“Over the past few weeks, much has been written about alleged problem areas and improvements that need to be made. Ladies and gentlemen, please don’t be fooled. Let me put it clearly: we know what we have to do in our large, global group. And we started doing it some time ago.” That was Marty Winterkorn at the Volkswagen Group’s annual general meeting five months ago. Marty was also chairman of Porsche and Audi. He controlled brands such as Bentley, Bugatti and Lamborghini. His company sold 10 million cars a year, 13 per cent of the world’s passenger vehicles. It turned over $324 billion and made $30bn in profit.
Today Marty is out of a job. Last month the US Environmental Protection Agency sent a letter to Volkswagen and Audi saying “four-cylinder Volkswagen and Audi diesel cars from model years 2009-2015 include software that circumvents EPA emissions standards for certain air pollutants”, and that 482,000 so-called clean diesel cars, such as the Golf, Audi A3, the Beetle and Passat, had to be fixed at VW’s expense. The software VW cleverly hid in its cars recognises when the engine is being tested and changes the tune so it meets environmental regulations. The EPA “determined that VW vehicles on the road emit up to 40 times more pollution than emission standards allow”.
Rorting vehicle emissions regulations is an established art form in the global car industry. Seventeen years ago to the day, the US Department of Justice and the EPA hit seven manufacturers of heavy-duty diesel engines with a $1.3bn fine to settle charges that they “illegally poured millions of tons of pollution into the air”. This included a $100 million civil penalty, the largest in environmental enforcement history.
Truck and engine makers Caterpillar, Cummins, Detroit Diesel (part of Mercedes), Mack, Navistar, Renault and Volvo had installed devices that defeated emission controls. This settlement was the third in three years. The same year, the EPA settled charges against Honda for $340m and Ford Motor Company for $10m for selling vehicles with a similar device. In 1995, the EPA settled with GM for $60m for putting defeat devices in 500,000 Cadillacs.
Usually the Europeans are more creative than the Yanks when it comes to the environment. Remember the Aston Martin Cygnet? Of course you don’t because it was a Toyota IQ with an Aston Martin logo. You can buy an imported IQ in Australia for about $13,000. Aston Martin was trying to sell its 1.3-litre hotty for $60,000. Maybe that’s why the plan said it would sell 4000 and even the Poms were awake and bought only 300.
Ferrari had a similar idea. In 2011 you could buy a new Fiat Abarth 695 Tributo Ferrari with real Fezzer badges for $70,000. Today you can buy a new Fiat 500 for $16,000. A new Fiat Abarth will cost you $40,000 without paying the extra $30,000 for the badges.
Both carmakers had the same idea. Under European regulations you can average out the total of the cars you sell to meet the emission laws. So sell 100 little Fiats and you can sell a few Ferrari V12s. Simple, really.
