Collapse of Volkswagen Group in US

Difficult times have come for the German car industry. In 2014 Volkswagen Group, which after a bitter fight with Toyota became the leader in the global level of sales (the number of cars sold was 9.91 million, and the annual turnover was more than 202 billion euros), is now at the center of the largest scandal in its existence. The story surrounding the 'People's Car' in the US market has put a black stain on the reputation of the German company. As Die Welt said, it is unlikely to be possible to recover the reputational loss in the near future.

As well-known experts of the International Council on Clean Transportation (ICCT) found out during environmental tests of their diesel engines, the automaker deliberately understated the level of stickoxide in the exhaust of cars – a substance hazardous to health, the level of emissions of which is strictly regulated. After nearly a year of investigation by the the US EPA Environmental Control, Volkswagen was forced to admit that its engineers had designed special software that allows the machine to determine whether it passes current testing or normal driving.

We will explain how this works in practice. For example, if the indicator on the speedometer indicates a speed of 90 km/h, but the machine does not budge, the program recognizes signs of 'unnatural driving' (in other words, test conditions). After that, it automatically reduces the level of stickoxide. During normal driving, of course, this decline did not happen – the automaker did not want to sacrifice the power of the motor for the sake of ecology.

Thus, this development allowed Volkswagen's 'smart' vehicles to successfully pass the test on the emission of dangerous substances, although, as it turned out, the emission levels were many times higher than normal during real driving - by 15-35 times in the case of the Volkswagen Passat and by 5-20 times in the case of the Volkswagen Jetta.

As it turned out, software for the circumvention of environmental tests is not a new development. Volkswagen has been deliberately deceiving environmental control authorities with its help since 2009. This means that 482 thousand cars of seven different models of Volkswagen and Audi will be withdrawn from the market. The sale of certain models in 2015 has been already stopped.

The chairman of the Board of Management of Volkswagen, Martin Winterkorn, announced the launch of a full and independent investigation. By the way, Winterkorn has to be re-elected to the post of Director of the Group this coming Friday. The current situation could significantly change the balance of voting in the Board of Trustees, which threatens a deep crisis of governance.

But a much more real and probably imminent threat is a complete loss of confidence in the US market, the second largest market for Volkswagen after China. In Germany the flagship automaker's shame caused such a flurry of emotions that senior members of the German Government made individual statements in this regard. "We are facing a blatant abuse of consumer trust and a degradation of the environment," the German State Secretary Jochen Flasbarth said. The Federal Minister of Transport and Digital Infrastructure, Alexander Dobrindt, ordered to carry out careful checks of diesel cars of Volkswagen in Germany. Meanwhile, Volkswagen's shares have fallen by 17%.

As NABU's national director Leif Miller said, "Volkswagen's objective of becoming the leading automaker in environmental terms by 2018 was damaged." Miller thinks that it is quite likely that, in addition to Volkswagen, other automakers also manipulate results during the course of environmental tests. As Frankfurter Allgemeine Zeitung rightly pointed out, the thing the experts have been saying for many years, has now become a proven fact: "Automakers pass environmental tests by fraud."