OK, I have to sound off on the Volkswagen emissions debacle and its implications. If you perused the headlines last week, you are probably aware that the company cheated on its emission tests. Calling VW a “cheat” doesn’t do justice to the shockingly devious lengths that they went to in order to deceive customers and regulators. Unfortunately, the number of people whose health and finances are negatively impacted by this extreme act of greed could end up being unprecedented.
In summary, Volkswagen has sold 482,000 vehicles in the U.S. since 2009 (and over 11 million globally!), with the claim that they were highly efficient “clean diesel” vehicles. In reality, they were not, as VW intentionally gamed emissions testing. And the deceived consumers of their vehicles, shareholders, employees, dealers, anyone who works in the diesel industry, and anyone who breathes air are paying a significant price.
The EPA found that Volkswagen used a “defeat device” and sophisticated software algorithms to:
“detect when the car is undergoing official emissions testing, and turn full emissions controls on only during the test. The effectiveness of these vehicles’ pollution emissions control devices is greatly reduced during all normal driving situations. This results in cars that meet emissions standards in the laboratory or testing station, but during normal operation, emit nitrogen oxides, or NOx, at up to 40 times the standard.”
NOx is some really bad stuff, by the way. It leads to acid rain, severe lung/respiratory damage, asthma, ozone toxins, and even death if exposed to enough of it.
Can you get more evil than that? Like, seriously? I imagine Satan, the ghost of Hitler, and a VW executive walking into a bar, finding a dark corner and plotting this all out…
VW executive: “OK guys – we gotta sell some vehicles – what do we do?”
Satan: “Well, how about we focus on fuel-efficient diesel engines, since gas prices are so high?”
Ghost of Hitler: “And how about we make those diesel engines “clean” by limiting NOx emissions?”
VW executive: “Interesting, interesting… how about we do both, but ONLY during emission tests through the use of a defeat device and software, and then crank out the NOx fumes in the face of unsuspecting children at all other times, while simultaneously claiming the vehicles are “advanced technology” and increasing their price?”
Ghost of Hitler: “Woah, Dude! That’s some F$CKED UP SH$T right there!!! I think I’ll pass…”
Satan: “Count me out on this one, bro…”
VW executive: “mwa hah hah hah. Mwaah haah haah haah. MWAAAH HAAAH HAAAH HAAAH!!!” <strangles puppy on the way out the door>
The Immediate Implications of the VW Scandal
The true impact of this deviousness is no laughing matter.
First, there is everyone who bought a bill of false goods. These are the 482,000 U.S. and 11 million global customers who paid a premium of thousands of dollars for “clean diesel” TDI Jettas, Beetles, Golfs, and Audi A3s from 2009-15 and Passats from 2014-15. Not only did these customers pay a premium, but they did so thinking that they were being environmentally responsible. In reality, the opposite was true. And to make matters worse, the resale value of their vehicles will likely fall through the floor. The cars can’t even be resold in the state of California due to their non-compliance.
Next, are the company shareholders. Volkswagen could face a maximum fine of $37,500 per vehicle ($18 billion total) in the U.S. alone. That figure doesn’t include fixing the recalled cars. And it doesn’t include the litigation costs and settlements for the dozens of lawsuits from regulators, shareholders, customers, dealers, and even employees that are already coming together.
As a result, VW’s share price has already lost 36% since this travesty was made public last Monday – and it will almost surely be losing much more. Shareholders will ultimately take a huge hit. Employees will as well. With the financial hit the company will take, it seems inevitable that job losses will ensue. And many VW employees are large holders of the stock, so it will be a double financial whammy for them. I’m sure all but a few VW employees had no knowledge of this scheme. And I’m sure those who are found to have known will get lovely golden parachutes to add insult to injury.
Then there are the dealers and all of their employees. About 23% of VW vehicles sold were diesel, and any on the lots can no longer be sold. Even if all of the vehicles are fixed, will the brand ever recover to the point that vehicle sales will match what they were prior to this?
And last but not least, there’s the environment and everyone who breathes what these vehicles have been spewing. Can you even put a dollar amount on all of the damage done here for VW to “make good” on? That’s 6 years of 11 million vehicles spewing out 40X the “acceptable” amount of pollution.
