Cheating to pass
UPDATE (June 18, 2018): Rupert Stadler, chief executive of Volkswagen AG’s luxury brand Audi, was arrested today in connection with a probe into his role in the German car maker’s diesel emissions-cheating scandal. The issue had surfaced in 2015, when it emerged that cars had been fitted with devices designed to cheat emissions tests.
The arrest comes a week after Stadler’s name was added to a list of suspects in a fraud investigation, which targets around 20 people. On June 13, a German court imposed a $1.2-billion fine on Volkswagen for rigging diesel engine emissions.
Last month, the US authorities exposed a sinister plot hatched by the Volkswagen Group, one of the world’s leading automobile manufacturers that makes popular glam diesel car models. Its two-litre turbodiesel engine car brands, often high on shopper’s list for their low emissions and fuel economy, were found patched with “defeat devices”, which allowed the cars to cheat and pass USA’s stringent emissions tests for nitrogen oxides (NOx)—noxious gases liberally spewed out by diesel engines. NOx cause and aggravate lung and heart diseases, and are key component in the formation of ozone, another deadly gas.
The German carmaker has admitted to have installed the defeat device on more than 11 million cars, manufactured under the brand names of Jetta, Beetle, Passat, Golf and even the upmarket Audi 3, which it has fraudulently sold across the US, Europe and perhaps in other parts of the world since 2009.
The corporate fraud caught global attention on September 18 when the US Environmental Protection Agency (USEPA), responsible for enforcing the Clean Air Act and emissions standards, issued “notice of violation” to the conglomerate—Volkswagen AG, Audi AG and Volkswagen Group of America. In its scathing notice, a copy of which is available with Down To Earth, USEPA has laid bare gruesome details of the scam.
The notice of violation states that the defeat device is actually a cheating software hidden in the electronic control module of the cars (see ‘Volkswagen’s smokescreen’ on p26). The software is programmed to sense whether the vehicle is being tested in the laboratory, based on parameters such as the position of the steering wheel, vehicle speed, duration of engine operations and barometric pressure. It then switches the car into a clean-running mode, reduces NOx emissions and helps it pass the test. But once on the road, the software switches to run on a separate calibration, which reduces effectiveness of the NOx control system, and the car begins to emit 10 to 40 times more NOx than the certified level, depending on the driving condition.
Since in diesel vehicles, it is difficult to balance the NOx control system with cost effective means of improving energy efficiency, Volkswagen could have altered the software to compromise on emissions.
The impact of this fraud on Volkswagen is immense. Its stock value is falling since the scandal broke—share prices dropped by almost 40 per cent within a week; its chief executive, Martin Winterkorn, has lost his job; and worse, its brand value is in tatters, casting a shadow over the much-famed German engineering in the global market.
Volkswagen has reportedly set aside US $7.3 billion to repair the damage. But this is too little. Under the US Clean Air Act, it faces fines of up to $37,500 per defective car. Given that Volkswagen has sold 482,000 defeat device-fitted cars in the US alone, it may have to shell out $18 billion as civil penalty.
This can wipe out most of its last year’s operative profits. Till the magazine went to press, 34 aggrieved customers had filed lawsuits against Volkswagen, claiming that the value of their cars has declined because of the scandal. Volkswagen will have to compensate them directly or through class action lawsuits. Besides, it will cost the earth to recall and fix all the vehicles, not just in the US but elsewhere. Other governments may also impose penalties. Its financial woes could get a lot worse as sales of Volkswagen diesel vehicles have taken a hit worldwide and stopped in the US.
SIX YEARS OF LIES, DECEIT
Volkswagen owned up only after it was threatened to be booted out of the US market
Exposing Volkswagen’s fraud was not easy. In fact, Volkswagen could still be selling lies had it not been for a chance testing.
