Sep 22, 2015

Business bites: VW’s emissions off … insurance deal soft …

Volkswagen has been polluting much more than it had said it was. Whoops!

Das Auto, Der Schwindel? German has eight words to describe fraud, swindles and their practitioners. Der Schwindel sounds about right for what is quickly emerging as one of the biggest corporate frauds/deceits of all time — the way Volkswagen avoided accurate emission readings on diesel cars sold in the US. The news broke at the weekend as a mid-level story, especially with the pie-in-the sky US$18 billion maximum American fine mentioned in many reports. Surely a ballpark figure? Even after VW management confirmed the story by apologising on Sunday night in Germany, markets and investors were not too fussed — until trading started last night on European markets and VW shares fell out of bed, down 22% at one stage, and ending off more than 17%. That translates to a loss of 13 billion euros in market value, or just under $20 billion. And why the big fall? Because investors have finally realised the potential cost may not be limited to America and in fact could be worldwide. Countries through Europe have started checking to see if the rort was pulled on VW diesel cars sold in the eurozone, the UK and beyond.  — Glenn Dyer

How wide is der Schwindel? Investors fear that it is more than just VW and are asking if other big global and regional car companies in Europe are involved. Shares in other big European car groups such as BMW, Daimler (Mercedes), Renault Nissan, Peugeot also fell in fear that they had been doing the same thing. America’s Environmental Protection Agency last Friday ordered the recall of nearly 500,000 VW vehicles, saying diesel variants of several VW and Audi models sold in the US over six years — including the VW Passat, Beetle and Audi A3 — had been fitted with sophisticated algorithms in the engine management system designed to deceive the laboratory testing regime by giving lower toxic emissions, when in fact the cars are high emitters. The EPA said that the cars’ engine management systems “contained software that turns off emissions controls when driving normally and turns them on when the car is undergoing an emissions test”. The big question is China, whose government has shown itself increasingly inclined to hit foreign companies it feels are flouting the law with big fines — French dairy company Danone, Mercedes-Benz and Microsoft come quickly to mind as prominent examples in recent years. — Glenn Dyer

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One thought on “Business bites: VW’s emissions off … insurance deal soft …

  1. ken svay

    I can recall that VW had problems with auto transmissions in Australia a few years ago and dug in against owners complaints.
    They finally recognised the problem but it cost them a lot of market share for a couple of years. I can recall that my son considered buying a Golf but I warned him not to. They are certainly slow learners.

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