is approved by the California Air Resources Board and the Environmental Protection Agency. Federal officials said such a modification does not yet exist, though the company is working on a fix.”

    Well, let’s hope VW figures out an actual fix for the vehicles. Because they’re presumably going to be driven by someone, whether its the current owners or the future owners who buy these cars on the global used car market that’s about to get flooded with cheap used diesel vehicles. It’ll be a pretty big problem if no fix is available. And not just for VW’s woes in the US. Because don’t forget that the number of impacted VW diesel vehicles in US market is dwarfed by the VW diesel market in the EU. And as we learned last month, fixing the vehicles is the only offer VW is making to its EU customers:

    Reuters

    EU Commission says VW pledged to fix all cars in Europe by late 2017

    Wed Sep 21, 2016 | 1:43pm EDT

    Volkswagen pledged to fix all cars equipped with illicit engine software in Europe by autumn 2017, the European Commission said on Wednesday after talks with the carmaker to ensure it is doing enough for affected clients.

    At a meeting with consumer Commissioner Vera Jourova, VW board member Francisco Javier Garcia Sanz committed to a plan to inform customers by year’s end of the need for a technical fix to bring diesel cars into line with EU caps on toxic nitrogen oxide (NOx) emissions, Jourova’s spokesman said.

    The German carmaker also committed “to have all cars repaired by autumn 2017,” spokesman Christian Wigand said, adding the carmarker would offer clients “proof of conformity.”

    VW has admitted that it installed improper software that deactivated pollution controls on more than 11 million diesel vehicles sold worldwide.

    EU officials have called on the German carmaker to do more to compensate European clients since its $15 billion settlement in the United States for using the cheat software, saying it is unfair for them to be treated differently.

    “Volkswagen committed to an EU-wide action plan today, which is an important step towards a fair treatment of consumers,” Jourova said in a statement.

    Volkswagen has rejected suggestions it may have breached EU consumer rules and said it does not see the need to compensate affected car owners.

    Europe’s largest automaker is making slow progress on fixing cars in Europe, having repaired less than 10 percent of the 8.5 million affected models in Europe.

    It said the majority of the cars in Europe can be repaired this year, but an unspecified number will have to wait.

    “EU officials have called on the German carmaker to do more to compensate European clients since its $15 billion settlement in the United States for using the cheat software, saying it is unfair for them to be treated differently.”

    That was the EU’s response a month ago before we learned the final amount of the US fine: European customers deserve compensation too. But as we just saw, VW disagrees with that assessment:

    Volkswagen has rejected suggestions it may have breached EU consumer rules and said it does not see the need to compensate affected car owners.

    And as reports back in January indicated, whether or not EU officials share VW’s assessment of its culpability towards EU consumers, basically no one is expecting a significant EU fine at all because the legal framework doesn’t really exist to do it:

    Reuters

    Facing U.S. storm, VW set for easier ride in Europe on emissions scandal

    By Barbara Lewis and Kirstin Ridley | BRUSSELS/LONDON
    Sat Jan 9, 2016 | 2:38pm EST

    Volkswagen (VOWG_p.DE) is unlikely to face U.S.-style fines in Europe over its emissions scandal because of a softer regulatory regime and its home country Germany’s determination to protect its car industry, EU sources and legal experts say.

    The carmaker has been embroiled in crisis since last September, when it admitted it had cheated U.S. emissions tests using software known as “defeat devices”.

    The U.S. Justice Department is suing the German company for up to $46 billion for allegedly violating environmental laws – though some legal experts expect the final settlement to be far lower.

    Other countries have also acted – Brazil and South Korea, for example, have both imposed fines of well over $10 million on VW for cheating on emissions.

    But although VW says 8.5 million of the 11 million vehicles world-wide that contain banned software are in Europe, no European national authority has ordered any penalties so far.

    EU sources and lawyers say it would be surprise if the firm received any significant fines in the European Union.

    While the bloc outlawed defeat devices in 2007, there are no defined penalties for using such software to mask emissions. Under U.S. law, by contrast, carmakers must identify and describe any emissions control devices, meaning they can be pursued for omission or wrongful declaration, widening the scope for punitive action.

    EU states are also reluctant to mete out tough financial penalties, because of an unwritten rule in the 28-member club that some national interests are sacred, according to the EU sources – and Germany’s car industry has traditionally been one of them.

    VW, Europe’s biggest motor manufacturer, employs more than 750,000 people in Germany, and has been a symbol of the nation’s engineering prowess. VW, Daimler and BMW, Germany’s big three German carmakers, hauled in revenues of 413 billion euros in 2014, far bigger than the German federal budget, which stood at just under 300 billion.

    Even if the European Commission wanted to impose penalties on VW, its powers are curbed. The EU executive can directly only impose financial sanctions on trade and competition issues. Lucas Bergkamp, a partner at law firm Hunton and Williams in Brussels, said any change to that “would be a huge step”.

    “In general when companies are already in great difficulties due to some crisis, European governments tend to be understanding and will not necessarily seek the imposition of all possible penalties,” he said, adding he could not comment on VW specifically.

    VW also declined to comment on anything pertaining to possible fines in Europe.

    LAWSUIT THREAT

    Britain has said it could prosecute a vehicle manufacturer if there were proof it knew or was reckless when supplying false information, for which there is an unlimited fine on conviction.

    But proving recklessness is a high hurdle – it remains unclear who at Volkswagen knew what and when, while the company itself has blamed a small cadre of employees.

    Lawyers say a bigger financial threat to VW than any EU regulatory fines is likely to come from private litigation. Lawyers are gathering investors for group actions in Europe and hundreds of lawsuits on behalf of enraged drivers have been filed in the United States.r

    The VW scandal has exposed the weaknesses of the regulatory system in Europe, where there is no EU-wide authority with oversight of car testing – like the U.S. Environmental Protection Agency (EPA) – but instead a patchwork of 28 national agencies with varying standards.

