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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.”
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. Lawsky, former 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. . . .
. . . . 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. . . .
. . . . 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. . . .
. . . . 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. . . .
The Political Implications of the UFO Phenomenon and the "ET" Myth
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 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:
“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.
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:
“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:
“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:
“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 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:
“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.
LOL!:
“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!*
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:
“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.
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 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:
“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.
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:
“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.
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:
“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.
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:
“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.
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:
“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:
“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:
“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.
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!:
““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.
It’s official: VW is paying the largest auto-scandal settlement in US history:
“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:
“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:
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:
“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:
“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:
Yes, VW’s response to the EU’s will be happy to “intensify dialogue with consumers” if the need arises. That should fix everything.
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:
““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:
“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:
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:
“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:
“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:
“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.
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 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:
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.
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:
“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*
Well, this probably isn’t going help the German auto industry’s ‘Dieselgate’ woes: It turns out VW, BMW, and Daimler paid for their own junk science outfit dedicated to producing research that demonstrated that their ‘clean diesel’ technology didn’t pose a asthma, heart attack or cancer threat, three big known risks of traditional diesel exhaust. The research institute, the European Research Group on Environment and Health in the Transport Sector (EUGT), was set up in 2007 just as VW was planning on selling its clean diesel technolgoy in the US, which had more stringent clean air rules than the EU. So how did the EUGT go about proving that this ‘clean diesel’ technology was actually clean? By exposing a group of 10 monkeys to the exhaust fumes, and then later exposing 19 men and 6 women to the fumes. Fortunately for these test subjects the studies were conducted on the rigged vehicles that were in ‘test mode’ and thus producing far less exhaust than these vehicle normally emit:
“On Thursday the New York Times reported that the EUGT research was designed to counter a 2012 decision by the World Health Organization to classify diesel exhaust as a carcinogen.”
So the World Health Organization declares diesel exhaust as a carcinogen in 2012, prompting the 2014 EUGT studies on monkeys and humans. Studies that would have been a lot more unethical, in terms of presenting a danger to the study subjects, had VW not been unethically using rigged cars that dramatically lowered their diesel exhaust emissions from real-world conditions:
So we have an industry-funded junk science organization, the EUGT, running fraudulent experiments on monkeys and humans back in 2014 in order to ‘prove’ that this clean diesel technology was safe. And as the follower New York Times report on this point outs, those 2014 studies were just some of the ‘research’ getting pushed out by the EUGT over its decade of operation:
“The automakers’ research group was created in 2007, as Volkswagen was readying a major push to market diesel technology in the United States, which has stricter limits on nitrogen oxide emissions than Europe. Mr. Spallek, the executive director, had been the chief medical officer of Volkswagen’s commercial vehicles division”
As we can see, this ‘research group’ that was solely funded by these big three German automakers got started in 2007, right when VW was planning on a big ‘clean diesel’ push into US markets. But it’s research wasn’t exclusively focused on these new cars. The EUGT also financed studies that cast doubt on the pollution emitted by older diesel vehicles. And studies that questioned data showing diesel pollution was an issue at all in some cities. Hence the obvious Big Tobacco parallels:
“Margaret Douglas, the chairwoman of a panel that advises the Scottish public health system on pollution issues, compared the automakers’ behavior to the tobacco industry. Just as the tobacco companies promoted nicotine addiction, Ms. Douglas said, the carmakers lobbied for tax breaks that made European drivers dependent on diesel.”
Yes, the production of faked scientific evidence does indeed have quite a few parallels with Big Tobacco. Including all the avoidable deaths from inhaling poisonous compounds. Deaths that reached 72,000 people in Europe along in 2012 alone:
And just like with Big Tobacco, this industry financed research was generated specifically to dispel public safety concerns:
And note how, even with the rigged VW Beetle, the 2014 study on monkeys and humans didn’t even provide a clear finding. But they pressed ahead with publishing their results anyway. Although the VW and the research company they hired disagree on which side was pushing for the publication:
“I feel like a chump”
Yeah, feeling like chumps seems like an appropriate response in this situation. For everyone involved. Except for the families of the people who died prematurely because of nitrogen dioxide pollution. They should feel like a lot more than just chumps in this situation.
