Volkswagen (VW) admitted cheating on emission tests for 11 million vehicles worldwide since 2009. The scandal, popularly known as DieselGate, was exposed in September last year by the Environment Protection Agency (EPA) who discovered VW cars being sold in America had a “defeat device” – or software – in diesel engines that could detect when they were being tested.
When this piece of smart and sophisticated device detected the car was operating under controlled laboratory conditions – on a stationery test rig – it would put the car into a sort of “safety mode”, changing the performance accordingly to improve results. However, when on the road with emissions controls switched off, the cars would pump out nitrogen oxide (NOx) – a pollutant – at up to 40 times the legal limit.
Almost immediately the sales plunged, with the VW sales in UK dropped 20% in November 2015 alone. Not only were VW-badged cars involved, but also cars from VW-owned Audi, Skoda and Seat. Surprisingly, VW put the blame on Audi, claiming the emissions “cheat device” was engineered at Audi back in 1999.
Since VW’s acknowledgement that the company intentionally defeated emissions tests, at least 500 owners have filed lawsuits against it. The latest carmaker that has jumped into the emissions-rigging bandwagon is Japan’s sixth-largest automaker Mitsubishi. But all the eyes are on VW, the U.S. Department of Justice and owners to settle the issue.
On Wednesday, Germany’s Die Welt newspaper reported that a deal to settle the case would involve VW paying each affected customer US$5,000 (£3,465; RM19,385). Last month, U.S. District Judge Charles Breyer had given VW until April 21st to come up with a settlement for the roughly 500,000 owners who bought their polluting cars.
As the deadline strikes, it seems all parties have reached a deal whereby VW will buy back almost half a million of the diesel cars affected – the world’s biggest automobile “repurchase deal”. Obviously, not all owners will get the same amount of compensation due to multiple factors such as the age and mileage of the car; hence the final details are still being negotiated with regulators.
Assuming all the VW owners will accept the deal of selling back their cars to the carmaker, it would cost the German car manufacturer more than US$7 billion. The deal affects the owners of about 482,000 Volkswagens with 2-liter, four-cylinder diesel engines – most of them VW Jetta, Golf and Passat models dating to the 2009 model year.
For those who do not wish to sell back their car to VW, they will be given a choice of having their diesel car fixed. Owners who choose to sell back their vehicles will get additional cash payment on top of receiving the estimated value of the vehicles from before the emissions scandal became public in September 2015.
So, was the earlier leaked news on Wednesday that each VW owner would get US$5,000 (£3,465; RM19,385) as part of a PR effort to pacify angry consumers a hoax? If Judge Charles Breyer’s gag order and criticism at parties for leaking previous details to the media are any indicators, the rumour is definitely true.
Paying US$5,000 to each of 482,000 VW owners would cost the giant automaker a whopping US$2.41 billion. But based on sources, some VW owners do not want to get their car fixed, let alone sell back to VW because they like how the polluting car drives. Screw global warming and car pollution. The loyal VW owners prefer car performance over saving the planet.
But for VW owners who are concerned about diesel pollution, they will most likely sell back to the car manufacturer because fixing older-model diesels could be time-consuming and will probably cut their performance and fuel mileage. There’s no hint whatsoever how VW plans to fix the problem – whether it would involve a software fix or new hardware altogether.
Breyer set a June 21 deadline for attorneys from the U.S. Justice Department and for Volkswagen owners to file additional paperwork about the agreement. Thereafter, the final terms of the settlement will be revealed to the public. Still, VW is looking at fines as much as US$20 billion for Clean Air Act violations alone.
In addition, some Volkswagen dealers have sued over financial losses from diesel cars sitting on their lots that can’t legally be sold until the emissions problems are resolved. And the settlement, when finalized, only covers the emissions scandal in the United States. In UK where at least 1.2-million VW cars could be fitted with the “cheat device”, it would be business as usual.
That’s because the testing in UK and Europe is not too demanding as in the United States. Britain Transport Secretary Patrick McLoughlin said: “Our tests have not detected evidence of manipulation of emissions lab tests as used by the VW Group by any other car manufacturer”.
Perhaps VW owners in UK can sue for losses due to excessive plunge in resale value after the DieselGate scandal. And what does VW plan to do with 482,000 cars to be bought back? They can always resell them – cheaply – to countries that don’t care about car pollution – Malaysia, Indonesia, Africa, Middle East, India, Pakistan and the list goes on.
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April 22nd, 2016 by financetwitter
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