    A vehicle approved in one country can be sold across the bloc, which environmental campaigners say allows carmakers to take their pick from national regulators.

    However European Commission proposals, expected over the coming weeks, will add some teeth to the EU regulatory regime and penalties for excessive emissions could start to bite around the start of the next decade.

    Some members of the European Parliament and environment campaigners want an independent EU-wide regulator, along the lines of the EPA.

    European Commission spokeswoman Lucia Caudet did not entirely rule out establishing such a body, but said there were other ways to improve oversight.

    “All options are on the table, but greater oversight can be achieved without the need for another EU agency,” she said, adding it was too soon to give detail of a proposal expected “in the coming weeks”.

    The International Council on Clean Transportation (ICCT), which alerted the EPA to Volkswagen’s use of defeat devices to trick regulators, has said mandatory, independent testing of cars once they are in use is crucial to good regulation.

    EU PLAN

    EU sources said the European Commission proposal was expected to ensure greater independence of the private firms that test car emissions in the bloc, which typically have worked very closely with the national regulators.

    The proposal, which would then face around 18 months of vetting from the European Parliament and member states before it can become law, could also hand powers to the European Commission to verify that cars on the market conform with standards and to exact clear penalties if they do not.

    The sources said the plan from the EU executive would be viewed as far too ambitious by some member states and not ambitious enough by members of the European Parliament.

    The parliament has set up an inquiry into whether the European Commission has done enough to police the car industry, but the Commission also faces counter-pressure from the industry and member states.

    Even at the height of the VW scandal, in October last year Germany led the dilution of separate new rules to restrict how much pollutants cars are allowed to emit above official limits, EU sources said.

    “EU sources and lawyers say it would be surprise if the firm received any significant fines in the European Union.”

    That was January. And here we are with a historically large fine in the US and basically nothing but a VW pledge to fix the cars in the EU. Surprise. And that’s why it’s probably not very surprising that the EU’s message to VW in the wake of this historic settlement in the US is to strongly ask VW to please guaranteed that it can come up with a fix:

    Reuters UK

    EU official urges VW to do more for European customers affected by Dieselgate

    Mon Oct 24, 2016 | 4:34pm BST

    European Union consumer champion Vera Jourova has sought to ramp up pressure on Volkswagen (VOWG_p.DE) to compensate European owners of diesel vehicles rigged to cheat pollution controls and asked it for guarantees that its technical fix will work.

    Jourova, the EU’s commissioner for consumer affairs, has written to VW official Francisco Javier Garcia Sanz asking for proof that the carmaker can fulfil a pledge to make vehicles comply with limits on nitrogen oxide (NOx) fumes by autumn 2017, a Commission official told Reuters on Monday.

    “We need VW to guarantee, in a legally binding way and without any time limit, that the repairs will work and do not have any negative impact,” the official said.

    The letter is in response to plans presented by Garcia Sanz last month to address harm caused to VW’s European clients with a fix the company says will bring vehicles in line with EU law.

    VW admitted to U.S. regulators last year that it installed illicit software on more than 11 million diesel vehicles sold worldwide.

    The majority of the affected vehicles are in Europe and Jourova’s letter shows the growing frustration among EU officials over the gap in VW’s approach to European customers while offering cash payouts to U.S. owners of its cars.

    VW has so far set aside about $18 billion to cover the cost of vehicle refits and a settlement with U.S. authorities. It also faces damages claims from investors over its disclosure of the emissions cheating.

    Jourova’s letter called on the German carmaker to offer to repurchase some vehicles, the official said.

    PATCHWORK REGULATION

    The commissioner said that VW could be in breach EU consumer law and repeated calls for voluntary compensation because European consumers are stymied by their inability to file United States-style class-action lawsuits in many EU nations and by weaker EU rules on defeat devices.

    Her letter to VW said that the company had an obligation to ensure its diesel fix does not leave consumers out of pocket in terms of fuel efficiency and engine life.

    VW, which has previously rejected suggestions it may have breached EU consumer rules, says it is meeting legal requirements and that customers will receive certification to show their vehicles conform with emissions requirements.

    The company said on Monday that it has provided Jourova with assurance that it would intensify dialogue with consumers if the need arises.

    Jourova, who sources said is due to meet again with Garcia on Thursday, has urged consumer groups to organise lawsuits based on allegations that VW duped consumers by promoting their cars as environmentally friendly.

    While the EU has little leverage in the domain of consumer law, the EU’s Industry Commissioner has threatened legal action against EU nations if they fail to enforce EU laws on air quality.

    “The majority of the affected vehicles are in Europe and Jourova’s letter shows the growing frustration among EU officials over the gap in VW’s approach to European customers while offering cash payouts to U.S. owners of its cars”

    Yeah, you can imagine how VW’s EU customers might be a little miffed by the historically large US fine vs the EU’s “please fix this” overall stance. Especially after seeing responses like this from VW:

    The company said on Monday that it has provided Jourova with assurance that it would intensify dialogue with consumers if the need arises.

    Yes, VW’s response to the EU’s will be happy to “intensify dialogue with consumers” if the need arises. That should fix everything.

    Posted by Pterrafractyl | October 25, 2016, 6:41 pm
  12. Here’s something to watch with the VW diesel scandal: while VW was apparently hoping to resolve its settlement with the US before the Trump administration begins, it doesn’t look like that’s going to happen. And that raises a lot of questions. Especially after the US just arrested a VW executive in Florida.

    First, note the professed hope of VW immediately following the election. It was mostly hope that Trump’s win won’t bring any additional negative consequences for VW’s settlement:

    Bloomberg
    Technology

    VW Wary Trump Election May Disrupt Diesel-Settlement Talks

    by Christoph Rauwald
    and Elisabeth Behrmann

    November 9, 2016, 6:34 AM CST November 9, 2016, 9:41 AM CST

    * CEO Mueller hopes vote doesn’t portend ‘negative consequences’
    * Volkswagen nearing ‘consent decree’ with U.S. authorities

    Volkswagen AG expressed concern that Donald Trump’s election as U.S. president could disrupt talks to reach a settlement with U.S. authorities over the German automaker’s cheating on emissions tests for diesel cars.

