By Marisa Nobs
The Environmental Protection Agency (EPA) announced this September that Volkswagen, the world’s largest automaker by volume, has been using software to cheat on diesel emissions standards for many years. Appallingly, this is the same company that has partaken in a “clean diesel” theme since 2008.
The impact of this immoral and harmful behavior stretches far beyond the estimated 11 million vehicles worldwide, including 500,000 in the U.S., that received the manipulating software. Credit Suisse has estimated the financial costs to VW as high as $86 billion, which would far eclipse the cleanup cost paid by BP in the 2010 Gulf of Mexico oil disaster.
The moral, medical and financial costs to society from VW’s behavior raise many concerns, some easier to answer than others.
Who knew and when? Martin Winterkorn, the CEO of VW who just resigned, was a lifetime employee and had the top job since 2007. The EPA traced the cheating back to at least 2009. The maker of the software, Bosch, warned VW that it was illegal to use the capabilities to defeat emissions testing. This proves that the practice was by no means new, and it was certainly no secret to those with the power to stop it. Also concerning, Bosch is a major supplier to many auto manufacturers.
It is an insult to the company, its employees, and customers to take this risk when it was a certainty that the deception would eventually come to light. Punishment can include enormous civil and criminal penalties plus long-term damage to the brand and network of VW dealers worldwide. Doesn’t seem worth it. Class action lawsuits will be launched and linger for many years.
The cost elements of this cheating scandal are staggering. Stock price decline is obvious; 20 percent decline occurred the day of the press release. VW clearly had no regard for how its carelessness could affect global markets. Costs to recall and repair, plus warranty extension, are still being assessed. Reduced car values for millions of VW owners are definite. Lost sales, which go to competitors and weakening of the VW dealer network, are assured. Why would any consumer choose a car company today that has been caught cheating over a long period of time? Reliability is a core value they all strive to showcase. The trust between a customer and a car company is sacred; after all, people are ensuring their safety with them.
This makes me wonder if the cheating is limited to just VW vehicles. VW owns several brands including Audi and Porsche. Then there is the concern of other major car manufacturers that share the same global network of suppliers and their growing desire to advertise better mileage and emission results. This scandal puts the future of diesel autos, which were advocated as a way to reduce harm, at risk. VWs are reported to have emitted nitrogen oxide pollution up to 40 times above the U.S. allowance. That’s no white lie or simple oversight. Loss of credibility for diesel as an option has important ramifications to our society, especially at a time when global vehicle sales are mushrooming.
A more personal concern is the long-term health costs like lung cancer and lung disease. With tens of millions of vehicles emitting higher than known and permitted levels, VW has created a moral hazard for which there should be significant consequences.
This VW emissions scandal influences everyone’s health and should be treated as such. Even those who do not own one of their vehicles may unknowingly have to suffer the consequences. It is not just an economic loss; there will be broad ramifications for society and the environment that will ultimately be immeasurable.