Volkswagen may settle with TDI diesel owners for $5,000; Audi developed emissions cheating software in 1999

Joel Hruska

As the Volkswagen dieselgate scandal has progressed, one enduring question has been how much the corporate executives knew, who authorized the adoption of the cheating technology, and when and how it was developed. We already know VW began using software “defeat devices” before the 2009 model year launched in the United States, but new information suggests the roots of the problem go even farther back — all the way to Audi and 1999.
The German publication Handelsblatt reports that it was Audi, not VW, that began working on a defeat device that would allow the company’s vehicles to turn parts of the engine off under certain conditions, but that the technology was never actually used by the luxury auto manufacturer. According to Reuters, it was this technology that VW relied on when it realized it couldn’t bring auto emissions under control through other means. This kind of internal development makes sense, since other manufacturers weren’t keen to work on the technology (Bosch sent VW a letter at one point warning it against deploying its products to circumvent air quality controls).
VW has already said it will significantly increase the amount of money it has set aside to deal with damages and claims associated with the EPA / CARB investigation. Currently the firm has allocated $7.6 billion dollars; analysts have suggested the total cost could be as high as €30 billion ($34 billion USD).

A slow investigation

The investigation into the scope of VW’s cheating has been slowed by the various ways that VW’s engineers actively obfuscated their conversation topic. Sources familiar with the ongoing probe have stated that the company used dozens of code words, including “acoustic software” to refer to the emission control defeat device, and that outdated and insufficient data retention practices have made it difficult to identify which individuals should be held accountable. Analyst Stuart Pearson with Exane BNP Paribas has stated he believes investors would tolerate €20-25 billion in costs if it simply means putting the issue behind VW.
VW is expected to argue that it should not be taken to trial if it can produce a solution for the emissions problems, but the company is due in court Thursday to state the terms of its agreement with regulators or face a courtroom. That deadline was pushed back from last month when the judge ruled that the two sides had made significant progress, there’s no word yet on whether or not VW will announce a solution tomorrow or ask for additional time. New rumors suggest that the EPA has reached an agreement and that VW owners will receive a check for $5,000, “with other conditions likely applied.”

The cozy regulator – auto industry relationship

There’s a larger problem here that we’ve alluded to in past stories, but that bears repeating in this context. Volkswagen cheated in a particularly egregious way and got caught doing it, but the hard truth is this: Long before VW acknowledged that it had cheated on US road tests, European publications were documented rampant deceit in both fuel economy and auto emissions.

This chart shows the difference between diesel emissions on paper and actual vehicle emissions.

This chart shows the gap between CO2 emissions. These results are the reason why European vehicles are often rated as being more efficient than their US counterparts, even when the exact same vehicle is sold on both sides of the Atlantic. European laws give manufacturers enormous amounts of leeway, allowing them to test vehicles at high-altitude sites with road surfaces so smooth, they alone impart a 3% fuel efficiency advantage. Companies are allowed to yank out sound systems, side mirrors, and all non-essential components; they can tape over panels and grills to improve wind resistance; they use low-resistance tires inflated with alternate gas blends; and they use different engine lubricants to improve efficiency.

The problem has only gotten worse in recent years. In 2001, vehicle scores were inflated by roughly 10%. They’re currently on track to hit 50%, which would make the EU’s official ratings about as useful for determining actual performance as a five year-old’s estimate of how many cookies he ate. The US doesn’t show the same gap between claimed and actual results, but the gap that exists has still been increasing in recent years.
If regulators on both sides of the pond are serious about stopping this kind of cheating, the solution can’t stop with penalizing VW. Clean air regulations that don’t actually get enforced are worse than no regulation at all. The presence of regulation means people will assume those regulations are actually being met when in reality, they aren’t