Volkswagen CEO Martin Winterkorn has resigned after eight years in the role, following revelations his company used software to ‘cheat’ diesel emissions regulations.
Winterkorn, formerly chief at Porsche, issued a statement today expressing his shock that “misconduct on such a scale was possible in the Volkswagen Group,” which is the world’s second-largest auto manufacturer behind Toyota.
His abdication comes after five days of intense pressure, as VW has sought to assuage a media storm and tumbling stock price, which has already fallen 35% since the U.S. Environmental Protection Agency (EPA) released its findings last Friday.
Then, it was discovered that a “sophisticated software algorithm on certain Volkswagen vehicles detects when the car is undergoing official emissions testing, and turns full emissions controls on only during the test.” This ‘defeat device’ has allowed up to 11 million cars to emit 10-to-40-times the legal levels of some pollutants, such as nitrous oxide.
Winterkorn quickly took to a video to voice his contrition. “Everything is being laid on the table in these hours, as fast, thoroughly and transparently as possible,” he said. “Many millions of people around the world trust our brands, our cars and our technologies. I am deeply sorry that we have betrayed this trust.”
He added that it would be “wrong” to judge the work of Volkswagen’s 600,000 employees “because of the bad mistakes made by a few,” appealing to viewers to “have faith” in the Wolfsburg auto giant.
Berlin newspaper Der Tagesspiegel reported that VW’s supervisory board held emergency talks yesterday, which have continued today, resulting in Winterkorn’s departure. Another Tagesspiegel article claimed he could be replaced by his Porsche counterpart Matthias Müller, which was described by VW as “ridiculous”.
But Winterkorn’s decision is the latest twist in a story that shows no sign of quietening. Even German chancellor Angela Merkel has been drawn in, demanding that all facts “be put on the table as soon as possible.” Transport minister Alexander Dobrindt has already opened an enquiry into the affair, and told Die Welt he would devote whatever it takes to get to the bottom of the VW affair.
Opposition politicians in Germany’s Green Party, however, have slammed the minister’s actions, while questioning whether dieselgate really is confined to one marque. “(Germany’s federal government must reveal) how many cars have been affected, and whether other auto companies besides Volkswagen have embezzled their true exhaust emissions,” said Oliver Krischer.
Dobrindt should, he added, “without delay introduce an independent enquiry, to make a conclusion on buyer deception…the government must finally control clear and transparent standards.”
Compatriot carmakers BMW and Daimler have been quick to refute suggestions dieselgate applies to their own product lines. It has been revealed that a BMW X5 passed the same test that VW failed. But that hasn’t stopped their stocks falling too. And Germany’s image for industrial excellence has taken a large hit.
VW has announced it will set aside €6.5 billion, or $7.2 billion, from its Q3 accounts to help assuage the scandal. It is clear from VW’s stock fall that few analysts believe it is enough. Emissions fines alone could total $18 billion. Investors will be slightly relieved on news that, upon Winterkorn’s departure, VW’s share price rose by 8.35%, to €114 ($127).
Type EA 189 engines are to blame. Affected models are 2009-2015 Jettas, Beetles and Golfs, the 2014-15 Passat and the 2009-2015 Audi A3.
Former auto industry insider Jim Collins, writing at Forbes.com, expressed shock that anyone thought road tests and lab results would match. “The testing done by regulators in laboratories – with the cars in question sitting on dynamometers – doesn’t accurately reflect conditions experienced in road driving. It’s an open secret in Detroit, Wolfsburg, Tokyo, etc.”
And Greg Archer, clean vehicles manager at Brussels-based advocacy group Transport & Environment, says that “VW’s cheating is just the tip of the iceberg.”
Writing on Monday, Mr Archer added that his group “has exposed countless ways carmakers manipulate emissions tests for both air pollution and CO2 emissions (fuel economy). For example, carmakers charge the car’s battery before a test, deduct 4% from each test result, and use incorrect laboratory settings for the inertia of the vehicle. The companies admit these tricks but claim they are “legitimate flexibilities” in the obsolete test used in Europe.
“For new diesel cars nitrogen oxide emissions are typically five times higher on the road than the allowed limit and just one in 10 cars meets the required level on the road. But for some models the gap is so large T&E suspects that the car is able to detect when it is tested using a “defeat device” and artificially lowers emissions during the test,” added Archer.
“For example: a diesel Audi A8 tested in Europe produced nitrogen oxide emissions 21.9 times over the legal limit on the road; a BMW X3 diesel was 9.9 times over the limit on the road; an Opal Zafira Tourer, 9.5 times; Citroen C4 Picasso 5.1 times. All these vehicles passed the laboratory test.”
Europe’s regulation landscape, he added, is far more fragmented, and thus less effective, that in the US. And considering that last year 7.5m of the world’s 10m diesel cars were sold in Europe, that is worrying.
In the US diesel cars account for only 3% of the market, despite a huge push from manufacturers, such as VW, to persuade buyers the fuel is more cost-efficient and cleaner. In Europe that figure is almost 50%, due largely to subsidies enacted by the continent’s governments in the 1990s.
Experts contacted by Red Herring were wary of commenting on any long-term effects to the relationship between Europe’s environmental agencies and its auto makers. In Germany already, said Jan Burck, team leader of German and EU climate policy at Germanwatch, that relationship has already been strained by a liberalized and under-regulated energy industry.
VW has already lost a CEO, customer confidence and a large chunk of its value. Whether the Wolfsburg giant can return from this, one of the automotive industry’s largest scandals, will become clearer in the next two days.