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What’s Volkswagen’s Deal, Anyway?

If you’ve been following the news of the private sector within the last few weeks, you’ve probably heard about the Volkswagen controversy at some point. The media is saying that the car manufacturer has messed up its software that was written specifically for emissions calculation. The software reports have apparently misled the consumers about the amounts of diesel emissions the cars were releasing. Understandably, the consumers are furious with the company, but how much do they really know about what’s going on? My name is Jeremy Powers and I’ll do my best to make sense of the controversy in this post.

Just to give you a bit of an introduction into the system, in 2005, parts of Volkswagen intended to purchase Mercedes’ “BlueTec” system for reducing pollution, but other parts of the company rejected that and preferred to develop their own system.

Volkswagen’s Engine Innovation

Starting with the 2009 model year, Volkswagen Group began migrating its light-duty passenger vehicle turbocharged direct injection diesel engines to a common-rail fuel injection system. This system allows for higher-precision fuel delivery using electronically controlled fuel injectors and higher injection pressure, theoretically leading to better fuel atomization, better air/fuel ratio control, and by extension, better control of emissions.

With the addition of a diesel particulate filter to capture soot, and on some vehicle models, a urea-based exhaust “after treatment system”, the engines were described by Volkswagen as being as clean as or cleaner than US and Californian requirements, while providing good performance. The system failed to combine good fuel economy with compliant emissions, and VW chose sometime before 2010 to program the engine control to switch from good fuel economy and high emissions to low-emission compliant mode when it detected an emissions test. This caused the engine to pollute in daily operation, but comply with pollution rules only when being tested. The difference was deliberate, and at least 30 people at management level in Volkswagen are said to have known about the deceit for years, which Volkswagen nonetheless denies.

As of 2014, VW is registered with a Corporate Average Fuel Economy of 34-38 mpg. The low emissions levels of Volkswagen vehicles tested with the defeat device in operation enabled the company to receive green car subsidies and tax exemptions in the US.

Here’s the Real Truth

The Volkswagen emissions scandal began on 18.09.2015 when the US Environmental Protection Agency has issued a Notice of Violation of the Clean Air Act to Volkswagen. The company had programmed the engines of certain cars so that US’ standards were met only during the compulsory emissions’ lab testing. The emissions released during driving were actually up to 40 times higher. The Agency classified this programming as a “defeat device”, expressly prohibited by the Clean Air Act. It is believed that over 11 million cars worldwide, and 500,000 in the US, included such programming.

These findings stemmed from a study on regional emissions discrepancies commissioned in 2014 by the International Council of Clean Transportation, and they are compiled of the data gathered from three different sources on 15 vehicles. The findings were provided to the California Air Resources Board in the spring of 2014.

The Domino Effect

Volkswagen became the target of regulatory investigations in multiple countries, and its stock price has plunged in value by a third in the days immediately after the news. Volkswagen Group CEO Martin Winterkorn had resigned, and the head of brand development Heinz-Jakob Neusser, Audi research and development head Ulrich Hackenberg, and Porsche research and development head Wolfgang Hatz were suspended. Volkswagen announced plans to spend $7.3 bn. on undoing the damage, and planned to refit the affected vehicles as part of a recall campaign. The scandal raised awareness over the higher levels of pollution being emitted by all vehicles built by a wide range of car companies, which, under real world driving conditions are prone to exceed legal emission limits. A study showed biggest deviations from Volvo, Renault, Jeep, Hyundai, Citroen and Fiat. A discussion was sparked that software-controlled machinery would generally be prone to cheating and a way out would be to make the software source code accessible to the public at large.

According to the EPA, Volkswagen had insisted for a year before the outbreak of the scandal that discrepancies were mere technical glitches. Volkswagen only fully acknowledged that they had manipulated the vehicle emission tests after being confronted with evidence regarding the defeat device I mentioned earlier. Formal acknowledgement of the deception was made by Volkswagen executives in Germany and the United States to the EPA and California officials during a 3 September conference call, during which Volkswagen executives discussed written materials provided to the participants demonstrating how Volkswagen’s diesel engine software circumvented U.S. emissions tests. That admission came after the EPA threatened to withhold approval for the company’s 2016 Volkswagen and Audi diesel models.

Volkswagen’s now-former CEO Martin Winterkorn said: “I personally am deeply sorry that we have broken the trust of our customers and the public.” Winterkorn was in charge at Volkswagen from the start of 2008 to September 2015. He attributed the admitted wrongdoing to “the terrible mistakes of a few people”. Winterkorn initially resisted calls to step down from his leadership role at Volkswagen but then resigned as CEO on 23 September 2015.

Volkswagen Group of America CEO Michael Horn was more direct, saying, “We’ve totally screwed up”. He also added, “Our company was dishonest with the EPA, and the California Air Resources Board and with all of you”. Olaf Lies, a Volkswagen board member and economy minister of Lower Saxony, later told the BBC that the people “who allowed this to happen, or who made the decision to install this software” acted criminally, and must be held personally accountable. He also said the board only found out about the problems “shortly before the media did”, and expressed concerns over “why the board wasn’t informed earlier about the problems when they were known about over a year ago in the United States”

On 29.09.2015 Volkswagen announced plans to refit up to 11 million vehicles affected by the scandal. The recall is going to affect the models fitted with Volkswagen’s EA 189 diesel engines, including 5 million at VW brand, 2.1 million at Audi, 1.2 million at Skoda and 1.8 million light commercial vehicles

In Germany, 2.8 million vehicles would have to be recalled, followed by the UK, with 1.2 million. In France, 984,064 vehicles were affected, in Austria around 360,000, while in the Czech Republic approximately 148,000 vehicles were involved. In Portugal, VW said it had sold 94,400 vehicles with the rogue software. The repair may not, however, require a recall: in the UK, for example, the company will simply offer to repair the cars free of charge; a recall is only required when a defect is identified that could result in serious injury. As the rules violation involved enabling emission controls during testing, but turning it off under normal conditions to improve performance or fuel mileage, the necessary software update might make cars perform less efficiently and impair fuel economy.

