The Volkswagen Scandal: The Plot Thickens

There are several facets of the long running Volkswagen diesel emissions cheating scandal that are happening just below the surface. First, the US Justice Department is trying to decide just how much a criminal fine it can levy against the German car maker without putting it out of business. Second, Audi and Bosch are getting drawn more deeply into the mess. And third, word is spreading in the German press that Martin Winterkorn, the man who replaced Ferdinand Piech as head of Volkswagen more than a year ago then suddenly departed the company after the scandal broke, may have been more deeply involved than he has admitted. Let’s take them in order.

Volkswagen diesel engine

First, the US Justice Department and Volkswagen are negotiating just how large a fine the company should pay to settle a criminal investigation against the company. According to Bloomberg, both sides want to wrap things up before the next president of the United States takes office in January. Business dislikes uncertainty and the prospect of having to deal with a new crop of government lawyers a few months from now is making Volkswagen anxious to get this phase of the scandal’s aftermath over with. Call it the “Better the devil I know than the devil I don’t know” strategy.

The Justice Department has broad authority to consider what effect its punitive power will have on the financial viability of any company it is dealing with. Volkswagen has already agreed to pay a record civil fine approaching $15 billion. Part of that agreement includes $2 billion to be used to improve electric car infrastructure, such as adding more charging stations. How ironic that a company that chose not to build an EV charging infrastructure for its customers the way Tesla has done should wind up paying for charging facilities its competitors can use.

The company still is facing investigations and fines in the European Union and elsewhere. Penalties from those investigations may cost the company another $8 billion. Volkswagen CFO Frank Witter said in June that the company had net liquidity of $32.4 billion at the time. He said it needs to maintain about $20 billion in liquidity in order to continue as a viable business. If other companies take $8 billion, that leaves only about $4 billion left over to satisfy US officials.

The oddity in all this is that US citizens will not get a dime’s worth of benefit from a fine against Volkswagen no matter what the size of it is. Criminal fines simply go into the country’s general treasury, where they will be quickly consumed by the giant financial maw that is the US budgetary process.

Second, Audi’s chief of development, Stefan Knirsch, departed that company suddenly this week. Knirsch replaced Audi’s long time development head, Ulrich Hackenberg, just 10 months ago. “We made it clear from the start that we don’t spare big names in the probe and will act if it becomes necessary,” Berthold Huber, deputy chairman of the Audi’s supervisory board told the press. No specific allegations have been leveled against him, but Audi has long been the technology incubator for Volkswagen Group. It appears that the origins of the diesel cheating scandal occurred at Audi and got shuttled downstream to Volkswagen.

That brings us to the third point. Martin Winterkorn, the man who overthrew Ferdinand Piech in a boardroom coup d’êtat in the spring of 2015 and became the top dog at Volkswagen, was himself a long time member of Audi’s senior staff before moving to VW. This week, rumors in the German press are suggesting that Winterkorn was in on the diesel cheating scandal up to his eyeballs, despite his protestations that he was only “on the periphery” of things and had no specific knowledge of wrongdoing.

German newspaper Bild am Sonntag has published a report claiming Winterkorn signed off on a report to US regulators which he knew only gave a partial account of how things transpired at Volkswagen when it came to designing and installing software to cheat on emissions testing.

The whole sorry mess seems to have started over a decade ago with a push by Audi, aided by Bosch, to make its diesel engines quieter using updated software. The fix worked, apparently, but sent emissions levels through the roof. That’s when people first realized how big an impact software could have on emissions levels. The rest, as they say, is history.

There are a lot of people who know a little about what went on at Volkswagen but they are not talking. Bild am Sonntag also reports that several VW engineers have been offered suspended sentences and deferred fines in exchange for confessions but they have declined because they are afraid they would lose the legal insurance provided by Volkswagen. Left alone to pay their own legal fees could bankrupt them, Bild reports.

And so it seems we do not have the full story about who did or said what at Volkswagen and just how the whole diesel cheating mess got started. We may find out who really shot JFK and what actually caused the collapse of  Building 7 at the World Trade Center before the dark details of the Volkswagen diesel cheating scandal are revealed in full.

Source: Automotive News

Steve Hanley

Closely following the transition from internal combustion to electricity. Whether it's cars, trucks, ships, or airplanes, sustainability is the key. Please follow me on Google + and Twitter.