    “I hope the election result won’t have more negative consequences for Volkswagen,” Chief Executive Officer Matthias Mueller said Wednesday at a conference hosted by German daily Handelsblatt in Munich. “I think we’re at a point where a ‘consent decree’ could be reached, but that’s the Department of Justice’s decision, not mine.”

    While Volkswagen has agreed to a $14.7 billion civil settlement covering 480,000 cars with 2.0-liter diesel engines, the company still faces criminal penalties and has yet to reach a deal on about 80,000 cars with tainted 3.0-liter motors. A delay in the talks would prolong the scandal and complicate Volkswagen’s efforts to emerge from the crisis, which erupted in September 2015.

    “The election of Donald Trump causes me great concern,” Stephan Weil, prime minister of the German state of Lower Saxony and member of Volkswagen’s supervisory board, said in an e-mailed statement. “Trump’s first task should be to bridge the existing divides — that he himself deepened during the past weeks — and carry out his duties with prudence and care.”

    ““I hope the election result won’t have more negative consequences for Volkswagen,” Chief Executive Officer Matthias Mueller said Wednesday at a conference hosted by German daily Handelsblatt in Munich. “I think we’re at a point where a ‘consent decree’ could be reached, but that’s the Department of Justice’s decision, not mine.””

    So right after the US elections we hear a kind of cautious optimism for VW about the trajectory of the investigation coupled with a vague concern over how a Trump administration might impact the settlement if it’s not concluded in time. The was November. By early December, however, things weren’t looking so good for VW’s executives:

    Bloomberg News

    VW’s German Execs Gird to Face Questions From U.S. Authorities

    By Tom Schoenberg and Alan Katz
    December 5, 2016

    Dozens of Volkswagen AG officials in Germany have hired U.S. criminal defense lawyers as the Justice Department ramps up meetings with managers to gather evidence that may lead to charges against executives, people familiar with the matter said.

    U.S. authorities have traveled to Germany to arrange interviews with managers and seek cooperation in their probe of the automaker’s efforts to subvert anti-pollution rules, the people said. With some interviews yet to take place, it makes it less likely, they said, that prosecutors will be able to reach a resolution with the company by the close of the Obama administration as some officials had hoped.

    That activity, and the Justice Department’s efforts to interview executives on foreign soil, shows the U.S. is keeping pressure on the automaker after it admitted last year that it had rigged its diesel engines to lower their emissions during testing.

    The U.S. has already helped broker a civil settlement that will cost the Wolfsburg, Germany, company more than $16 billion in fines and penalties. The Justice Department, characterizing the diesel cheating as a 10-year conspiracy to deceive environmental officials, has said it will pursue criminal charges against not only the company but also individuals.

    Environmental Capstone

    The two-pronged approach would make good on the department’s 2015 call for prosecutors to focus on the individuals behind corporate misdeeds, a policy drafted after criticism that it had entered into multibillion-dollar corporate settlements while failing to prosecute the people responsible. The case could also serve as a capstone to the environmental-enforcement cases pursued under the Obama administration, which includes the $25 billion in criminal fines and civil penalties paid by BP Plc for the Deepwater Horizon oil spill.

    Peter Carr, a Justice Department spokesman, declined to comment.

    “Volkswagen continues to cooperate with the Department of Justice as we work to resolve remaining matters in the United States,” Eric Felber, a spokesman, said in an e-mailed statement.

    The U.S. investigators have urged some of the VW employees to come to the U.S., where they can be interviewed away from German prosecutors, who are building their own cases against company officials, said one of the people.

    U.S. prosecutors may seek cooperation from some of the employees to testify against those above them in the organization, the people said, as is typical with such cases. In September, U.S. prosecutors secured a guilty plea and cooperation from a former VW software engineer who reported to German executives.

    Winterkorn’s Exit

    Beyond that engineer, it isn’t clear who, if anyone, may face charges in the investigation into fraud and Clean Air Act violations. Nor is it clear whether former Chief Executive Martin Winterkorn, who was forced out as a result of the scandal, or the company’s most senior executives who make up what is known as the management board, are a focus of the U.S. probe. Winterkorn took responsibility for the scandal when he resigned in September 2015 but said he wasn’t aware of any wrongdoing on his part.

    For a primer on Volkswagen’s Diesel Emissions Scandal, click here

    VW has said top management were unaware of the decision to install the software to cheat emissions tests. “The then and current board of management of Volkswagen AG had, at any rate, no knowledge of the use of unlawful engine-management software at the time,” Volkswagen wrote in its annual report for 2015, a statement it has cited in response to subsequent inquiries.

    German prosecutors have said that they have no evidence that shows that Volkswagen’s top leadership approved the diesel-cheating program. German authorities are investigating whether Winterkorn and Chairman Hans Dieter Poetsch were too slow to inform the market about the investigation into the cheating devices.

    “Based on careful examination by internal and external legal experts, the Company reaffirms its belief that the Volkswagen Board of Management duly fulfilled its disclosure obligation under German capital markets law,” Volkswagen said in a Nov. 6 statement responding to the allegations against Poetsch. Poetsch himself hasn’t made any public statement about that investigation or the U.S. criminal probe.

    Unfinished Business

    The activity in the U.S. criminal case may dash expectations set by VW’s chief executive officer Matthias Mueller, who said last month that he would like to secure a criminal settlement with the U.S. before the new U.S. president takes office on Jan. 20.

    Any unfinished business in the VW matter would pass to the administration of president-elect Donald Trump, who has said he would name U.S. Senator Jeff Sessions as attorney general. At a Senate hearing six years ago, Sessions, a former federal prosecutor from Alabama, said he wouldn’t back away from charging a major company if there was evidence of criminal conduct.

