Volkswagen: 11 Million Cars Used Deceptive Emissions Software - InformationWeek

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9/22/2015
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Volkswagen: 11 Million Cars Used Deceptive Emissions Software

The German carmaker has acknowledged that its suspect emissions testing software is a global issue.

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Volkswagen's emissions scandal took a turn for the worse on Tuesday after the company disclosed that 11 million of its diesel cars worldwide include software designed to cheat on emissions tests.

The company acknowledged that vehicles with 2-liter diesel engines (Type EA 189) produce a "noticeable deviation between bench test results and actual road use."

On Friday, the US Environmental Protection Agency and the California Air Resources Board charged that 482,000 diesel cars made by Volkswagen AG and its subsidiaries, Audi AG and Volkswagen Group of America, included a "defeat device" to throttle emissions during testing. When used on the road, affected cars emit 10 to 40 times more pollution than allowed by law, the agencies said.

"Volkswagen is working intensely to eliminate these deviations through technical measures," Volkswagen said, noting that it is working with authorities in affected markets and the German Federal Motor Transport Authority.

The software in question has not been disclosed, so it's not clear how Volkswagen will address the issue. But if it's simply a matter of patching the code to ensure engines meet emissions standards during road use, that could translate to reduced engine power or fuel efficiency.

(Image: Volkswagen)

(Image: Volkswagen)

New Volkswagen Group vehicles currently being offered in the European Union with EU 6 diesel engines are compliant with regulations, the company said.

Volkswagen has set aside €6.5 billion ($7.2 billion) in its third quarter to cover potential costs, which may include fines from regulators, litigation, and repairs. That's about half of the company's 2014 operating profit. The company's stock has lost about a third of its value since Friday.

"The financial fallout out from Volkswagen's emission scandal will be colossal," said Fiona Cincotta, a senior market analyst at UK financial firm Finspreads, in an email.

The €6.5 billion Volkswagen has set aside is only the tip of the iceberg, she said. Noting that the company could face as fine of up to $18 billion from the US EPA, Cincotta said lawsuits and reputation damage could add to the damage. "The real cost of this fraud will be trickling down to the bottom line for many months or possibly years to come," she said.

CEO Martin Winterkorn has apologized for a second time on Tuesday, this time through a video. But the scandal may make it difficult for him to keep his job. Winterkorn surived an attempt to oust him earlier this year, and Volkswagen said in early September that it would renew his contract through 2018.

But Cincotta doubts he will remain in charge. "Winterkorn's days are numbered," she said. "There is little doubt that he will be replaced in the coming days. There is no feasible way that he will be able to remain in power. Trust has been lost and the share price has tanked. A new leader is a necessity to undo, or at least try to undo, the damage done."

[Does this mark the dawn of the electric car? Read: Apple, California DMV Reportedly Meet Over Project Titan.]

If there's a upside to Volkswagen's tribulations, it may take the form of increased interest in electric and alternative fuel vehicles among car makers and investors. Volkswagen's manipulation of emissions testing suggests diesel engines face increasing challenges keeping up with tightening environmental standards.

"This definitely supports the case that diesel cars may be losing their shine in today's environmentally conscious market," said Cincotta. "With Apple also intending to enter the electric car market, it only seems to be a matter of time until diesel is considered passé."

[Cover image:  Michael Luhrenberg/iStockphoto]

Thomas Claburn has been writing about business and technology since 1996, for publications such as New Architect, PC Computing, InformationWeek, Salon, Wired, and Ziff Davis Smart Business. Before that, he worked in film and television, having earned a not particularly useful ... View Full Bio

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impactnow
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impactnow,
User Rank: Author
9/30/2015 | 5:48:06 PM
Re: Independent testing

 

I think if they were that determined to do something illegal they probably would have just found a way to surpass that test as well. The issue lies in the integrity of the management and their sense of a fiduciary relationship to their customers and their shareholders.

kstaron
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kstaron,
User Rank: Ninja
9/29/2015 | 12:44:27 PM
Independent testing
I agree with making sure the people at the top are not only relieved of their positions but also without the customary golden parachute. VW is in real trouble and I'm not sure it's going to ba able to recover anytime soon. I hope this kind of thing acts as a wake up call so the EPA can demand the money required from the manufactures to test the cars instead of having them do their own tests and 'report back' I doubt they would have felt as comfortable with this type of idea if an outside source was the one doing the testing.
impactnow
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impactnow,
User Rank: Author
9/29/2015 | 11:51:17 AM
Re: DRM and deception

 

Sane IT sadly I am sure you are correct. I am glad the CEO as released since this type of issue needs accountability at the highest levels. I am not sure it will change the type of mindset that gave the okay to this software but hopefully it will make someone think twice. Golden parachutes should be null and void in the case of gross negligence.

SaneIT
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SaneIT,
User Rank: Ninja
9/29/2015 | 8:33:37 AM
Re: DRM and deception
I like your optimism but I think that this software was developed because it was far less expensive, far less time consuming and far easier in many ways than it  is to make a low emission diesel engine that American drivers will be happy with.  Knowing who would be doing the testing and how the tests were run it should not have been a complex problem to solve, when the car was put under the standard testing load with monitoring equipment attached it simply changed the tuning in the ECU/ECM to a cleaner running and less performance minded mapping.  
impactnow
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impactnow,
User Rank: Author
9/28/2015 | 1:17:22 PM
Re: DRM and deception

Sadly the time spent devising deceptive software could have been spent fixing the emissions issue. Unless legislation addresses these types of intentional breaches we will see more of them. What a sad situation for owners, investors, and our environment.

progman2000
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progman2000,
User Rank: Ninja
9/28/2015 | 9:29:17 AM
Re: DRM and deception
I was thinking the same thing. This is going to have a domino effect, we will start to hear about other car companies doing the same exact thing (or worse...).
glenbren
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glenbren,
User Rank: Ninja
9/28/2015 | 8:56:09 AM
Re: DRM and deception
I hope this will at least get them to do more (some?) spot checking, and not just for emission testing!
SaneIT
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SaneIT,
User Rank: Ninja
9/28/2015 | 8:21:43 AM
Re: DRM and deception
@ glenbren, that does sound like the system is setup in a way that allows abuse.  I know it has to be hard to find experts and to test every single vehicle made but you would think some spot checking should be implemented, especially if the states that do emissions testing tend to see a larger number of specific vehicles failing or near failing their tests.
SaneIT
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SaneIT,
User Rank: Ninja
9/28/2015 | 8:16:26 AM
Re: DRM and deception
I heard that BMW is having similar issues with one of their cars now under the same circumstances.  To me that says the multiple auto makers are playing the same game and it's more normal than we know.  I remember when the TDI Golf and Jetta came out, it was a very big deal that they could built a pleasant to drive clean diesel vehicle. I guess maybe when we hear things that sound too good to be true we shouldn't wait 10 years to look into how they pulled that off.  
SachinEE
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SachinEE,
User Rank: Ninja
9/24/2015 | 10:22:19 AM
Re: DRM and deception
@glenbren: US regulations can be very effective state wise and can be bypassed using bribing and other things. However EPA's jurisdiction is over the entire EU and then some more.  
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