The scandal surrounding Volkswagen installing technology to get around emissions tests has forced the CEO to resign. Matthew Partridge asks if there’s more to come.
What’s going on?
Volkswagen has been rocked by revelations that its diesel cars sold in the US were fitted with so-called ‘defeat devices’ that enabled them to detect when they were being tested. This put the car into a special low-powered mode that allowed it to pass US emissions tests, even though it would normally have failed.
VW’s chief executive, Martin Winterkorn, has resigned, and the share price plunged by a third at one point, wiping $25bn off the company’s value. Around 500,000 diesel cars sold in the US will have to be recalled, and VW has admitted that up to 11 million cars sold worldwide were fitted with the device (even though it was only intended to dodge US tests).
How much could it cost Volkswagen?
Recalling cars will be extremely expensive. The company has already set aside as much as ￡4.7bn to cover the immediate costs. Meanwhile, experts believe that fines from the US Environmental Protection Agency (which discovered the fraud) alone could end up being as high as $18bn.
Criminal investigations have begun in both Germany and America, while it could face a barrage of lawsuits from customers who say that they were misled by the claims made about the cars’ emissions. There is also the question about what this will do to the reputation of VW in general.
Were any other carmakers involved?
So far, only VW has been directly implicated in the scandal. However, there are concerns that other car companies are doing similar things. Even if this turns out not to be the case, the industry has come in for criticism recently for trying to hide a negative report on safety standards.
The Independent claims that the report showed that “American models are much less safe when it comes to front-side collisions, a common cause of accidents that often results in serious injuries”. This report suggested that “trade negotiators would potentially be putting lives in danger by allowing vehicles approved in the US to be sold in Europe and vice-versa”.
Are there any implications for German politics?
VW is part-owned by the German government – the regional state of Saxony owns around 13% of it (and controls around 20% of voting rights), although Qatar’s sovereign wealth fund has a higher stake. It is also a major German employer. Questions have therefore been asked about what Berlin knew about the scandal.
The German government has claimed that it didn’t know anything about the specific issues at VW, but the opposition Green Party has pointed out that in July it acknowledged that “defeat devices” existed, and that there was little it could do to stop them being used to get around the law.
More generally, the UK and France have lobbied aggressively for a more lenient testing regime, despite concerns that it allowed firms to flaunt the regulations.