It was unclear as of September 2015 whether the repair would also include additional hardware modification. The recall was scheduled to start in January 2016, with all affected cars projected to be fixed by the end of the year. The company also announced a review of all of its brands and models, including the Bugatti’s.

On 8.10.2015, Volkswagen US CEO Michael Horn said in testimony that it could nevertheless take years to repair all the cars, especially the older models, due to the complex hardware and software changes that will be required. He also said that the repairs will likely preserve fuel economy ratings but, that there might be a slight impact on performance. In Europe, almost half of the affected cars require hardware changes, including the fitting of new parts, in order to meet emission standards.

On 10.10.2015, Consumer Reports tested a 2015 Jetta TDI and a 2011 Jetta Sportwagen TDI in what they presumed was the special emissions testing, or cheat, mode. The 0 to 60 mph (0 to 97 km/h) acceleration time of the 2011 Jetta increased from 9.9 to 10.5 seconds, and the 2015 car’s time went from 9.1 to 9.2 seconds. The fuel economy of the 2011 car decreased from 50 to 46 mpg-US (4.7 to 5.1 L/100 km; 60 to 55 mpg-imp) and the 2015 car’s fuel economy decreased from 53 to 50 mpg-US (4.4 to 4.7 L/100 km; 64 to 60 mpg-imp). Consumer Reports’ Director of Auto Testing said that while the added fuel costs, may not be very dramatic, these cars may no longer stand out among the many competitors. The method the magazine used to engage cheat mode while driving required making assumptions about the ECU’s operations. Because disabling electronic stability control is a necessary step for running a car on a dynamometer, the magazine assumed that this would put the car in cheat mode.  In order to keep the electronic stability control from reactivating while driving, they disconnected the cars’ rear wheel speed sensors, simulating the inputs the ECU receives while the car is on a stationary test rig, even though it was being driven on the road. Besides front and rear wheel speeds, the EPA had said that steering wheel movement, barometric pressure and duration of engine operation were factors in triggering cheat mode.

On 12.10.2015, Paul Willis, Volkswagen’s UK managing director, told the Commons Transport Select Committee that about 400,000 Volkswagen cars in the UK will need fuel injectors altered as well as a software fix. The vehicles requiring the hardware fix are the 1.6 liter diesel models. The 1.2 liter and 2.0 liter diesel models would only require a software fix.

For Concerned Customers

On the same day, Volkswagen announced it would overhaul its entire diesel strategy, saying that in Europe and North America it will switch as soon as possible to the use of selective catalytic reduction technology to improve diesel emissions. It also announced plans to accelerate the development of electric cars and plug-in hybrids, as well as petrol, instead of diesel engines for smaller cars. On 12-13 October 2015, Volkswagen Group vehicle drivers in the UK started receiving notification letters, to rectify the problem.

All of the above sounds incredibly complex and not very flattering for Volkswagen as a whole. You’re probably asking yourself – if I have a Volkswagen automobile, how much does any of the above affect me?

The easiest way to find out whether you’re affected is to check your V5C documents and service books to see if you have the Type EA189 engine. You can also call the VW UK customer care center to confirm your engine type. You, as a driver, are under no obligation to send the vehicles back to Volkswgaen dealerships to get them modified, according to the Department for Transport. Motorists would not be fined if their cars weren’t fixed, but it appears to be in their interest to do that.  It’s possible that the necessary software update will leave drivers with a car that doesn’t perform as efficiently as they were told it would when they bought it. You may also face higher fuel bills as tighter controls on the car’s emissions will lower its fuel economy.

However, that’s not to say that you can’t get any compensation.  If your diesel car has a Type EA189 engine and is one of the makes affected, you could be entitled to compensation. The key issue facing drivers that have been affected by the scandal is the loss of car’s value. As well as increased fuel costs for drivers, the overall value of the vehicle is likely to decrease. Road tax also looks set to rise for these vehicles, as well as expenses associated with future repairs, according to several legal professionals. Volkswagen car’s owners could possibly have valid claims for breach of contract as they have purchased the vehicles as a result of misrepresentations relating to emission levels. Another fortunate thing for you is that the insurers say that it is unlikely that drivers’ car insurance is going to be affected in any way. 

Early signs show that resales of Volkswagen automobiles have taken a small hit following the emissions scandal. Various data from several car trends experts tells us that the resale value of used Volkswagen cars fell 0.2 per cent in September versus a 2.8 per cent rise in the wider market. Drivers of the affected cars would be wise to keep some proof that the software has been corrected if they want to sell them in the future. Moreover, the scandal has put diesel under the microscope and it now appears that the cars aren’t nearly as “green” as they were initially considered to be. This means that the governments will be more likely to levy higher taxes on diesel cars – and consumers would, as a result, be less likely to want to purchase them. It goes without saying that that would do even more damage to Volkswagen in the long term than has already been done. The company could face billions of dollars in fines from the EPA and, potentially, other government agencies around the world. There’s also the chance of civil lawsuits launched by consumers who have been wronged by Volkswagen’s actions.

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