Because it has admitted to using clever software in its diesel cars to cheat on the US Environmental Protection Agency’s air quality test, German automaker Volkswagen will have to recall half a million cars with 2-liter diesel engines dating back to 2009.
The company’s chief executive Martin Winterkorn apologized on Sunday, saying that the company will not sell its 2015 and 2016 diesel cars in the United States. Since then, Volkswagen’s public stock has lost 20 percent of its value. The company's reputation seems shattered, at least for now. The company also faces billions of dollars in fines, potential criminal charges for executives, and a class-action lawsuit by consumers.
This is very bad news for the automaker, whose US sales already fell 10 percent last year. But it also might be really bad news for other automakers, as the US and other countries with emissions regulations could test more brands for their compliance.
“The artificial gaming of emissions tests threatens to become the car industry’s Libor moment,” Stuart Pearson, an analyst at Exane BNP Paribas, told the Financial Times, referring to the massive financial scam uncovered among London banks in 2012.
He said it’s likely that other companies are cheating the system globally.
The EPA said on Friday that some diesel cars from 2009 through 2015 – the Volkswagen Golf, Jetta, Beetle, and Passat, and the Audi A3 – emit up to 40 times the national standard for nitrogen oxide, which is restricted because it’s linked with asthma and lung illnesses.
To get around the agency’s environmental regulations, the company admitted to equipping these cars with “defeat devices,” software that measures the steering wheel position, vehicle speed and barometric pressure to determine when the car is being tested in order to temporarily reduce harmful emissions and pass the test.
Meeting the emissions standards, reports The New York Times, could reduce the fuel efficiency and power of Volkswagen diesel engines. More than half of the cars VW sells in Europe are diesel. In the US its 23 perecent.
Whether Volkswagen’s deception will affect customer's views of the company and long-term sales is questionable. Greg Schroeder, assistant director and senior research engineer at the Center for Automotive Research in Ann Arbor points to General Motors and Toyota as examples. Both were recently involved in ignominious car-safety scandals and certainly faced short-term backlash from consumers. But corporate efforts to win them back has helped the companies rebound over time.
In the case of Volkswagen, “This is a NOx emission issue,” he told The Christian Science Monitor. “I’m not even sure if consumers know what NOx is.”
He added, “It’s probably not a big driver in their decision [to buy the car or not].”