VW emissions scandal: VW posts £1.2bn loss, 5-point plan to fix

VW Emissions scandal update 2

The ‘dieselgate’ scandal is starting to takes its toll on the Volkswagen Group, as the company has just reported its first quarterly loss in over 15 years, while also being overtaken by Toyota as the top-selling global car maker. 

The Volkswagen Group has reported a £1.2billion loss in its quarterly earnings, after setting aside £4.8bn to cover the diesel emissions scandal. VW is expecting a further fall in profits, but has said that it expects sales to grow this year. 

While VW remains optimistic over sales, Toyota has nevertheless overtaken the Group for the top spot of global car sales after selling 7.5million units year-to-date, compared to the VW’s 7.43million sales. 

With uncertainty looming over future sales and profitability, VW Group CEO Matthias Muller has announced a five-point plan to turn the company around. 

His first point is to support all of the 11million VW customers affected – though the £4.8billion does not include any form of customer compensation, and VW has yet to confirm any. 

The second point is to complete the investigation over the defeat device, and those involved will face severe consequences, according to the CEO. Muller said: “We must uncover the truth and learn from it.” 

The third and fourth points revolve around a cultural and managerial realignment within Volkswagen, as well as a detailed investigation into the 300 model strong portfolio. 

Muller’s fifth point is to transform its ‘Strategy 2018’ to a ‘Strategy 2025’. Strategy 2018 was VW’s internal commitment to sell over 10 million vehicles a year, along with being a leader in customer and employee satisfaction. 

VW diesel crisis: the story so far 

The latest news from the VW Group confirms that vehicles fitted with Euro 5 and Euro 6 EA288 engines are not affected by the emissions scandal, as previously thought. German reports suggested older versions of the 1.6-litre and 2.0-litre EA288 engines, a derivative of the affected EA189 engine, were also built with a defeat device to cheat emissions tests, but VW has announced this is untrue. 

However, the VW Group has informed US authorities that its 2016 diesel models do contain an ‘auxiliary emissions control device’ that may help cars produce lower emissions during an official test – this is different to the defeat device that was found to be cheating Environmental Protection Agency (EPA) emissions tests  in the US, sparking the VW emissions scandal. 

The VW diesel scandal was previously thought to apply to the EA 189 engines fitted in cars built between 2009 and 2015, but now US authorities including the EPA – the organisation which first uncovered VW’s cheat software – are looking into whether the auxiliary device fitted has been installed to specifically cheat emissions tests. VW has also removed its application for approval to sell 2016 model cars in America, according to VW’s US boss Michael Horn.

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Message to VW customers on the ‘dieselgate’ scandal

Three-point plan to recall UK’s dieselgate cars 

In the UK, the VW Group is looking to implement a three-stage plan to recall and repair all 1.2 million vehicles affected by its diesel emissions scandal by the end of 2016. 

The Group is currently working with the German Motor Industry Federation (KBA) to approve a permanent fix to the emissions crisis – with the first round of recalls expected to start in the first quarter of 2016. The German authorities have announced a mandatory recall to all of the 8.5 million vehicles in the EU – thus rejecting VW’s proposal for voluntary repairs to the affected vehicles. 

However, each EU member state can choose whether to enforce the recall, and according to the Department for Transport (DfT), the UK Government’s stance isn’t affected by Germany’s announcements. A DfT spokesman told Auto Express: “We are in constant talks with Volkswagen to make sure the company does whatever it can to put things right for the consumer.”

In the UK, the first vehicles to be recalled are the EA 189 2.0-litre TDIs, ideally in early 2016, with the rest of the 60 models from the five affected brands recalled and repaired by the end of 2016.  

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VW’s UK boss Paul Willis has confirmed the 1.2-litre and 2.0-litre diesel engines will require a software fix, while vehicles with a 1.6-litre diesel will also need new injectors fitted. This means around 400,000 UK cars would require mechanical changes. Speaking before the House of Commons’ select committee, Willis failed to answer questions relating to whether or not UK owners would be compensated. 

VW group cars

German Ministry officials have also raided VW head offices in Wolfsburg and other locations as part of a criminal inquiry into the firm’s diesel scandal. The officials have since confirmed a total of 3.6 million VW vehicles in the EU will require a hardware fix. 

While UK vehicles look to get by with software tweaks and injector swaps, vehicles in the US may be in need of physical changes to the catalytic converters and/or the Selective Catalytic Reduction (SCR) AdBlue urea injection systems. VW’s US boss, Michael Horn, admitted these changes may be needed to pass the strict US emissions tests. Horn also added that any fix will likely affect the performance of the cars, and that customer compensation is currently being looked into. 

