‘Defeat device’ leads to Volkswagen crisis

Software discrepancies have revealed a shocking case of alleged emissions fraud by Volkswagen, it was revealed earlier this week. On Monday, the German carmaker revealed that said discrepancies could apply to 11 million of their vehicles worldwide. Fallout from the case has led to VW’s shares to tumble dramatically, while yesterday evening German chancellor Angela Merkel called for “full transparency” during ongoing investigations into the matter. 

“Given the difficult situation, this is about showing complete transparency, clearing up the entire case. The Transport Minister is in close contact with the company, Volkswagen. And I hope that the facts will be put on the table as quickly as possible,” Merkel said in Berlin yesterday.

The case hangs on the presence of a “defeat device” in nearly 500,000 VW cars sold in the US between 2009 and 2015. The US Environmental Protection Agency, which revealed this information earlier this week, explained how the device is sensitive to whenever the car is being tested for emissions, and automatically lowers them to acceptable levels. The Agency said that as a result, each of these cars released 40 times more pollution than what is currently allowed by law.

In a statement, Volkswagen were quick to reassure customers that the allegations have no bearing on the safety of their vehicles, adding that all efforts are being focused on finding a solution to the problem. 

“Volkswagen is working at full speed to clarify irregularities concerning a particular software used in diesel engines. New vehicles from the Volkswagen Group with EU 6 diesel engines currently available in the European Union comply with legal requirements and environmental standards. The software in question does not affect handling, consumption or emissions. This gives clarity to customers and dealers,” the group said in a statement. 

They added: “Discrepancies relate to vehicles with Type EA 189 engines, involving some eleven million vehicles worldwide. A noticeable deviation between bench test results and actual road use was established solely for this type of engine. Volkswagen is working intensely to eliminate these deviations through technical measures. The company is therefore in contact with the relevant authorities and the German Federal Motor Transport Authority (KBA – Kraftfahrtbundesamt).”

Though the VW group said that it would set dedicate €6.5 billion to mitigate any required service measures and accommodate “other efforts to win back the trust of [their] customers” it is believed that this will be far from enough to cover the fallout from the scandal, as analysts suggest that VW could be fined $18 billion by the US alone; to say nothing of the potential class-action lawsuits, criminal charges and recalls that are likely to follow. Some analysts are even suggesting that the scale of the financial fall-out for VW could be comparable to the “blockbuster fines” leveled at British Petroleum following the oil spill in 2010. 

South Korea has opened a probe into some of its VW models, with Europe likely to follow suit soon enough. As the story was developing yesterday evening, German media reported that Volkswagen CEO Martin Winterkorn – whose contract was to last until Friday – was to have his contract terminated and to be replaced by current Porche CEO Matthias Mueller. However, a spokesperson for VW quickly took to Twitter to shoot down the rumour as “ridiculous”.