Volkswagen is Being Engulfed by a Growing Crisis Over Its Attempt to Make Millions of Diesel Cars Appear Cleaner Than They Are
October 6th, 2015
Updated March 17th, 2017
Volkswagen has become embroiled in a scandal of epic proportions, the consequences of which may take months or even years to fully play out. The scandal broke in late September, when U.S. regulators first revealed that the iconic German automaker had intentionally programmed well over 500,000 vehicles to emit a lower level of harmful emissions during official tests than what were actually emitted when the vehicles were in regular use. Only four days after this shocking revelation, Volkswagen admitted that upon further internal investigation, upwards of 11 million Volkswagen vehicles worldwide have been affected by this discrepancy.
Volkswagen CEO Martin Winterkorn stepped up to offer an official apology from the company, stating that he was "deeply sorry" for the breach of trust that has resulted from the "misconduct" committed by the automaker. Winterkorn's apology comes on the heels of an earlier scandal at the company, in which longtime Chairman Ferdinand Piech abruptly resigned from Volkswagen after failing to oust Winterkorn as CEO. Interestingly enough, Piech cited the dissipation of "an environment of trust" as the main reason for his premature departure. Winterkorn subsequently resigned from his position on September 23rd, stating in a letter issued by the company that he was "shocked by the events of the past two days." Volkswagen has named former Porsche President and CEO Matthias Mueller as Winterkorn's replacement.
U.S.-based regulators stated that Volkswagen programmed the electronic control units (i.e., the tiny computers that manage various aspects of the engine's activity) in some of their diesel cars to engage the emissions control function only when being tested. According to the Environmental Protection Agency, vehicles that featured this "emissions hack" would output roughly 40 times more emissions on the road than what would be reported on tests. Affected models include the VW Beetle, Jetta, Golf, Passat, and the Audi A3. The company has issued recall notices for all affected vehicles, and has set aside more than $7 billion to cover the costs of the recall effort, decimating its current fiscal year profit forecast as a result.
As the world's second-largest automaker, Volkswagen's stock has taken quite a beating as well, losing nearly $29 billion of market value the same week in which the news of the scandal first broke. Many analysts have speculated that the damage done to the Volkswagen brand as a result of this scandal may be so extensive as to be irreparable. As a company that currently employs 775,000 people and is regarded as one of the most salient examples of the industrious reputation of Germany itself, Volkswagen's fall from grace has caused untold amounts of collateral damage, and may indeed take years to fully sort out.
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