The VW Group has set up websites for their affected brands, Audi, VW, SEAT, and Skoda, for owners to see if their cars are fitted with the EA 189 engines affected by the defeat device software. The VW Group has also withdrawn over 4,000 new vehicles from sale across their UK dealers. The 4,000 vehicles withdrawn represent around 3 per cent of the brand’s total stock in the UK. 

Auto Express website poll hints at damage to VW brand

A poll of 8,500 users on the Auto Express website has shown that 71% of the public now trust the Volkswagen brand less than they did before. Users were asked, ‘how has the VW emissions scandal affected your opinion of Volkswagen? While 71% of the respondents said they trusted the brand less, 25% said they trusted it the same as they did before and only 4% said they trusted VW more in the wake of Dieselgate.    

VW Group recall: numbers of UK cars affected

The VW Group has said that the following quantities of UK vehicles are set for a recall… 

  • • VW passenger cars – 508,276
  • • Audi – 393,450
  • • SEAT – 76,773
  • • Skoda – 131,569
  • • VW commercial vehicles – 79,838

Total VW Group cars set for UK recall: 1,189,906 

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Check if your VW Group car is subject to the recall

The websites below let owners of VW Group cars check whether or not their models are fitted with the EA 189 engine and subject to the recall. All you need is your car’s VIN number which should be located at the bottom corner of the windscreen on the driver’s side or in the car’s service book. 

  • • VW recall website 
  • • Skoda recall website 
  • • SEAT recall website
  • • Audi recall website   

VW Group UK hq

What is the VW emissions scandal?

The recall notice comes after the VW Group was caught by US authorities for violating vehicle emissions standards. Volkswagen was found to have installed a ‘defeat device’ software algorithm on its cars to manipulate exhaust emissions tests making its cars appear cleaner than they are. 

The US Environmental Protection Agency (EPA) found four-cylinder diesel engines made by the German car giant were built with a software device that detects when the vehicle is undergoing emissions tests and activates full emissions control measures to produce results far better than those achieved in real-world driving.  

The net result is that cars pass strict US emissions limits under laboratory conditions, but when unplugged from the testing rigs, the EPA states that the diesel engines emit nitrogen oxides (NOx) up to 40 times the legal limit. The limits for N0x emissions in Europe are less stringent than the EPA’s standards and it remains unclear whether the cars found to be deliberately cheating US tests have broken the law in Europe, although VW admits that the same software is present. 

VW Scandal: EA 189 engines affected

The engines in question is VW’s type EA 189, found in over 11 million diesel cars with 1.2, 1.6, and 2.0-litre capacities across the Volkswagen Group’s product range but no longer fitted to new models in Europe. 

VW Tiguan badge

VW says five million of its cars around the world use the EA 189 engine, with known diesel models including the Mk6 Golf, Mk7 Passat and the first generation Tiguan equipped exclusively with the EA 189 engine. Further models that include the EA 189 engine in their line up are the Jetta and Beetle sold between 2008 and 2015.

Audi and Skoda have said 3.3 million of their cars with so-called EU5 compliant engines come with the ‘defeat device’ installed. Some 1.42 million Audis with the software are found in Western Europe, with 577,000 in Germany alone, and 13,000 in the US.

An Audi spokesman said the affected models include the A1, A3, A4, A5, A6, TT, Q3 and Q5. While Skoda also confirmed that 1.2 million of its cars are also affected by the diesel scandal.

Audi TT Ultra – front tracking

The Volkswagen Group has set aside £4.7 billion to cover potential damages arising from the emissions scandal, but the Group could face fines up to £12 billion in the US alone. The 11-million vehicle planned recall is expected to cost the Group approximately £4.3 billion. 

Since the emissions crisis started, the Group’s CEO, Martin Winterkorn has resigned and was replaced by the former Porsche chief executive, Matthias Muller. Winterkorn is now facing criminal prosecution in Germany for alleged fraud.

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VW emissions crisis timeline: how it happened

http://cdn.knightlab.com/libs/timeline3/latest/embed/index.html?source=1kKCcjTM21il9ev9XeiP0YTUFNCJol0fY96IFE5nWxXc&font=Default&lang=en&initial_zoom=2&height=450

