In September 2015, the world was rocked by the revelation that Volkswagen, one of the largest and most respected automakers in the industry, had been cheating on emissions tests. The scandal, dubbed "Dieselgate," exposed a sophisticated scheme that involved the use of "defeat devices" in Volkswagen's diesel engines to manipulate emissions results. This unethical practice not only violated environmental regulations but also betrayed the trust of millions of customers and investors worldwide.
In this blog, we will delve into the details of the Volkswagen emissions scandal, exploring the chronology of events,how it affected the company and the automotive industry, and the consequences faced by Volkswagen.
In September 2015, the United States Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) accused Volkswagen of installing illegal software, known as "defeat devices," in its diesel vehicles. These devices could detect when the car was undergoing emissions testing and adjust the engine's performance to meet the required standards.
The defeat devices allowed the cars to pass the laboratory tests by reducing emissions during testing conditions. However, during real-world driving, the vehicles emitted nitrogen oxide (NOx) pollutants at levels up to 40 times higher than the permissible limits.
The scandal affected an estimated 11 million vehicles worldwide including 500,000 in the United States, in models like the Volkswagen Jetta, Golf, Passat, and Beetle, as well as the Audi A3. These cars were equipped with the EA189 diesel engines and had been sold globally.
The seeds of the Dieselgate scandal were sown in 2014 when the International Council on Clean Transportation (ICCT) conducted a study on diesel vehicle emissions. Back in 2013 ICCT asked experts from the West Virginia University Center for Alternative Fuels Engines and Emissions (WVU CAFEE) to check how much pollution diesel cars were making on roads in the US. These experts used a special tool from Japan to test cars while they were driving in California. They found that two out of three cars made by Volkswagen were putting out nitrogen oxide (NOx) than they were supposed to. Then, in May 2014, the ICCT shared what they found with two important groups, the California Air Resources Board (CARB) and the United States Environmental Protection Agency (EPA). This study prompted the EPA to conduct its investigation.
In May 2014, the EPA and CARB jointly informed Volkswagen of their findings regarding the discrepancy between lab tests and real-world emissions. Over the next year, the agencies engaged in discussions with Volkswagen, which initially offered technical solutions but failed to acknowledge the deliberate use of defeat devices.
Initially, Volkswagen denied any wrongdoing, claiming that technical issues were responsible for the discrepancies between laboratory and real-world emissions. However, the mounting evidence and investigations eventually forced the company to admit that it had intentionally programmed the software to deceive emissions tests.
The breakthrough came in September 2015, when the EPA threatened not to approve Volkswagen's 2016 diesel models for sale in the United States unless the company explained the emissions discrepancies. Volkswagen subsequently admitted to using defeat devices, leading to the scandal's full-blown revelation.
In response to the crisis, Volkswagen's CEO, Martin Winterkorn, resigned from his position. Additionally, key figures within the company, including Heinz-Jakob Neusser, in charge of brand development, Ulrich Hackenberg, overseeing research and development at Audi, and Wolfgang Hatz, responsible for research and development at Porsche, were suspended.
Following the revelation of the scandal, regulators from various countries launched investigations into Volkswagen's actions. As a result, the company's stock price plummeted by a third shortly after the news broke. In an attempt to address the scandal, Volkswagen unveiled plans in April 2016 to allocate €16.2 billion (equivalent to $18.32 billion at April 2016 exchange rates). By June 2016, the company had reached an agreement to pay up to $14.7 billion to settle civil charges in the United States.
As the legal proceedings unfolded, Volkswagen pleaded guilty to criminal charges in January 2017. An agreed Statement of Facts detailed how the company's management instructed engineers to create the defeat devices. These devices were deemed necessary because Volkswagen's diesel models could not pass US emissions tests without them. Moreover, the company deliberately concealed the use of these devices.
The legal repercussions continued to escalate. In April 2017, a US federal judge ordered Volkswagen to pay a substantial $2.8 billion criminal fine for manipulating diesel vehicles to cheat on government emissions tests. Winterkorn, the former CEO, faced serious charges of fraud and conspiracy in the United States, with legal proceedings commencing on May 3, 2018.
By June 1, 2020, the financial toll of the scandal had reached a staggering $33.3 billion for Volkswagen. This sum encompassed fines, penalties, financial settlements, and the costs associated with buying back affected vehicles.
The Dieselgate scandal serves as a stark reminder of the consequences that unethical actions can have on a global scale. It fundamentally reshaped Volkswagen's trajectory, prompting the company to navigate a complex legal landscape, reevaluate its corporate culture, and make significant financial commitments to rectify the damage caused by the emissions manipulation.
The company embarked on a massive global recall initiative, recalling and repairing affected vehicles to bring them into compliance. The effort involved removing the defeat devices and implementing software updates.
The impact of the Volkswagen emissions scandal was not limited to the United States. Regulators and governments worldwide launched investigations into the company's practices. Countries such as the UK, Italy, France, South Korea, and Canada opened their own inquiries, seeking to hold Volkswagen accountable for its actions
In response to the scandal, Volkswagen announced a global recall of 8.5 million vehicles in Europe, including 2.4 million in Germany and 1.2 million in the UK.
The scandal severely impacted Volkswagen's reputation, leading to a decline in sales and market share. To salvage its image, Volkswagen intensified its focus on electric vehicles (EVs) and committed to transitioning toward a greener future. The company unveiled ambitious plans for EV production and invested heavily in EV technology and infrastructure.
The Volkswagen emissions scandal serves as a strong reminder of the consequences of dishonesty in business and the need to care for the environment. Intentionally manipulating emissions tests not only hurt nature but also damaged trust in one of the world's most famous car companies. The effects of Dieselgate are still being felt across the industry, leading to changes in rules, what people like, and how cars will be made in the future.
Dieselgate, serves as a lasting reminder of the consequences of corporate misconduct, deceit, and ethical violations. As Volkswagen continues its journey toward redemption and transformation, Dieselgate stands as a crucial chapter in the automotive industry's evolution, influencing the landscape of vehicle emissions, compliance, and consumer trust for years to come.
