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Das Auto to Bust Pronto - et tu VW?

It made its name as the Peoples Car. The Volkswagen (VW) Beetle, designed by Ferdinand Porsche, became the longest-running and most-manufactured car on a single platform, with almost 22 million cars produced over a 65 year period!

Das Auto to Bust Pronto - et tu VW?

Over several decades, the VW Group expanded and expanded. It became the largest automobile group in the world in 2014, pipping Toyota by just a few thousand units. The group sells passenger cars under the Audi, Bentley, Bugatti, Lamborghini, Porsche, SEAT, Škoda and Volkswagen brands; motorcycles under the Ducati brand; and commercial vehicles under the MAN, Scania, Neoplan and Volkswagen commercial vehicles brands. In 2014, the group produced more than 10 million vehicles and achieved one of its strategic goals. In the last fiscal year, it had revenues of US$ 269 billion(around Rs 17,48,500 crore-129 times the turnover of Ashok Leyland) and almost 425,000 employees globally.

All in all, the company was doing quite well and poised to continue its excellent trajectory. That is what VW would have wished at least.

But then, strange things were set in motion. A US non-profit organization called The International Council on Clean Transportation (ICCT), hired West Virginia University to do standard emissions tests on diesel cars in America mainly to validate and talk about the hype diesel cars have been getting all over the world and of how the US could benefit from this.

As the biggest hype and the boldest claims came from Volkswagen, the lead researcher at the University’s labs, a Chennai-educated Research Assistant Professor, Dr Arvind Thiruvengadam, tested a couple of that company’s cars. In none of the road or lab tests, the research team was able to get the low emissions that VW was claiming. After ensuring that their processes and findings were accurate, Dr Thiruvengadam and team reported the concerns to ICCT, which in turn alerted the US Environmental Protection Agency.

Volkswagen could force their software to hide the amount of nitrogen oxides being emitted but not force the US EPA and public opinion to look past this.


$28 billion wiped out in two days!

Volkswagen’s CEO, Martin - Winterkorn, the highest paid corporate executive in Europe, resigned in the wake of the scandal. $28 billion was wiped out of the group’s market capitalisation in just the first two days after the scandal broke! Most of the profit for the year is now set up to handle recalls and to manage the crisis. This doesn’t even factor the anticipated US$18 billion in fines by the US EPA and possible criminal charges by the US Justice Department. And these are just in the US!

The diesel emission scandal affects not just owners of those vehicles. In the US, taxpayers shelled out more than US$50 million in green car subsidies directed at Volkswagen diesel vehicles, where the owners got a tax credit of more than $1300 per diesel car bought.

Globally, VW has marketed diesel as a clean fuel (on par or better than petrol) than any other automobile major. Millions of customers now are not only left ruminating over the marketing message, but also the premium they paid for such bragging rights and promised savings.

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