It never ends: There’s a new mass recall of diesel-powered cars over the use of “defeat devices” to hide emissions. This time it’s Daimler. In particular, 774,000 vehicles, mostly Vito vans and diesel-powered versions of GLC 4x4s and C‑class sedans, are all recalled. Keep mind that VW ended up recalling some 11 million vehicles, so Daimler has a ways to go to catch up to VW. But as the following article notes, when German prosecutors declared their investigation “only getting started” when they raided BMW in March. And the same is likely true for Daimler, so we’ll see what the final recall number is for the company but given how this scandal has played out so far it’s hard to believe this is the end of Daimler’s diesel-woes:
“Germany ordered Monday the recall of some 774,000 vehicles from Mercedes-Benz maker Daimler across Europe, citing illegal “defeat devices” designed to conceal high levels of harmful emissions from regulators’ tests.”
774,000 vehicles that have been secretly spewing out far more pollution than advertised finally get recalled three years after Dieselgate was first discovered. It’s a start:
“In the years since 2015, other German carmakers have also been forced to recall vehicles to fix manipulated software, although none has so far admitted to mass cheating as Volkswagen did.”
Will Daimler admit to “mass cheating” or is 774,000 considered minimal standard cheating by auto industry standards? Because don’t forget the story of VW: pretty much ALL their ‘clean diesel’ vehicles were using defeat devices because that’s the only way they could offer ‘clean diesel’. Not cheating wasn’t an option for VW. So if Daimler is caught using defeat devices on some of their ‘clean diesel’ vehicles it’s hard to see why it isn’t highly likely that all of their ‘clean diesel’ vehicles were using such devices. Why use it in some, but not all, models? So we should probably expect this story to be a prelude many more stories about Daimler cheating:
And note the warning from auto industry expert Ferdinand Dudenhoeffer: The German government should approve hardware, rather than software alterations to manipulated vehicles to produce “an honest solution” to excessive emissions, Dudenhoeffer charged. Otherwise, “car firms will continue to stumble into the future and watch as their reputations are destroyed”. It’s quite a warning:
And part of what makes that warning about Dudenhoeffer so interesting is that it suggests a concern that the software ‘fixes’ to these ‘defeat devices’ might, themselves, not actually be actual fixes. And that concern just happens to be shared by German Environmental Minister Svenja Schulze of the SPD. According to Schulze, hardware fixes to all of the impacted vehicles is the only way to actually make them clean enough for use in urban area. German Transport Minister Andreas Scheuer, who happens to be a member of the hard right CSU, opposes Schulze’s call. So we have a situation where one agency of the German government is saying hardware fixes are required and another agency arguing the opposite. Thus, when Dudenhoeffer says “it’s of course up to the politicians” over whether or not “an honest solution” like hardware fixes are implemented, it’s a very open question whether or not that will happen:
“German Environment Minister Svenja Schulze has told a newspaper she does not think software updates for diesel vehicles in Germany will be enough to solve air quality problems and that hardware retrofits are the only way to avoid driving bans.”
The software updates are just another scam and manufacturers should have to pay for the much more expensive hardware updates. That’s more or less the message from Germany’s environmental minister:
Not surprisingly, Germany’s conservatives disagree, including the German Transport Minister:
And that all highlights how the future reputation of Germany’s auto industry is going to be shaped by a political fight within Germany over whether or not an “honest fix” should actually be mandated. A political fight that’s yet to be resolved. But it’s not just the reputation of the auto manufacturers at stake. Heck, they’ve already demonstrated that they will do whatever they can get away with. Instead, it’s the German government’s own reputation that’s at stake, a reputation that those auto manufacturers are going to have to fall back on more than ever as Dieselgate continues to unfold. So if the manufacturers ‘win’ this political fight and avoid a mandatory hardware fix, they could end up demonstrating to the world that the German auto industry calls the shots when it comes to German regulations. In other words, if Dieselgate turns into a scandal where politicians beholden to the auto industry thwart real fixes and everyone is left with software fixes that don’t actually fix anything thanks to corrupt politics, that’s no longer just an auto industry scandal.