Hey there, time traveller!
This article was published 27/9/2015 (1941 days ago), so information in it may no longer be current.
Emissions of nitrogen oxide and other nasties from vehicle exhaust cause large numbers of early deaths -- perhaps 58,000 a year in the United States alone, one study suggests. So the scandal that has engulfed Volkswagen this month is no minor offence or victimless crime.
The German carmaker has admitted, on 11 million of its diesel cars worldwide, it installed software that allowed them to pass America's stringent NOx-emissions tests. Once the cars were out of the laboratory, the software deactivated the emission controls, and they began to spew out fumes at as much as 40 times the permitted level.
The damage to Volkswagen is immense, but the scandal will also affect other carmakers, other countries and the future of diesel itself.
VW first. Its chief executive, Martin Winterkorn, has resigned, and the company is setting aside US$7.3 billion to cover the coming financial hit. Investors fear worse, though: in the first four trading days since the scandal broke Sept. 18, VW shares fell by one-third, cutting its value by US$29 billion.
Once all the fines, compensation claims, lawsuits and recall costs have been added up, this debacle could be to the German carmaker giant what Deepwater Horizon was to BP.
At least BP's oil-drilling disaster was an accident -- this was deliberate. The U.S. Department of Justice is quite right to open a criminal investigation into the company. Other countries should follow South Korea and probe what VW has been up to in their neighbourhoods. Though few Chinese motorists buy diesel cars, the scandal may prompt China's government to tackle the company for overstating fuel-economy figures for gasoline engines.
Whether or not Winterkorn bore any personal responsibility for the scandal, it was appropriate he should lose his job over it. He is an engineer who is famous for his attention to detail -- if he didn't know about the deceptive software, he should have. Selling large numbers of "clean diesels" was central to VW's plan for cracking the American market, a weak spot, which in turn was a vital part of the plan to overtake Toyota as the world's largest carmaker. The grand strategy Winterkorn had overseen now lies in ruins.
A change at the top, and a hefty fine, must not be the end of the matter. American prosecutors should honour their promise to go after individuals responsible for corporate crimes, instead of simply punishing companies' shareholders by levying big fines. Most of the recent banking scandals have ended not in the courtroom, but in opaque settlements and large fines.
Earlier this month, the U.S. Department of Justice announced a US$900-million settlement with General Motors, America's largest carmaker, for failing to recall cars with an ignition-switch defect blamed for crashes that killed at least 124 people and injured 275. Prosecutors said unnamed managers at GM knowingly ignored the potentially deadly effects of the defect and put profit before safety, but they announced no charges against any such managers.
That has to change, and the authorities know it. In a speech this month, Sally Yates, the deputy attorney general of the U.S., said from now on, fining businesses would take a back seat to pursuing criminal and civil charges against individuals. An accused company no longer will get credit for co-operating with investigations, as VW says it will, unless it gives the feds the names of every manager or employee involved in wrongdoing and seeks to gather and submit evidence of their personal responsibility.
VW is a test of this new approach, but to avoid suspicions of being tougher on foreign firms -- as were raised in the BP Deepwater case and in recent banking settlements -- American authorities should also prosecute culpable GM managers.
The biggest effects of the scandal will be felt across the Atlantic, however. VW's skullduggery raises the question of whether other carmakers have been up to similar tricks, either to meet Europe's laxer standards on NOx emissions or its comparable ones on fuel economy and, hence, on emissions of carbon dioxide. BMW and Mercedes, VW's two main German peers, rushed to insist they had not.
However, European emissions testing is a farce. The carmakers commission their own tests, and regulators let them indulge in all sorts of shenanigans, such as removing wing mirrors during testing and taping up the cracks around doors and windows to reduce drag and thus make the cars burn less fuel.
Regulators also tolerate software a bit like VW's, which recognizes when a car is being tested and switches the engine into "economy" mode. This is why the fuel efficiency European motorists achieve on the road is around 40 per cent short of carmakers' promises.
At least America's regulators, unlike Europe's, sometimes stage their own tests to verify the manufacturers' findings.
Now, though, it is time for this whole system to be swept away and replaced, everywhere, with fully independent testing of cars in realistic driving conditions. Now, with outrage at VW's behaviour at its height, is the moment to act.
That would mean overcoming the objections of carmakers, but it also would require European regulators to change their attitudes toward diesel, which accounts for half of cars sold on the continent. Diesel vehicles can be economical on fuel and thus emit relatively little carbon dioxide, but often at the cost of increased NOx emissions. That trade-off has been decided in diesel's favour by Europe's lousy testing regime and more lenient NOx-emissions standards.
Even if other makers of diesel vehicles have not resorted to the same level of deception as VW, the scandal could mean these vehicles will struggle to meet standards applied rigorously to both types of emissions. Some fear this may be the "death of diesel." If so, then so be it.
There is still scope to improve the venerable gasoline engine and to switch to cleaner cars that run on methane, hydrogen or electricity, or are hybrids. A multibillion-dollar race is already underway between these various technologies, with makers often betting on several of them as the way to meet emissions targets.
If VW's behaviour hastens diesel's death, it may lead at last, after so many false starts, to the beginning of the electric-car age.
-- Economist