    At the time, the Justice Department was investigating BP over the Deepwater Horizon spill. Sessions warned that the department shouldn’t be swayed by concerns about whether criminal charges could harm people who depended on the company for jobs. “They are not too big too fail,” he said.

    No Extraditions

    The U.S., should it choose to pursue charges against executives in Germany, could face challenges. The U.S. can charge individuals even if German authorities issue their own indictments. But getting executives to stand trial in the U.S. could be difficult. Germany’s constitution doesn’t allow citizens to be extradited outside the European Union. The Justice Department is exploring its options to get executives to the U.S., according to one of the people familiar with the mater.

    In one scenario, the U.S. could put pressure on the company as settlement discussions advance by filing charges against individual executives, issuing arrest warrants and sending enforcement requests through Interpol via the so-called red-notice system. At the least, that could restrict executives from travel outside Germany for fear of being detained and flown to the U.S. Investigators have already used this technique in investigations of global banks for rigging benchmark interest rates.

    The U.S., should it choose to pursue charges against executives in Germany, could face challenges. The U.S. can charge individuals even if German authorities issue their own indictments. But getting executives to stand trial in the U.S. could be difficult. Germany’s constitution doesn’t allow citizens to be extradited outside the European Union. The Justice Department is exploring its options to get executives to the U.S., according to one of the people familiar with the mater”

    Possible executive extraditions from Germany to the US. Uh oh. And note the contrast with the findings of German prosecutors that VW’s executives did nothing wrong:


    VW has said top management were unaware of the decision to install the software to cheat emissions tests. “The then and current board of management of Volkswagen AG had, at any rate, no knowledge of the use of unlawful engine-management software at the time,” Volkswagen wrote in its annual report for 2015, a statement it has cited in response to subsequent inquiries.

    German prosecutors have said that they have no evidence that shows that Volkswagen’s top leadership approved the diesel-cheating program. German authorities are investigating whether Winterkorn and Chairman Hans Dieter Poetsch were too slow to inform the market about the investigation into the cheating devices.

    “Based on careful examination by internal and external legal experts, the Company reaffirms its belief that the Volkswagen Board of Management duly fulfilled its disclosure obligation under German capital markets law,” Volkswagen said in a Nov. 6 statement responding to the allegations against Poetsch. Poetsch himself hasn’t made any public statement about that investigation or the U.S. criminal probe.

    At this point you have to wonder just how much VW is actually fearing a Trump administration as opposed to hoping it comes in and saves them. After all, executive extraditions aren’t something you see very often in a the investigation of a mega-corporation’s mega-scandal. Usually it’s just a fine, if that.

    But also note the sentiments expressed by the likely next Attorney General, Jeff Sessions, when it came to charging large corporations with criminal charges when the Justice Department was investigating BP:

    The activity in the U.S. criminal case may dash expectations set by VW’s chief executive officer Matthias Mueller, who said last month that he would like to secure a criminal settlement with the U.S. before the new U.S. president takes office on Jan. 20.

    Any unfinished business in the VW matter would pass to the administration of president-elect Donald Trump, who has said he would name U.S. Senator Jeff Sessions as attorney general. At a Senate hearing six years ago, Sessions, a former federal prosecutor from Alabama, said he wouldn’t back away from charging a major company if there was evidence of criminal conduct.

    At the time, the Justice Department was investigating BP over the Deepwater Horizon spill. Sessions warned that the department shouldn’t be swayed by concerns about whether criminal charges could harm people who depended on the company for jobs. “They are not too big too fail,” he said.

    Any unfinished business in the VW matter would pass to the administration of president-elect Donald Trump, who has said he would name U.S. Senator Jeff Sessions as attorney general. At a Senate hearing six years ago, Sessions, a former federal prosecutor from Alabama, said he wouldn’t back away from charging a major company if there was evidence of criminal conduct.”

    So if Sessions sticks to those sentiments, he should be pretty tough on VW, including issuing criminal charges. We’ll see what he actually does, but that’s what he should do based on his past statements. Especially after the arrest of the former top emissions compliance manager for Volkswagen in the US that just happened today:

    The New York Times

    F.B.I. Arrests Volkswagen Executive on Conspiracy Charge in Emissions Scandal

    By ADAM GOLDMAN, HIROKO TABUCHI and JACK EWING
    JAN. 9, 2017

    The F.B.I. has arrested a Volkswagen executive in Florida, accusing him of playing a central role in a broad conspiracy to keep United States regulators from discovering that diesel vehicles made by the company were programmed to cheat on emissions tests.

    The executive, Oliver Schmidt, a German who is the former top emissions compliance manager for Volkswagen in the United States, was arrested on Saturday by investigators in Florida on a charge of conspiracy to defraud the United States. He is expected to be arraigned on Monday.

    The arrest of Mr. Schmidt is an escalation of the criminal investigation into emissions cheating by Volkswagen and comes amid talks between the company and the United States Justice Department about what penalties the carmaker should accept as part of a settlement.

    After a study by West Virginia University first raised questions over Volkswagen’s diesel motors in early 2014, Mr. Schmidt played a central role in trying to convince regulators that excess emissions were caused by technical problems rather than by deliberate cheating, Ian Dinsmore, an F.B.I. agent, said in a sworn affidavit used as the basis for Mr. Schmidt’s arrest.

    Mr. Schmidt deceived American regulators “by offering reasons for the discrepancy other than the fact that VW was intentionally cheating on U.S. emissions tests, in order to allow VW to continue to sell diesel vehicles in the United States,” the affidavit said.

    Mr. Schmidt continued to represent Volkswagen after the company admitted in September that cars were programmed to dupe regulators. He appeared before a committee of the British Parliament in January, telling legislators that Volkswagen’s behavior was not illegal in Europe.

    Lawyers representing Mr. Schmidt did not respond to requests for comment late Sunday. Officials at the Justice Department also declined to comment, as did an F.B.I. spokesman in Detroit.