  • • 18/09/2015: The US environmental standards agency EPA files a Notices of Violation of the Clean Air Act to the Volkswagen Group stating cars sold between 2009 and 2015 included software to specifically pass EPA’s emissions tests.
  • • 20/09/2015: Then-CEO, Martin Winterkorn, issues a public apology admitting to “breaking the trust” of customers.
  • • 22/09/2015: VW announces the engine in question is the type EA 189, found in 11 million vehicles worldwide and the company has set aside £4.7 billion to cover the costs of the scandal.
  • • 23/09/2015: Martin Winterkorn resigns as the CEO of the Volkswagen Group. VW confirm new EU6-compliant diesel engines not affected by the defeat device software.
  • • 24/09/2015: Germany’s Transport Minister, Alexander Dobrindt states the cheating software can be found in 1.6 and 2.0-litre diesels in Europe.
  • • 25/09/2015: Matthias Muller appointed as the CEO of the Volkswagen Group. Dobrindt confirms 2.8 million diesel cars affected in Germany alone. VW confirms five million of its own cars affected.
  • • 28/09/2015: Audi and Skoda admit 3.3 million of their diesel cars were built with the emissions cheat software. Winterkorn faces criminal prosecution in Germany for alleged fraud.
  • • 29/09/2015: VW Group announces plans to rectify 11 million of the vehicles involved. 
  • • 30/09/2015: VW Group announces that 1,189,906 UK cars will be recalled.
  • • 01/10/2015: 4,000 new cars with affected engines withdrawn from sale in the UK.
  • • 05/10/2015: VW Group brands start to launch websites where owners can check if their cars are affected by the recall
  • • 06/10/2015: VW CEO Muller announces potential job cuts within the Group along with freezing all unnecessary expenditures.
  • • 07/10/2015: Muller announces that the recall of affected models will begin early in 2016 and be completed by the end of that year with some cars needing a hardware fix. 
  • • 08/10/2015: The head of VW US, Michael Horn, admits he knew of the defeat device software as early as spring 2014. VW offices raided by German investigators.
  • • 09/10/2015: German transport ministry officials say that 3.6m European cars with the 1.6-litre EA 189 engine need a hardware fix. 
  • • 12/10/2015: Paul Willis, VW UK boss, tells MPs that all 1.6-litre EA 189 engines need new fuel injectors and outlines 3-point plan to fix all recalled cars.
  • • 13/10/2015: VW board announces new electric car focus and €1bn of cost cutting.
  • • 14/10/2015: VW reveals that new 2016 models also have software that could help them produce lower emissions in tests. 
  • • 22/10/2015: Reports in Germany suggest EA 288 engines could also be involved, but VW deny claims stating Euro 5 and Euro 6 EA288 engines were not built with defeat device software.
  • • 27/10/2015: Toyota outsell the VW Group for the first time in 2015, becoming the best selling car manufacturer in the world. 
  • 28/10/2015: VW report first quarterly loss in 15 years, while CEO Muller announces a five-point plan to turn things around.
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New VW Group CEO and bosses in the firing line

Matthias Müller

Martin Winterkorn isn’t the only high-ranking VW Group boss having walked the corporate plank; other directors and chief executives have come under the microscope with the company needing to start on a “clean sheet”, according to the former CEO Winterkorn. New boss Matthias Muller has also hinted at job losses accross the group.

Jurgen Stackmann, previously chairman of SEAT has been replaced by Luca de Meo from Audi, as Stackmann replaces Christian Klinger as VW’s sales and marketing boss.   

US, Mexican and Canadian markets are to be combined under a single North American region, which was to be headed by former Skoda chairman, Winfried Vahland. However, Vahland quit the job after just three weeks due to differences in opinion over VW’s organisation of the North American business. The Group has not announced who will run the North American operations after Vahland.  

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The Volkswagen Group will also be split into four key divisions to simplify communications and operations – volume, premium, sports and commercial vehicles.

The volume division will consist of VW’s own brand, Skoda and SEAT, while the premium division will feature the likes of Audi, Lamborghini and Ducati. The sports segment will have the Group’s Porsche, Bentley and Bugatti brands, and the commercial division will house truck and commercial vehicle operations.

VW emissions crisis: your key questions answered

Volkswagen Golf GTI cornering

I own a VW car, what should I do? 

The VW scandal shouldn’t affect your everyday driving; the software only alters the car’s behaviour when undergoing emissions tests. However, given that VW is issuing a recall in the UK, you might have to make a trip to the local garage at the VW Group’s expense. 

The VW brands have released an online service where users input their VIN number to see if their cars are affected by the scandal but the company will still contact customers individually to make arrangements for the recall to take place. Recalls are due to begin early in 2016.

But, the real issue is whether VW can remedy the problem and still replicate the emissions levels produced by its cars in the official tests. If not, it may face claims for fraudulent misrepresentation and breach of the 1979 Sale of Goods Act by owners. The Department for Transport has already announced it will be re-testing a range of diesel cars in the UK to compare real world figures to the ones achieved in official tests that are quoted by the manufacturers.

If my car is faulty, will I get compensation from VW?

This remains a question VW are unable to answer. However, in the US, VW’s boss Michael Horn admitted that customer compensation is something the company is looking into. The VW Group is already facing individual lawsuits over the emissions test cheat software. 

