It is time for carmakers to clean up their act

Despite promises of a culture change from Volkswagen’s new management, the company’s handling of the crisis has treated its customers with disdain, regulators as bureaucrats, and the public as fools. Volkswagen continues to obfuscate and prioritise minimising costs over fixing the problems.

First, Volkswagen denied for 18 months that it had fitted its 2.0-litre diesel engine with the software that regulated NOx emissions in the US. It eventually confessed after 18 months when the US authorities threatened to prevent sales of it new models.

Volkswagen subsequently denied similar cheating with its 3.0l engine – only to later confess. Yet the new CEO, Matthias Muller, said at the Detroit Motor Show: “We didn’t lie. We didn’t understand the question first [from the US Environmental Protection Agency]”. The statement is symptomatic of a company that still fails to understand the difference between right and wrong despite the threat of $18billion (€16.5bn) of potential fines in the US.

Delays and delays

In an apparent spirit of openness Volkswagen admitted to cheating CO2 tests on 800,000 vehicles, but then announced it made a mistake and that only 38,000 vehicles were affected with tiny discrepancies in fuel economy. No explanation has ever been given as to why it dramatically announced further instances of cheating or why it changed its mind. The German government agency that approved the vehicles, the KBA, also refuses to give any information about why it accepts these test results.

In Europe, Volkswagen has delayed and then delayed again providing information to the European Commission, which has been unwilling to challenge the German giant for fear of upsetting the powerful chancellor Angela Merkel.

Here in Europe, Volkswagen’s treatment of customers is dismissive in contrast to the US where every affected customer has been given a $1,000 pay out. CEO Muller recently visited the US to present the company’s solution for fixing vehicles fitted with the illegal defeat devices, but he returned to Europe rebuffed when the proposal was ruled insufficient by the US Environmental Protection Agency. These actions create the impression of a company out of control, unable to meet its own deadlines or to fix the problems it has created.

In Europe, the fixing of the cars has proved simpler – a plastic tube with a grid costing pennies is their solution to meet the EU’s weak emissions limits. The tube is symbolic of the tragedy of a company with such distorted priorities that it risked its reputation, half its shareholder value and the lives of citizens forced to breathe its toxic exhaust fumes – just to save itself around €100 per car and fit an effective exhaust treatment system. Had it simply chosen to clean up the exhaust fumes properly in the first place the crisis would never have happened.

The chairman of the Volkswagen supervisory board, Hans Dieter Poetsch, has tried to draw a line under the scandal, blaming “individual misconduct and personal failure”. But he fails to recognise that companies comprise of individuals operating within a corporate culture. There has been no acknowledgement of any serious management failings or that the pervading culture of Volkswagen contributed.

‘Defeat devices’

While Volkswagen have severely damaged their own reputation and that of Europe’s important automotive sector, they are not the only villains. Their deceit is now being exposed to be the tip of an iceberg with systemic manipulation of tests being exposed by an increasing number of firms.

In France, Renault’s offices have been raided by anti-fraud investigators. This follows the disclosure that a Renault Espace was producing over 2 grammes of NOx per kilometre in a test compared to the legal limit of 0.08 grammes. The company has now agreed to recall 15,000 Captur SUVs to fix the pollution-control systems. It will also “voluntarily” recall about 700,000 vehicles for a software upgrade to reduce emissions.

The value of the company has declined by around 20%. But the French government (which owns 20% of Renault) is clearly anxious to protect its investment and has declared there is no illegal software in use. This is despite reports that the company only operated the pollution control equipment at the high temperatures experienced in tests and not in everyday use – a clear breach of the testing rules on “defeat devices”.

Several suspicious test results have also been published for the Vauxhall/Opel Insignia and Zafira models. Opel also recently secretly recalled vehicles for a software upgrade of its engine management system that radically reduced the emissions. Yet General Motors, the parent company, claims nothing is wrong and that the independent tests exposing their wrongdoing are incorrect.

Mercedes has gone even further in seeking to cover up anomalously high NOx emissions during laboratory tests. When independent tests exposed the worrying test results Mercedes lawyers tried to intimidate the environmental organisation that commissioned the tests, even warning them against publishing the threatening letters.

The wide gap between test and real-world fuel economy is also the highest for Mercedes cars and continues to grow.

BMW and Ford diesel vehicles have also been implicated in having high NOx emissions. Meanwhile, the government tests underway in Germany, France and the UK are shrouded in secrecy – no results are being published though they are being shared with the car industry.

A culture of perverting

It is time for carmakers to clean up their act and for regulators to ensure that they do. Manufacturers routinely deploy the talents of their engineers to circumvent environmental rules rather than deliver genuinely cleaner cars. This is made possible by the use of obsolete tests compounded by supposedly “independent” testing and approval authorities that are actually paid for by the carmaker.

A culture of perverting rather than complying with environmental rules has been allowed to prosper through political patronage, as governments seek to protect their national car companies. This is enabling past cheating to go unpunished and also allowing carmakers to weaken and delay the introduction of new regulations and tests while regulators turn a blind eye.

The enquiry by the European Parliament into the Volkswagen scandal needs to look broadly at these issues. The European Commission must ensure its changes to the testing rules prevent the industry from being protected by rogue regulators and their ministerial masters. Only in this way can the reputation of the European automotive industry be restored and the cars on Europe’s roads be considered clean and green. If not, Europe’s fixation with protecting the market for diesel cars will damage the long-term competitiveness of its industry.

One in every two new cars sold in the EU is a diesel, but in the rest of the world the figure is just 1 in 20. While Europe protects dirty diesels by allowing cheating and weak regulation, the rest of the world is electrifying vehicles through hybridisation, plug-in and battery electric models. Technology developed for and sold in other world markets will find its way into European showrooms, competing with our dirty diesel cars. Weak regulations that allow tests to be manipulated do not stimulate innovation and without innovation the competitiveness of the automotive sector will quickly decline.