Our Faith in Unchecked Capitalism
Acts of this kind of corporate greed and evil are not isolated to VW, of course. Madoff, Enron, BP, Countrywide Financial, Healthsouth, Goldman Sachs, Toyota, GM, Bear Sterns, Lehman Brothers, Tyco, Arthur Andersen, Worldcom, Qwest, Martha Stewart, and Lance Armstrong are just a few of the well-known examples among the thousands of lesser known and tens of thousands of uncaught evils in corporate America.
Just last week, the former Peanut Corporation of America President was sentenced to a shamefully light 28 years in jail for knowingly authorizing salmonella tainted product to be shipped and sold to consumers, killing 9 and making 700 others ill.
When money is the driving factor, those in power can do some really evil things – while pushing aside all moral and ethical standards. It can not only ruin lives, but ruin the very place we call home. Everyone is on a Pope Francis kick lately, and here’s a timely and relevant quote from il Papa himself,
“Time, my brothers and sisters, seems to be running out; we are not yet tearing one another apart, but we are tearing apart our common home. Today, the scientific community realizes what the poor have long told us: harm, perhaps irreversible harm, is being done to the ecosystem. The earth, entire peoples and individual persons are being brutally punished. And behind all this pain, death and destruction there is the stench of what Basil of Caesarea called “the dung of the devil”. An unfettered pursuit of money rules. The service of the common good is left behind. Once capital becomes an idol and guides people’s decisions, once greed for money presides over the entire socioeconomic system, it ruins society, it condemns and enslaves men and women, it destroys human fraternity, it sets people against one another and, as we clearly see, it even puts at risk our common home.”
Capitalism can result in great things when those in power exercise strong values. The large majority of businesspeople make sound ethical and moral decisions. Yet, many don’t. Left to their own greedy devices, many are happy to cut corners at the expense of others and the environment. This is why we created and need a legitimate EPA. This is why we created and need strong insurance company, payday loan, broadband monopoly, and for-profit education industry oversight. This is why we created and need the Consumer Financial Protection Bureau, the FDA, and the Clean Water and Clean Air Acts. It’s to catch the few bad among the many good and protect those who otherwise have no recourse.
Please keep this in mind the next time you are sold “getting rid of job killing regulations” (aka “self regulation”) as an economic cure-all. What is the economic cure when consumers spend nothing because they don’t trust any companies to do them no harm? If we can’t at least take that away from this VW hoax, that would be the biggest tragedy of all.
When I first heard this story, I thought maybe someone fudged some report somewhere. Eh, fudging a report you can chalk up to someone under duress making a bad choice.
Then, the news started reporting a defeat device and I knew VW was in some serious trouble. Everyone involved, from customers to shareholders to employees, are going to take a huge hit on this and it’s unfortunate for those who didn’t have a hand in it.
On a positive note when do you think VW stock will hit bottom so we can buy a ton of it for the ride back up?
Who knows for sure. This could easily bankrupt the company and the stock could become worthless.
Will this bankrupt them?
Well, I think it depends on how well the aftermath is handled. I am sure we may see parallels with BP crisis, where that company nearly overnight, had set up attorney sweatshops to handle the claims that begun pouring in, and was able to stay afloat despite huge losses.
Will VW be as efficient? Who will take the blame and how much of the fall will satisfy everyone involved? Do we really want this global company to go under? Probably not, it will affect adversely everyone, but the guilty party. We want the responsible people punished, and we want to set a good example for greedy people elsewhere. We want to fix the issue at hand for current owners and shareholders.
Also, this is a very serious accusation to the German pride and German business ethics. I think VW industry peers, BMW and Mercedes, will also feel negatively affected, as this puts the famous German Made value to the test.
I think you go with the media and overexeggerate the so called “scandal”?
How many people died because of this? I think there have been some manufacture errors where people have been hurt or even worse.
Could you please be so kind and compare the emissions of one of the sinners to one a usual diesel truck or maybe a ford vehicle within the US…
You said: “Who paid a premium of thousands of dollars for “clean diesel” TDI Jettas, Beetles, Golfs, and Audi A3s from 2009-15”
– Why is ther Audi?
– Who says that GM, Toyota and all the others have not done the same?
Huh? Anyone think I’m over-exaggerating?
On your other comments:
Audi is owned by VW.
GM, Toyota have not been caught cheating (and combined only have one diesel model) – and if they did cheat, I’d blast them as well.
This was crazy news. The CEO obviously had to step down but he will probably get that golden (platinum?) parachute.
I think you can add Martin Shkreli, the boy genius who jacked up the price of a cancer/AIDS drug from $13.50 to $750, to that group who walked into the bar.
