Emissions Scandal Triggers Investigations

by Ed Burke, Dennis K. Burke Inc.

Right from the start, Volkswagen has built up its brand based on innovative engineering and technology. So when the company got caught cheating on emissions, it came as a huge blow to just about everyone – their employees, their customers and even the public. Volkswagen was considered a leader in clean diesel technology – so how did this happen? Unfortunately, Volkswagen’s explanation of the deception just doesn’t ring true.

The scandal began to unfold back in April 2014, when West Virginia University researchers were testing diesel car emissions. They detected much higher NOx emissions during live road tests compared to the numbers they were getting from their lab tests. Ironically, the research was part of a study commissioned by the International Council on Clean Transportation (ICCT) to help demonstrate the benefits of U.S. diesel technology, hoping to convince Europe to follow suit.

ICCT provided their findings to the U.S. Environmental Protection Agency (EPA) and the California Air Resources Board (CARB), who retested the cars. That’s when they requested an explanation from Volkswagen about their poor real-world NOx emissions.

Volkswagen offered a voluntary recall of TDI cars, but when EPA and CARB retested the cars, they were not satisfied with the fix – and they still wanted more answers.

In September 2015, EPA stepped up the pressure on Volkswagen and threatened to withhold certification of 2016 VW diesels. Volkswagen then admitted to EPA that there was diesel engine software programmed to cheat emissions testing.

EPA issued a Notice of Violation of the Clean Air Act to the Volkswagen Group. A notice of violation says that EPA believes there were violations, but it’s not a final determination of liability. The regulators said the German automaker had programmed their model year 2009 through 2015 turbocharged direct injection (TDI) diesel engines to cheat on NOx standards. EPA says 482,000 diesel-powered cars in the U.S., and 11 million cars worldwide have this “defeat device” engine software that circumvented U.S. emissions tests.

A few days later, Volkswagen publicly admitted and apologized for the deception. After the announcement, Volkswagen stock prices dropped 20 percent. The next day, when VW announced plans to allot $7.3 billion to help cover the costs to fix the problem, stock prices dropped another 12 percent. Volkswagen was taking a real beating. The following day, Volkswagen Group CEO Martin Winterkorn resigned.

Dual Calibration Mode

What Volkswagen calls dual calibration mode, EPA calls a defeat device. VW was using an algorithm that detects when the cars are being tested and changes their performance to meet emissions standards, the Agency said. The rest of the time, the cars emitted between 10 to 40 times the permissible level.

Besides front and rear wheel speeds, steering wheel movement, barometric pressure and duration of engine operation were factors in triggering the engine’s cheat mode.

Volkswagen’s Explanation

Michael Horn, the CEO of Volkswagen of America appeared on Capitol Hill before the House of Representative’s Energy and Commerce Investigative Committee looking into the diesel emissions scandal.

Horn claimed that the defeat devices were put in place by a few rogue software engineers, and denied that he or other Volkswagen executives had any knowledge that their cars were cheating emissions tests. Volkswagen is conducting its own internal and external investigation, Horn added, which has led to the suspension of three executive-level employees.

Horn said Volkswagen will be able to fix the cars to comply with emissions standards, but car owners should expect a “slight impact” on performance. Most of the vehicles will need five to 10 hours of servicing to disable the defeat device and correct the car’s emissions. But it could take at least one or two years to fix all of the cars, due to the hardware and software changes required in the older models. The recall is scheduled to start in January 2016.

“Dealer profitability in this country is my first objective,” Horn said. “Volkswagen is providing U.S. dealerships with a discretionary fund to give dealers financial flexibility. Dealers can use these funds to offer loaner cars to customers, or do whatever they think is best for each customer’s situation, with no questions asked.”

Environmental Damage

So how much extra NOx emissions did these cars emit over a span of seven years? EPA doesn’t have that number yet. “It’s not really something you figure out on the back of an envelope,” one regulator pointed out. “Right now we’re focused on getting these cars fixed.”

How much will EPA fine Volkswagen? That’s the multi-billion dollar question. There are several ongoing investigations to get to the bottom of the scandal. With dozens of countries claiming damages, Volkswagen will probably be in court for years.

Moving Forward

VW will begin fixing the affected cars in January. Volkswagen has also withdrawn its application for U.S. emissions certification for its 2016 diesel models for now.

EPA said they don’t expect defeat devices to be a widespread problem, but the Agency has warned automakers that it is “stepping up” its emissions testing going forward. They have already started using new testing methods that include real-world driving conditions, and they will no longer share their testing procedures with carmakers.

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