The NOx standards of the US are the most stringent in the world. In 2007, when the USEPA upgraded its standards for cars and enforced USEPA Tier2-Bin5 standard, Volkswagen could not comply with it and had to pull out of the US market. So in 2009, when it re-entered the crucial market, it came with what now seems a cheating strategy to circumvent the tighter emissions standards. It launched cars with two types of NOx control technologies—lean NOx catalyst and urea-based selective catalytic reducing technology—and convinced American regulators that they had cleaned up diesel car emissions.
Its claims came under suspicion two years ago when the US-based International Council on Clean Transportation (ICCT), along with the West Virginia University, tested a few 2012 and 2013 diesel car models of Volkswagen and BMW to assess if the new cars were meeting the emissions standards in real-world driving conditions. For this, the researchers mounted portable devices to monitor emissions from the vehicles as they moved in cities of California. The results showed that the on-road NOx emissions from cars equipped with lean NOx catalyst exceeded the USEPA Tier2-Bin5 standard by 15 to 35 times; it was five to 20 times for cars equipped with urea-based selective catalytic reducing technology.
ICCT brought the results to the attention of USEPA and California Air Resources Board (CARB), the state’s clean-air agency, which ordered Volkswagen to recall fraudulent vehicles and fix the problem. Volkswagen first tried to dismiss the problem of increased emissions as “technical issues or unexpected in-use conditions”, but later recalled 482,000 cars and claimed to have rectified the problem. USEPA and CARB conducted confirmatory tests and found little improvement. When challenged, Volkswagen could not give a convincing explanation. “It is only when USEPA and CARB threatened that they would not approve certification of conformity for the Volkswagen 2016 model until the company explained adequately, did Volkswagen admit that it had designed and installed a defeat design,” mentions USEPA’s notice of violation (see ‘On emissions crime trail’).
| On emissions crime trail
Volkswagen's cheating went unnoticed for four long years
- • 2013 | International Council on Clean Transportation (ICCT) and University of West Virginia tested diesel cars to verify emission claims
- • May 2014 | ICCT alerts US Environmental Protection Agency (USEPA) and California Air Resources Board (CARB) that Volkswagen's models emit much more nitrogen oxides (NOx) than permitted by law
- • December 2014 | USEPA and CARB ask Volkswagen to recall the cars and fix the problem. Volkswagen recalls 482,000 cars sold in USA
- • May 2015 | USEPA and CARB carry out confirmatory tests only to find little improvement
- • July 2015 | In technical meetings with CARB, Volkswagen says the problem is due to technical issues or unexpected in-use conditions. USEPA says without satisfactory answers Volkswagen will not be allowed to sell in the country till 2016
- • September 2015 | Volkswagen admits that their cars are designed and manufactured with "defeat device" to bypass and defeat vehicle emissions control systems. CARB initiates probe into all its two-litre turboengine models, manufactured between 2009 and 2015. USEPA and CARB also announce they would improve their compliance programme to prevent such frauds in the future
Such frauds can undercut other players in the automobile market, which are investing in advanced technologies to ensure that their products comply with the emissions standards. ICCT and the University of West Virginia had tested a BMW 5X model along with the Volkswagen brands. They found that emissions from BMW were high but more or less within the expected range of variation from the limits: it was close to the US standards for both city and highway driving and higher during uphill and downhill drive. John German of ICCT, who carried out the tests, says, “Without vigilant enforcement, companies that comply with the standards will be placed at a competitive disadvantage. If left unchecked, that could undermine the whole regulatory framework.”
The impact of Volkswagen’s deceit has spread far beyond the US. Switzerland has taken the stern step by stopping sales of all two-litre diesel Volkswagen cars that meet its Euro V emissions standards; the current Euro VI standards have come into force only recently. The UK, Germany and South Korea have announced investigations into the Volkswagen diesel car models. France, Italy and other EU member states have called for inquiries. In fact, diesel car engines of Volkswagen that are bigger than the tarnished two-litre engines may come under scrutiny.
In India, soon after the Volkswagen controversy came to light, Union Minister of Transport Nitin Gadkari issued a statement that the emission fraud is still not a concern in India but this is a development that the government is watching. The government has, however, directed the Automotive Research Association of India (ARAI) to carry out tests on Volkswagen cars.