Yeah – there are the drug price inflators as well.
I wonder if VW will ever recover…? Wait and see.
VW will be hit bad by this! I cant see myself ever buying a VW again. The length at which those engineers went to game the system is beyond belief. Just shocking and disgusting.
If the EPA and all the other government programs are so grand at catching the bad guy, then why wasn’t it one of those organizations that caught them?
I read that it was an independent non-profit organization (ICCT) partnered with WVU that caught VW.
What is your point? We should have no regulation, b/c a non-profit stumbled across something odd first?
The ICCT has no authority to punish them.
My point is we don’t need big brother watching every company to make sure that everyone is following the rules. There are plenty of private companies that do a better job at that then the government.
Yeah, private companies are great at regulating and enforcing standards across an industry. And they’re totally happy to do it at no cost, with no conflict of interest. FIFA, NFL, UCI, MLB, Olympics….I’d provide more great examples, but I’d probably run out of room to type them all…
Saying that the government does not have a conflict of interest in creating more bloated systems to regulate and ultimately make more money off taxes, fines, permits… ect. The list goes on… but i would run out of patience as to how much money the government gets. ( and wastes ) All the while they themselves are being foolish with money, not paying off debts, taking away peoples rights, and NOT following the constitution they SWORE to uphold. I wouldn’t care soo much if they actually were any good at doing anything. But hey, thats what happens when you have NO competition, and you get to make the rules. As you said, anyone in positions of power, or influence should try to uphold a certain level of moral uprightness. But that especially goes for the government, which is too often blindly trusted. At least with the capitalist system you understand that every company has to, and will try to make money. How else will you pay your employees, or even yourself?
Once again what government agency has outed any of those private companies for their wrong doings?
You seem to have this blind faith that the government is a cure all for all the evil in the world. How much of the money that VW is going to pay to the government (if it doesn’t go bankrupt first) is going to go back to the people to right the wrongs? I bet very little of that money will be distributed to all those people (as you pointed out in your article) that will lose money on their cars, their dealerships, and the employees themselves that had no involvement. Better yet how much money will be invested into coming up with new technologies for cleaning running cars? I doubt we’ll ever hear about anything along those lines.
What does that have to do with your opinion that for-profit enterprises are able to regulate and enforce better than govt (your original point)?
I don’t thing govt. is a cure all – but I sure as hell would rather have regulatory authorities with real power to enforce vs. some for-profit sham with no teeth when it comes to things like regulating food, drugs, pollution, consumer protections. Even if a non govt. entity raises a flag, what power do they have to cause any pain to dissuade the bad from being bad?
You obviously thing any govt. regulation/enforcement of any kind is bad, so I don’t think we’re going to agree. But it’s clear you’re the one with the extreme position here.
I don’t think you know what you are asking for here. Of course a government can do a “better job” of regulating companies than they can do themselves. The operative word in that last sentence is “can”. There are many, many problems with this pipe dream, the first of which is that government is rife with corruption and power-hungry despots around every cubicle. It is never ending, and getting worse. You in the younger generation have your head somewhere I care not to describe here, letting people walk all over you without a hint of oversight, or even wanting to. The apathy epidemic came in with the narcissism epidemic. I was recently reading an article on narcissism that said not to trust anyone under 30. I now know why, if this is the way your generation thinks. If you do not wake up and reverse the trend of nanny-state despotism, you will be enslaved by your pipe dream. Christ, we see your favorite politicians openly worshiping mass murderers like Mou Tse Dung and Josef Stalin, your “il Papa” calling capitalism an outright scourge, and your generation nodding your head right along with the outright proven lies spewed from people that have pretty much open agendas to control you. Go ahead, f$%^ it all, it’s your world now. We in the older generation will be dead, so what will we care? Oh, yeah… we have already fought world and numerous smaller wars to keep that phone against your ear while driving, the fast food cornucopia available at any time day or night, and the free flow of international trade that gives you practically everything you own. America is on top of the heap right at this time in history because we took it. If we didn’t some other nation would have; the British, French, Spanish, Romans, Chinese, Egyptians, Greeks, Phoenicians, and numerous other “civilizations” all did it before we did. This one happens to be the best one of the bunch when it comes to rights. And if you f^*& this one up, another one will take our place. Guaranteed. And the next won’t be so nice. No other people on Earth were willing to unite for the cause of good like we were, or they would have done it.