    In a statement, Jeannine Ginivan, a spokeswoman for Volkswagen, said that the automaker “continues to cooperate with the Department of Justice” but that “it would not be appropriate to comment on any ongoing investigations or to discuss personnel matters.” A Volkswagen spokesman in Germany also declined to comment.

    Lawsuits filed against Volkswagen by the New York and Massachusetts state attorneys general accused Mr. Schmidt of playing an important role in the carmaker’s efforts to conceal its emissions cheating from United States regulators.

    In 2014, when California air quality officials began an investigation of Volkswagen emissions, Mr. Schmidt was general manager of Volkswagen’s Engineering and Environmental Office based in Auburn Hills, Mich. For more than a year, he and other Volkswagen officials repeatedly cited false technical explanations for the high emissions levels, the authorities said.

    In September 2015, Mr. Schmidt and other Volkswagen officials formally acknowledged the existence of a so-called defeat device that allowed Volkswagen cars to cheat emissions tests.

    Volkswagen’s cover-up and belated confession angered officials from the California Air Resources Board and the Environmental Protection Agency, and it is likely to have vastly increased the cost to the company from the scandal. It has already agreed to pay $16 billion to owners of diesel vehicles and will probably have to pay several billion dollars more in fines.

    Volkswagen eventually said that it had fitted 11 million diesel cars worldwide with illegal software that made the vehicles capable of defeating pollution tests.

    The software enabled the cars to sense when they were being tested for emissions and turn on pollution-control systems to curb emissions at the cost of engine performance. But those controls were not fully deployed on the road, where cars spewed nitrogen oxide at up to 40 times the levels allowed under the Clean Air Act.

    James Liang, a former Volkswagen engineer who worked for the company in California, pleaded guilty in September to charges that included conspiracy to defraud the federal government and violating the Clean Air Act. But Mr. Schmidt’s arrest brings the investigation into the executive ranks.

    The arrest came as Volkswagen and the Justice Department neared a deal to pay more than $2 billion to resolve the criminal investigation into the emissions cheating. The company or one of its corporate entities is expected to plead guilty as part of the deal.

    The settlement could come as early as next week, barring any last-minute hiccups, according to people with knowledge of the negotiations.

    The German automaker has been eager to put the Justice Department investigation behind it before President-elect Donald J. Trump is sworn in on Jan. 20.

    American prosecutors had traveled to Germany in recent months to interview Volkswagen executives, according to German prosecutors.

    The criminal case against Volkswagen, and the potential guilty plea, set it apart from other recent auto industry investigations. In settlements with General Motors and Toyota over their handling of safety defects, for example, the companiesagreed to pay large fines but did not plead guilty.

    Prosecutors are also mulling criminal charges against Takata, the Japanese manufacturer under criminal investigation for its defective airbags.

    “Mr. Schmidt deceived American regulators “by offering reasons for the discrepancy other than the fact that VW was intentionally cheating on U.S. emissions tests, in order to allow VW to continue to sell diesel vehicles in the United States,” the affidavit said.”

    So in the waning weeks the Obama administration we’re seeing a VW executive arrested for lying to US regulators about the cause of the emissions testing discrepancy. If that’s the bar for an executive getting arrested, you have to wonder how many other VW executives crossed that threshold. Maybe quite a few:

    Bloomberg

    Volkswagen Executives in Germany to Face U.S. Charges in Diesel Case

    * Charges to follow Florida arrest of manager for conspiracy
    * U.S. criminal settlement expected as soon as this week

    by Tom Schoenberg, David McLaughlin, and Andrew M Harris
    January 9, 2017, 8:41 AM CST January 9, 2017, 1:58 PM CST

    U.S. prosecutors are planning to charge high-level Volkswagen AG executives based in Germany over the automaker’s emissions cheating scandal, according to a person familiar with the matter, after arresting a manager in the U.S. for allegedly misleading regulators.

    A top Volkswagen emissions-compliance executive Oliver Schmidt, 48, was arrested at Miami International Airport on Saturday and charged with conspiracy to defraud the U.S.

    A court filing against Schmidt lays out what could be a roadmap to charges against higher-level executives. Volkswagen’s senior officials in Wolfsburg, Germany, were told in July 2015 of the existence, purpose and characteristics of the device that lowered emissions on diesel cars when it detected it was undergoing environmental testing, the U.S. alleged, citing information obtained from three cooperators. VW admitted its efforts to skirt environmental standards in September 2015.

    “VW employees assured VW executive management that U.S. regulators were not aware of the defeat device,” according to the filing in federal court in Detroit. “Rather than advocate for disclosure of the defeat device to U.S. regulators, VW executive management authorized its continued concealment.”

    The person familiar with the investigation declined to specify when charges against more senior-level executives may be filed or whether the executives to be charged are still employed by the automaker. The Justice Department declined to comment on additional charges.

    Settlement Close

    Volkswagen is a nearing a multibillion-dollar settlement with the Justice Department to resolve a criminal investigation into the diesel emissions-cheating allegations, which could be announced as soon as this week, Bloomberg reported Friday.

    The government and Volkswagen have been trying to reach a settlement by Jan. 20 before the Trump administration comes into office and replaces the political appointees who have been overseeing the diesel-cheating case. VW also faces a criminal probe and lawsuits in Germany. The automaker’s shares rose 4.9 percent to 145.85 euros in Frankfurt.

    Any criminal penalty from the government would come on top of a $14.7 billion U.S. civil settlement between drivers, regulators and VW that requires the company to fix or buy back about 480,000 of the cars in the U.S. with 2.0-liter engines cars and pay to promote zero-emissions vehicles.

    “Volkswagen continues to cooperate with the Department of Justice as we work to resolve remaining matters in the United States,” the company said in a statement. “It would not be appropriate to comment on any ongoing investigations or to discuss personnel matters.”

    Schmidt is accused of participating in a conspiracy to defraud the U.S. government and Volkswagen customers and to violate the federal Clean Air Act from 2006 to 2015, according to court papers. He was scheduled to make a court appearance in Miami later Monday.

