EPA Charges VW For Falsifying Emission Stats

The Environmental Protection Agency (EPA) has accused Volkswagen for misrepresentation of data in order to mark its diesel engines cleaner than they actually were. This may lead to a massive and expensive repercussion to German auto giant.

VW has yet not posted any reply or comment to the concerns but the incident might have reminded the investors the unintentional acceleration scandal of the 1980’s which involved Audi vehicles. It had put company’s business in reverse for many years, this makes the situation critical as VW owns Audi and the latter is also included in the recent charges by EPA.

The U.S. Consumers Union has already alleged VW of ripping off consumers.

Ellen Bloom, the senior director of federal policy, Consumer Union said “This is a serious violation of the law. Volkswagen was ripping off the consumer and hurting the environment at the same time”.

Bloom added, “The carmaker was apparently installing software in vehicles that effectively let them generate more pollution than advertised. It’s outrageous. We applaud the EPA and California for cracking down on Volkswagen. These actions send a powerful message that if a carmaker uses technology to get around the rules, regulators are going to come down hard on you breaking the law”.

Bernstein Research is investigating the possible financial consequences from the point of view of VW investors. In his published report, Max Warburton, Bernstein analyst said that the consequences will be profoundly serious.

Warburton commented, “The accusation is that VW deliberately set out to mislead regulators with as cleverly hidden piece of software. There is no way to spin this – this is really serious”.

Adding further Warburton said, “The best case for VW is probably still a multi-billion dollar fine – the potential $18 billion reported may prove excessive – but a large penalty looks likely – pariah status in the U.S. with government and possibly consumers, damage to its leading position in diesel in the U.S. and a slower path to improvement in its far-from-perfect-North American business”.

Warburton summed up the situation by adding, “The reality is VW will recover from this and will remain in the U.S. The air may have been polluted but no one is known to have died. It will have the consequences for the broader auto industry – expect Ralph Nader type cries about the whole damn industry being untrustworthy”.

Warburton also contacted an unnamed emissions expert to gather more details.

The situation hardly looks like an innocent mistake and may lead to an intense and thorough investigation regarding the involvement or adoption of similar practices of other German auto manufacturers. 

Apart from government fine and penalties, there will be other claims too. For instance, the company may have to take in warranty affected vehicles for a long time, owners of vehicles may also claim compensation for loss of fuel economy and there will be different lawsuits filed. The prospect of diesel cars in U.S. will be damaged, although the segment is still small.

Investors too are awaiting a detailed explanation from the company.

Martin Winterkorn, CEO of VW Group, said on Sunday, “I personally am deeply sorry that we have broken the trust of our customers and the public”. “Volkswagen has ordered an external investigation of this matter”.

Assuring that the company will fully cooperate with investigating agencies Winterkorn added, “We do not and will not tolerate violations of any kind of our internal rules or of the law”.