If this article made you angry at me, go and do some reading and research before responding. You might be surprised what you find out, especially about yourselves.
I really enjoy your finance posts but when you jump off into politics you lose me big time! I would think that living in a highly regulated state like MI would open your eyes to big government at its finest but apparently not. I just can’t go for more regulation from the EPA and the CFPB. I work in banking and I just had to tell my Dad yesterday to move his banking entirely to a Credit Union because the bank I work for and he uses is so overregulated that they charge a fee for everything. The reason they are fee happy is because of Dodd-Frank and your much loved CFPB. So you can’t tell me that we need more regulation because as far as I’m concerned you’ve lost all credibility when you start down that road. You simply are uninformed!
Banks charge fees because they are profit-driven. Banks are more profitable and bigger now than they’ve ever been.
Credit unions are way better for customers b/c their members own them. It’s no wonder your dad moved over. Maybe you should too.
That’s not CFPB – it’s common sense.
I think we need to be careful about being too outraged toward the manufacturer. Many Americans do this exact same thing to their diesels in the aftermarket and nobody bats an eye. There is a whole industry dedicated to making reprogrammed computers that improve power and fuel economy for diesel vehicles, at the expense of emissions controls. Most are explicit to say these aren’t street legal, but people install them anyway. If we are going to be angry at VW, we should be angry at these aftermarket companies who sell products that do the same thing as VW’s cheat devices.
OK, I’m equally angry at the aftermarket guys too.
Yeah, Its been frustrating to see people with diesel trucks spewing out soot and other pollutants just so that they can squeeze out a few more horsepower and miles per gallon. We should make it more illegal to sell products that modify your engine than just requiring the manufacturer to label the product “not for highway use”. Maybe the VW scandal will draw more attention to this issue.
Most excellent reporting GE Miller. I love the use of the Pope’s quote and you joking that someone could actually catch up with and speak with Satan. Satan has no real virtue, but only cunning. And cunning is exactly what VW did. I’d like to hear more of the other companies you wrote of that were also devious and cunning. And what is it with people who read this article who do not consider the article to debate through personal opinion which type of company/organization is best as a stop measure for these leviathans. This reminds me of a news report of a murder and the news report focused on how fast the public servant response time was — It seemed so callous to not be concerned with what happened, who it affected and the recourse; rather the news report focused the issue on the public servant’s response time. I hope a wake up call is happening at all levels of people of the seriousness of the issues of consumer products which deceive the population to make a profit and how the bible predicts this as the 4th BEAST with Iron teeth in Daniel 7. Righteous!
OOps, please change my wording to omit the words “do not” where appropriate. And this issue is really a conjunction of the 4th beast in Daniel 7, as industrialization, and the harlot of Revelation 18, as part of her crimes. Oh boy there are other beast correlations such as Rev 13, but its better one reveals for themselves…
Sir, you are performing a valuable public service, kudos on your excellent report and creative writing. The crimes VW has committed are beyond the pale, an affront to every citizen. As astounding as their greed appears, some of the comments are actually berating regulations; if they knew anything about the Trillion dollars in fraud committed every year, or cared, they would be ashamed. Medicare regulators have uncovered Billions of dollars in fraud every year, and returned that money to the system. The money that is returned helps to pay for the regulations. Insurance fraud is rampant and costs every policyholder in increased premiums; until these criminals go to jail it will continue to increase. The stock market frauds are caused by a lack of regulation, this is a danger to the entire economy and families retirement funds. Keep up the good work, thank you!
I agree with all but one statement – “they would be ashamed”.
Good point, shame would indicate they gave a dam!
I am shocked to say the least about how ‘easily’ they forge, use ‘nasty’ ingredients (the food industry), fill up the cans with less product etc. Most of these companies are doing AMAZINGLY well anyway, I cannot for the life of me understand why would anyone try all these gimmicks? OK, I understand, maximize profits, but still. Is there a limit?
We run a small home based business (husband and I) and we’re doing everything in our powers to take care of our clients the best we can. We strive to make them happy and play ‘fair’. I’d have thought that a big company, who’s got the know-how and a great name to over-deliver just as us, small companies, do.
But apparently we’re in a different game :D
I’ve been reading literally hundreds of articles and letters on the dastardly deeds of the psychotic German automakers. Your article is one of the best on the subject not to mention funniest. Thanks for your input on the topic and keep up the good writing.