    Schmidt began working for the automaker in 1997 and served as general manager in charge of its Environmental and Engineering Office from 2012 to 2015, according to an affidavit filed by the Federal Bureau of Investigation. That agency was primarily responsible for communicating and coordinating with U.S. regulatory agencies, according to prosecutors. In March 2015, Schmidt was promoted to a more senior management position within Volkswagen and returned to the company’s headquarters in Germany.

    After learning in April 2014 that West Virginia University’s Center for Alternative Fuels, Engines and Emissions had found that three VW diesel vehicles had emitted 40 times the permissible limit in the U.S., Schmidt wrote to a colleague: “It should first be decided whether we are honest. If we are not honest, everything stays as it is,” according to the affidavit.

    In the same message, Schmidt noted that the International Council on Clean Transportation, an environmental group, had “stupidly” published the WVU findings. “Not good,” he said. In the summer 2015, Schmidt took a direct role in VW’s response to questions from U.S. regulators about the emissions tests.

    After these emissions-testing discrepancies became known to the U.S. government, he allegedly misled federal regulators about reasons for the differing test results. Schmidt offered “reasons for the discrepancy other than the fact that VW was intentionally cheating on U.S. emissions test in order to allow VW to continue to sell diesel vehicles in the United States,” according to the affidavit.

    The document lays out how in August 2015, senior Volkswagen managers approved a plan for what the automaker’s employees would say in an upcoming meeting with California regulators. That plan called for Volkswagen employees to continue concealing the existence of the emissions device. However, one employee, who is cooperating with the investigation, ignored those instructions and admitted that Volkswagen cheated on U.S. emissions tests.

    The government notes in the criminal case against Schmidt that the charge against him is based in part on information from two cooperating witnesses who worked in Volkswagen’s engine development department and also from James Liang, a former VW software engineer who pleaded guilty to a conspiracy charge in September. The unidentified witnesses are helping the U.S. in exchange for immunity from prosecution, according to the FBI affidavit.

    Dozens of Volkswagen officials in Germany have hired U.S. criminal defense lawyers over the past several months as the Justice Department ramped up its investigation, Bloomberg reported last month. U.S. authorities have traveled to Germany to arrange interviews with managers and seek cooperation.

    U.S. cases against against executives in Germany would face challenges. The U.S. can charge individuals even if German authorities issue their own indictments. But getting executives to stand trial in the U.S. could be difficult. Lawyers for some VW managers in Germany have advised their clients not to leave the country, according to a person familiar with the matter.

    The German constitution bars extradition of German nationals to foreign countries other than European Union members states. The law allows it to hand over Germans to international tribunals like the The Hague-based International Criminal Court.

    If German nationals leave their home country, they could face the fate of German hedge fund manager Florian Homm, who in 2013 traveled from Germany to Italy only to be arrested at the Uffizi Gallery in Florence on U.S. charges.

    VW has said top management was unaware of the decision to install the software to cheat emissions tests. “The then and current board of management of Volkswagen AG had, at any rate, no knowledge of the use of unlawful engine-management software at the time,” Volkswagen wrote in its annual report for 2015, a statement it has cited in response to subsequent inquiries.

    VW has suspended or pushed out about a dozen executives in the aftermath of the scandal including former Chief Executive Officer Martin Winterkorn, who has denied any knowledge of the cheating.

    “The document lays out how in August 2015, senior Volkswagen managers approved a plan for what the automaker’s employees would say in an upcoming meeting with California regulators. That plan called for Volkswagen employees to continue concealing the existence of the emissions device. However, one employee, who is cooperating with the investigation, ignored those instructions and admitted that Volkswagen cheated on U.S. emissions tests.

    Double uh oh. It sure sounds like US prosecutors are closing in on a case that could implicate VW’s senior management in a conspiracy to lie to US regulator. And if that prosecution goes through, these executives might not be able leave Germany for fear of extradition. That’s the situation VW is facing and was apparently hoping to resolve before the Trump team steps into place. At least as of November that was what VW was publicly hope for. Whether or not they still hold that hope is unclear, but considering that we’re seeing actual executive arrests and plans for executive extraditions it seems like there’s a good chance that VW’s new plan is to lobby for a Trump executive bailout.

    So that’s going to be something to watch for going forward. What will Attorney General Sessions do? Will he stick to his previous calls to charge major companies with criminal conduct after US prosecutors hand him a pile of evidence? Or does VW get an executive bailout? VW’s behavior is exactly the kind of corrupt behavior that prompted the “Drain the Swamp” theme that drove much of Trump’s campaign so it seems like it would be a no-brainer for Trump’s administration to not just pursue these charges but go even further. Of course, that was then, and this is now, so things are probably looking up for VW on January 20th. At least for the executives.

    Posted by Pterrafractyl | January 9, 2017, 3:51 pm
  13. Here’s the latest ‘uh oh’ for VW: The arrest of VW executive Oliver Schmidt last week in Florida was just followed up with criminal charges against five more executives in Germany:

    The New York Times

    U.S. Charges 6 Volkswagen Executives in Emissions-Cheating Case

    By HIROKO TABUCHI, JACK EWING and MATT APUZZO
    JAN. 11, 2017

    WASHINGTON — Federal prosecutors announced criminal charges on Wednesday against six Volkswagen executives for their roles in the company’s emissions-cheating scandal, a substantial turn by a departing administration that is trying to remake its image of being soft on corporate crime.

    The six executives include a former head of development of the Volkswagen brand and the head of engine development. One of those charged on Wednesday, Oliver Schmidt, was arrested in Florida last week; the other five are believed to be in Germany.

    Volkswagen also formally pleaded guilty to charges of conspiracy to commit wire fraud and to violate the Clean Air Act, customs violations and obstruction of justice. Many of the 600,000 cars in the United States equipped with emissions-cheating software were imported from Germany or Mexico.

