Volkswagen CEO: Using Deceptive Software Was Wrong - InformationWeek

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9/21/2015
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Volkswagen CEO: Using Deceptive Software Was Wrong

Volkswagen CEO Martin Winterkorn pledges cooperation as investigators delve into alleged emissions test cheating.

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Volkswagen AG CEO Martin Winterkorn on Sunday issued an apology in response to allegations from the US Environmental Protection Agency and the California Air Resources Board that VW and two of its subsidiaries had used software to cheat on vehicle emissions tests.

"I personally am deeply sorry that we have broken the trust of our customers and the public," said Winterkorn in a statement. "We will cooperate fully with the responsible agencies, with transparency and urgency, to clearly, openly, and completely establish all of the facts of this case. Volkswagen has ordered an external investigation of this matter."

On Sept. 18, the EPA issued a Notice of Violation accusing Volkswagen AG, Audi AG, and Volkswagen Group of America of deliberately employing a "defeat device" to allow four-cylinder Volkswagen and Audi diesel cars from model years 2009-2015 to appear to meet emissions standards during testing.

During actual use, however, the affected vehicles emitted 10 to 40 times more pollutants than allowed, according to the EPA.

(Image: Volkswagen)

(Image: Volkswagen)

As trading resumed on Monday, Sept. 21, stock of Volkswagen AG was down about 20% in the wake of the EPA/CARB charges. For Clean Air Act violations, VW could be fined up to $37,500 per vehicle, which would amount to $18 billion for 482,000 affected vehicles. There may be additional litigation.

The EPA has not said how much it will seek in fines, but a similar case in 1998 may offer some guidance.

That year, the EPA and the Justice Department announced the largest Clean Air Act settlement up to that point, an $83.4 million civil penalty against seven truck makers -- Caterpillar, Cummins Engine Company, Detroit Diesel Corporation, Mack Trucks, Navistar International Transportation Corporation, Renault Vehicules Industriels, and Volvo Truck Corporation.

In 2015 dollars, that fine would be about $122 million, based on a cumulative inflation rate of 46.2%. That's significantly less than the statutory maximum.

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The EPA and Justice Department claimed that the truck makers sold 1.3 million vehicles with defeat devices that disabled emission controls while on the road. The EPA estimated that the vehicle makers would spend an additional $850 million to develop cleaner diesel engines and bring old engines into compliance.

Last year, South Korean automakers Hyundai and Kia agreed to pay a $100 million civil penalty to resolve alleged Clean Air Act violations.

Beyond direct financial fallout, Volkswagen will have to contend with brand damage. For example, Consumer Reports on Sunday suspended its recommendation of two Volkswagen models, the Jetta diesel and the Passat diesel. The publication will wait until VW fixes the emissions system to re-test the cars.

Thomas Claburn has been writing about business and technology since 1996, for publications such as New Architect, PC Computing, InformationWeek, Salon, Wired, and Ziff Davis Smart Business. Before that, he worked in film and television, having earned a not particularly useful ... View Full Bio

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Thomas Claburn
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Thomas Claburn,
User Rank: Author
9/22/2015 | 4:49:29 PM
Re: Is it the individual or the culture in which they operate?
Interestingly, Hyundai and Kia cheated in a smarter way than VW, though they were still caught. The two South Korean car makers manipulated tests for favorable results without resorting to software trickery.  

From the EPA: "For example, Hyundai and Kia restricted their testing to a temperature range where its vehicles coasted farther and faster and prepared vehicle tires for optimized results. In processing test data, Hyundai and Kia chose favorable results rather than average results from a large number of tests. In certain cases, Hyundai and Kia relied predominantly on data gathered when test vehicles were aided by a tailwind."

So there's probably a lot of cheating that goes on. Some of it is just more obvious.
Charlie Babcock
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Charlie Babcock,
User Rank: Author
9/21/2015 | 6:36:17 PM
Is it the individual or the culture in which they operate?
This a black eye for Volkswagen. How often do people talk themselves into doing what they think "has to be done," only to find how much cheaper and better in the long run if they had just concentrated on doing it right the first time. I don't think it's always one or two individual at fault. It's more the culture in which they operate, make promises, meet deadlines, etc., whether realistic or not.
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