I’m considering buying a VW, should I think again?

At this stage it’s too early to know how the automotive market will be shaped by the diesel scandal. VW Group brands are currently the only manufacturers involved but it may not be exclusively their cars that are taking the hit in residual values – other diesel models could be affected. If you’ve got your eyes set on a specific VW it’s best to wait and see where the situation heads in the weeks to come although dealer have reported some buyers trying to negotiate big discounts in light of the crisis.

The same can be said for those looking to sell their VW, Audi or any of the makes involved. VW has lost a big chunk of its market value in the stock markets, indicating the damage that has been done to the reputations of the brands involved. This could ultimately funnel down to the resale value of VW vehicles but it’s too early to say on what scale. 

What about my vehicle tax band, will I have to pay a higher rate? 

No. The Department for Transport (DfT) has announced that UK taxpayers will not incur higher vehicle excise duty (VED) if their existing vehicles are found fitted with the defeat device software. 

Which manufacturers are involved in the diesel crisis and which are not?

With VW Group companies firmly in the firing line, rumours have circulated that other car brands could also be involved but there’s no evidence of this yet. So far, BMW, Daimler, Mercedes Benz, Ford, Jaguar Land Rover, the PSA Group, Volvo, Toyota, Lexus, Fiat Chrysler Automobiles, Honda, Subaru, Kia, Mitsubishi, Vauxhall, Hyundai, Ford, Mazda, and Renault-Nissan have all categorically denied manipulating emissions tests by using software based algorithms or other means.

Emissions and efficiency testing rolling road

What does this all mean for VW and diesel cars in the future?

VW is facing one of the biggest crises to hit the automotive industry in years. The company is already looking to have to deal with US authorities billing it up to £12 billion for violating the US Clean Air Act, and numerous other countries are currently launching their own investigations into the matter.

The next few weeks and months are crucial for the German car giant, it needs to choose its steps carefully to avoid damaging its reputation further. The Group has already confirmed it will waste no time in getting to the bottom of the issue. The VW board announced there will be “streamlined processes” to cut costs, and a move away from diesel with the development of modular electric car platforms. Investment is also set to be reduced by 1 billion Euro with the possibility of job losses. 

But it’s not just VW that needs to clean up its act; it’s the whole automotive industry. Over half the cars bought in the UK are diesels, and buyers are now waking up to the fact that their cars are not as clean as they thought. To ensure diesels have a future in the automotive industry, manufacturers have to come together to ensure their cars are appropriately built and tested in a way that reflects real-world driving conditions.

What does this mean for emissions and mpg testing, how will it look in the future?

There are already plans to adopt more stringent emissions and mpg tests in the EU, and the VW diesel scandal will surely add fuel to the fire in showing just how important appropriate testing standards are for car buyers.

A World Harmonised Light Vehicle Testing Procedure (WLTP) is scheduled to come into force in 2017, and will introduce a global set of emissions testing standards. The WLTP is developed to be more representative of real world driving conditions, with more dynamic braking, acceleration and speed times.

Another test currently under proposal is the Real World Driving Emissions (RDE) test, which would feature a real-world driving scenario for emissions tests. Cars would be hooked to machinery that records their emissions as they are driven on the road and feeds them to a computer. 

The real-world element would add a more accurate representation of vehicle mileage and emissions, helping manufacturers like VW win back trust from buyers. 

The Auto Express view on the diesel scandal

By editor-in-chief- Steve Fowler


Opinion bad dealers VW

This is one of the biggest scandals I’ve ever seen in over 25 years of reporting on the car industry. For a company like Volkswagen, which prides itself on engineering excellence, to admit to rigging emissions tests erodes trust not only among its own customers, but all car owners.

It remains to be seen whether any cars in other territories are involved, but if the company is capable of cheating emissions tests in the US, surely it could be doing it everywhere. And if Volkswagen is doing it, many assume that rivals are doing the same – after all they often share technologies and parts suppliers.

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If I was a VW customer who’d invested my hard earned cash in a car that was sold to me and marketed as being environmentally friendly, I’d be very angry knowing that the information I based my buying decision on might have been falsified. And I’d probably be looking for recompense. I’m not sure that near-£5bn VW has put aside to take care of this issue will be enough. And I’ll be really interested to learn exactly how they plan to fix the problem on the 11 million cars affected.

We’ve known for many years that the tests used for creating mpg and emissions figures are ludicrously out of touch with the real world, but now we know that car makers are capable of cheating in official tests, too. This is a very bleak time for the Volkswagen Group and the car industry in general. Much work needs to be done to restore the trust of existing and potential customers – and fast.

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