    The automaker is set to pay $4.3 billion in criminal and civil penalties in connection with the federal investigation, bringing the total cost of the deception to Volkswagen in the United States, including settlements of suits by car owners, to $20 billion — one of the costliest corporate scandals in history.

    “When regulators expressed concerns, Volkswagen obfuscated,” Attorney General Loretta E. Lynch said at a news conference in Washington. “And they ultimately lied.”

    Extracting a guilty plea from a major corporation is a notable feat for an administration that has been accused of allowing companies to buy themselves out of indictments through so-called deferred prosecution deals.

    But the charges against the Volkswagen executives are just as striking and show that prosecutors are determined to hold the company’s highest ranks to account.

    The Volkswagen case is the first major test of a Justice Department commitment to hold executives more accountable. In 2015, Deputy Attorney General Sally Q. Yates issued new policies that prioritized the prosecution of individuals at corporations accused of wrongdoing. The policies were a response to criticism that the department had been too soft on Wall Street executives after the financial crisis.

    The five Volkswagen employees charged on Wednesday were Heinz-Jakob Neusser, 56, who oversaw development of the company’s brand; Jens Hadler, 50, who oversaw engine development; Richard Dorenkamp, 68, another supervisor of engine development; Bernd Gottweis, 69, who helped oversee quality management; and Jürgen Peter, 59, who was a liaison between regulatory agencies and the carmaker.

    They and Mr. Schmidt were charged with conspiracy to defraud the United States, defraud customers and violate the Clean Air Act.

    It was unclear whether the five executives named on Wednesday would ever appear in a United States court. If they are in Germany, the country does not normally extradite its citizens.

    Even if Germany does not extradite or prosecute them, the charges in the United States would severely limit their ability to travel. The case could also set up a diplomatic tussle between Germany and the administration of President-elect Donald J. Trump, though Mr. Trump’s stance on the case is far from clear.

    Ms. Lynch said she could not speculate on whether Germany would hand over the five charged. Still, she said: “We’ve always worked very well with our German colleagues.”

    Regulators in the United States first began to investigating Volkswagen early in 2014 after a study by West Virginia University showed that its diesel cars polluted far more on the road than during official emissions tests.

    Company executives knew that the cars were programmed to recognize when they were being tested and to deliver optimum pollution readings, according to investigators. But rather than admit wrongdoing, Volkswagen representatives provided false and misleading information for more than a year to the California Air Resources Board and the E.P.A.

    Mr. Schmidt arrested on Saturday at Miami International Airport as he was about to board a flight to Germany. In September, a former Volkswagen engineer who worked for the company in California, James Liang, pleaded guilty to charges that included conspiracy to defraud the federal government and violating the Clean Air Act.

    None of the executives charged on Wednesday were members of the Volkswagen management board, although several of them reported directly to the board. The lack of accusations against any top managers could help insulate Volkswagen from lawsuits by shareholders who have accused the company of failing to disclose the risks it faced.

    Several of those charged on Wednesday played management roles in the development of the diesel engines that were equipped with so-called defeat devices — software intended to mask excess emissions by cranking up pollution controls whenever a car was being tested on rollers in a lab.

    Several others have been accused of concocting excuses for the excess emissions and trying to prevent regulators from discovering the truth. Volkswagen also admitted that its employees destroyed emails and other evidence in 2015 as it became clear that regulators would soon learn of the illegal software.

    The Volkswagen case is the first major test of a Justice Department commitment to hold executives more accountable. In 2015, Deputy Attorney General Sally Q. Yates issued new policies that prioritized the prosecution of individuals at corporations accused of wrongdoing. The policies were a response to criticism that the department had been too soft on Wall Street executives after the financial crisis.”

    Yep, adding to the stakes of this prosecution is the fact that this the first major test of a 2015 Justice Department commitment to actually hold executive accountable. Better late than never! Seriously. Way better late than never. At least there’s hope.

    Although note how this first test is still going to rely on the Trump administration to complete it, so this test is about to face quite a test:


    It was unclear whether the five executives named on Wednesday would ever appear in a United States court. If they are in Germany, the country does not normally extradite its citizens.

    Even if Germany does not extradite or prosecute them, the charges in the United States would severely limit their ability to travel. The case could also set up a diplomatic tussle between Germany and the administration of President-elect Donald J. Trump, though Mr. Trump’s stance on the case is far from clear.

    Ms. Lynch said she could not speculate on whether Germany would hand over the five charged. Still, she said: “We’ve always worked very well with our German colleagues.”

    That’s going to send quite a signal to the rest of the corporate world if Trump’s DOJ backs off in prosecuting these guys which why it’s this VW scandal is turning about to be a much, much bigger deal. On the other hand, since none of the executives charged were on the management board there’s plenty of room for the Trump administration to turn this into an example of how he’ll crack down of corporate corruption. Is the Trump administration’s corruption going to be largely Trump-centric or is he going to unleash a corporate malfeasance free-for-all?
    Sure, anyone with a brain can reasonably assume that Trump is going to unleash a corporate free-for-all, but this is the kind of case that will send a confirmatory signal to the corporate world. That’s the politics and real-world economics that is now intertwined with this case. It’s the Justice Canary in the Trumpian Coal Mine.

    So let’s hope this new Justice Department commitment to hold executives accountable is actually a DOJ commitment and not just an Obama DOJ commitment. Of course, that’s going to be up to Trump’s Justice Department going forward which, in turn, is going to depend quite a bit on Donald Trump’s general attitude regarding the importance of corporate ethics and prosecuting executives which is why today’s ‘uh oh’ for VW’s executives to become easily an ‘uh oh’ for the American public if Team Trump goes easy on them.

    So we’ll see what happens, although it’s not looking so good for that canary.

