Volkswagen And The High Price Of Lying

It has recently come to light that Volkswagen has not been entirely truthful about the performance and emission standards of many of the diesel engines it has produced over the past several years. In fact, these engines have been designed specifically to fool emissions tests, which means VW may very well top the charts for automaker scandals despite the stiff competition. The Takata air bags, GM ignition switches, and Chrysler’s conspiracy to ignore recalls were all lies by omission, but Volkswagen has committed a lie by commission, making it a bigger deal by far.

The Long Con

VW has recently come clean about a special device which comes standard in nearly 500,000 diesel vehicles in the United States, and in 11 million vehicles worldwide. This device can tell when someone is monitoring the car for an emissions test, and it modifies the vehicle’s performance to pass these tests. Out on the open road, it allows the engine to perform at its best, but this just so happens to release 40 times the pollution limit set by the EPA.

These pollution limits are less strict in the European Union than they are in America, but even so it’s less a question of whether VW cheated the EU regulators and more how badly they cheated. What’s worse, diesel engines in small cars are far more popular in Europe than they are here, in part thanks to marketing efforts by VW and other manufacturers who claim that diesel engines are better for the environment. Half of VW’s European sales are diesel cars, which means that this scandal will have a far greater impact on the manufacturer than on the American car market.

A lot is still unknown at this time, but the “defeat device” as it’s called may not be exclusive to VW vehicles. Ford, Renault-Nissan, and BMW have stated outright that they don’t use such devices, but other automakers haven’t been as forthcoming. It may be that VW was alone in flaunting the regulators, or it could be that every major diesel manufacturer took part in this deception. Only time will tell.

A Financial Catastrophe

Fiat Chrysler Automobiles set a record back in July when the National Highway Traffic Safety Administration dropped a $105 million fine on the company for its attempts to ignore its defective products and delay the recalls meant to fix these products. The EPA, however, has the ability to fine a company up to $37,500 for each and every vehicle which fails its standards. Multiplied by 500,000 offending cars, the potential fine becomes an amazing $18 billion, making FCA’s punishment a slap on the wrist by comparison.

VW’s financial woes don’t end with the government, either. Not only must it recall every vehicle which violates EPA standards, the car owners can expect that when they get their rides back, they will be vastly underpowered compared to how they were before. That means a lot of returns and exchanges for gasoline vehicles, and it also means a lot of civil lawsuits. After all, Volkswagen has sold their customers defective products, products which don’t live up to the performance and emissions specifications which they promised to their customers. The company could stand to lose millions or even billions of dollars just on settling customer complaints.

When a company fails to identify a defect in time or fails to issue a recall in a timely manner, that’s bad. When a company intentionally lies to regulators about their product’s performance, and when they create a device specifically designed to fool regulators, that’s even worse. Volkswagen has betrayed the trust of governments and the trust of its customers, and it’s very likely that an EPA fine will soon be the least of its worries. Once other countries start to weigh in, countries which have far larger diesel markets, VW as a company may not be long for this world..