    Posted by Pterrafractyl | January 11, 2017, 3:55 pm
  14. Here’s an update on VW’s ‘dieselgate’. And as far as updates go it’s a pretty massive update: VW, BMW, Daimler, Audi and Porsche are all charged with colluding with each other on technology, components, and supplier, in particular the technical details of diesel exhaust treatment systems, going back to the 90’s:

    Financial Times

    German car industry faces being hit with big fines
    Tarnished auto sector on the line as groups confront accusations of cartel-like behaviour

    by: Guy Chazan in Berlin, Patrick McGee in Frankfurt and Jim Brunsden in Brussels
    July 24, 2017 11:17 am

    The allegations of collusion among German carmakers have plunged an industry already tarnished by the Volkswagen diesel scandal into a fresh crisis. The news magazine Der Spiegel reported on Friday that German automakers — VW, BMW, Daimler, Audi and Porsche — had been engaging in cartel-like behaviour since the 1990s, in particular colluding with each other on the technical details of diesel exhaust treatment systems. The EU competition authorities have opened an investigation, and Germany’s economics minister says the credibility of the whole German car industry is at stake. FT reporters consider the main points.

    What are the German carmakers accused of?

    BMW, Daimler and the Volkswagen Group are accused of holding secret meetings since the 1990s to collude on technology, components and suppliers. The most significant allegation is that they agreed to use only small tanks for AdBlue, a urea solution critical for neutralising emissions from diesel engines. But so far there is no evidence they colluded on prices of end products.

    How have the carmakers responded to the allegations?

    VW and Daimler have refused to comment, while BMW adamantly denies that it colluded with its rivals. However, BMW said on Friday there was nothing unusual in working with other carmakers on certain components if they “do not contribute to differentiation of the two brands and are therefore not relevant to competition”.

    The EU has confirmed it is investigating the allegations — but how likely is it that they will really crack down on German industry?

    Germany exercises huge power in the EU and can easily influence the European Commission agenda. But the competition directorate has a reputation for fierce independence — one that under its current boss, Margrethe Vestager, has only grown. She has taken on a phalanx of corporate titans, ranging from Apple and Google, to Gazprom, Amazon and McDonald’s, and is expected to be just as tough in her approach to the German carmakers. “Knowing her, I bet she would have the guts [to go after them],” says Philippe Lamberts, a Green MEP. It would also be an opportunity for her to show “she is not just after big US companies, but also European champions [that break the rules].”

    Are there precedents for EU action against German companies?

    Yes. Sven Giegold, a German Green MEP, notes how tough the EU competition authorities were when it came to restructuring the four German Landesbanken — public sector banks with a regional focus — that got into trouble during the financial crisis. The directorate also acted against German utility Eon in the late 2000s over concerns it was abusing its dominant market position: in a settlement with Brussels, it was forced to sell its long-distance grid and a big chunk of its domestic generating capacity. And so much more is riding on the carmaker cartel issue. “This is a test case for the rule of law,” Mr Giegold says.

    What kind of fines could the carmakers face?

    EU cartel fines are determined by (i) the annual revenue of the product in question; (ii) the duration of the infringement; and (iii) the gravity of the offence. There is a maximum cap of 10 per cent of global revenues — equivalent to €8bn for BMW, €14bn for Daimler and €19bn for Volkswagen, according to analysts at Exane BNP Paribas. Leniency is a big factor. Some companies have escaped a fine by self-reporting. A similar approach could reduce any fines for the German carmakers. Spiegel reported that VW and Daimler had self-reported themselves in this case. This has been confirmed by VW, while Daimler has declined to comment.

    What do auto industry experts say about the claims?

    Details are scant, so analysts are having a hard time quantifying the risks. Stuart Pearson, at BNP Exane Paribas, said it was “difficult to separate what is normal industry co-operation and co-development, and what went beyond this normal practice and crossed the grey line into the realms of anti-competitive behaviour”.

    What does this mean for the use of diesel engines?

    The allegations come at “the worst possible time for the carmakers,” says Stefan Bratzel of the Center of Automotive Management. Already, diesel technology is in trouble: there were the revelations that VW had installed software in its diesel cars to cheat emissions tests, and then came the announcements by some European cities such as Paris and Madrid that they were considering banning diesel cars, because of their NOx emissions: London is also to impose an extra congestion charge on diesel vehicles from this autumn. This is affecting sales: overall, diesel accounted for 47.2 per cent of sales in Europe’s biggest countries last quarter, down from 51.6 per cent a year ago.

    ———-

    “German car industry faces being hit with big fines” by Guy Chazan, Patrick McGee and Jim Brunsden; Financial Times; 07/24/2017

    BMW, Daimler and the Volkswagen Group are accused of holding secret meetings since the 1990s to collude on technology, components and suppliers. The most significant allegation is that they agreed to use only small tanks for AdBlue, a urea solution critical for neutralising emissions from diesel engines. But so far there is no evidence they colluded on prices of end products.”

    Keep in mind that one of the key ‘features’ of VW’s emissions-cheating ‘clean diesel’ cars was an “advance” in the technology that eliminated the need for these urea solution tanks in some smaller models (but in reality just emitted more NOx and hid it by cheating the tests). And after everything we’ve learned about the dieselgate thus far and now widespread it was beyond VW, it’s not hard to imagine industry collusion on the cheating technology that German industry was pioneering. A technology procurement cartel is potentially a great tool for implementing a long-standing cover-up for something like emissions-cheating. After all, it’s a lot less risky to peddle special “advanced”(cheating) clean diesel technology when all your competitors are selling similarly “advanced” technology. For instance, if one manufacturer was honestly selling “clean diesel” cars that all required a large urea solution tank, but all the rest of the cheater companies had small tanks, that could raise some eyebrows.

    And don’t forget that BMW, Mercedes, Audi, Porsche, and whole lot of non-German companies too have all been facing charges of diesel emission cheating, so it makes sense that they might all have been engaged in cartel-like behavior in part to obscure that cheating by locking everyone into the same cheating technology.

    So, yeah, dieselgate is about to emit a lot more scandal. *cough* *gag*

    Posted by Pterrafractyl | July 24, 2017, 12:57 pm

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