The Exquisite Irony of Dieselgate.
By Don Quijones, Spain & Mexico, editor at WOLF STREET.
As corporate falls from grace go, few have been quite as sudden or spectacular as Volkswagen’s. Over the last month, since the “defeat device” has been publicly exposed, executives have tried desperately to pin the blame for the dieselgate scandal on anyone but themselves. VW shares have fallen 25% and are now roughly 50% down from their March high.
The fallout from the dieselgate scandal is not limited to Volkswagen. Other big car manufacturers are suffering the consequences of a generalized crisis of confidence in the sector. Renault’s shares are down 21% over the last month; PSA Peugeot Citroën has lost 17%; Daimler, 16%; Toyota, 13% and BMW, 9%.
For shareholders, the carnage has been relentless. And now they want someone to blame, as Euractiv reports:
A group of 19 major investors in the ShareAction coalition, including AXA and four Swedish pension funds, have recently addressed a letter to nine of the biggest car companies, asking them to explain their lobbying positions on emissions standards, particularly in the United States and the European Union, where the rules are currently being revised.
The letter also called on manufacturers to provide details of their relations with regulators concerning emissions standards and the amounts of money they give to professional associations, like the European Automobile Manufacturers’ Association (ACEA).
The irony is exquisite. After all, the car manufacturing industry has for decades enjoyed an immense amount of lobbying influence in Brussels, home to the second biggest lobbying industry in the world [read: Full Steam Ahead for the EU Gravy Train]. It’s unlikely that the likes of AXA, which itself is among the Top 50 biggest corporate spenders in Brussels, are unaware of this fact. Which kind of makes you wonder: where was all the fuss about corporate lobbying before the scandal?
Cozy Relations
In 2014, car manufacturers and their trade associations spent more than €18 million lobbying in Brussels. The top three industry spenders are all German manufacturers: Volkswagen, BMW and Daimler. Volkswagen is by far the biggest spender of all, with almost €3.5 million spent in 2014, roughly five times the outlay of the biggest non-German manufacturer, Fiat-Chrysler (€700,000).
€3.5 million a year – that goes a long way in Brussels. But it’s not just money that counts: in terms of personnel, Volkswagen is also miles ahead of its competitors: Daimler has 14 staff lobbying in Brussels. BMW has 8. VW has 43, almost double the other two combined. The highest non-German manufacturer is Honda, with 10 lobbyists.
What all that money and personnel gets you above all is access and influence, reports Corporate Europe Observatory (CEO). A look at Commissioners’ meetings during their first six months in office shows that the car industry met a Commissioner or a cabinet member over twenty times, with three-quarters of these being German manufacturers or trade associations.
Given the coziness of relations between industry and regulators, it’s not much of a surprise that the Commission did absolutely nothing to address the emissions “issue” despite having known for years that actual emissions by cars driven on real roads are much higher than those measured during official laboratory tests. The Wall Street Journal:
Already back in 2011 a study, conducted by the commission’s own Joint Research Center, warned that road tests showed NOx levels exceeded European limits at times by as much as a factor of 14. In such tests, known as a Real Driving Emission test, a so-called portable emissions measurement system is installed on a vehicle, which is then driven on regular streets, at different temperatures, speeds and road conditions…
Crucially, that report said such a test “appears to be more effective in preventing the detection of emissions tests by vehicles and thus the use of defeat strategies under normal conditions of vehicle use.” That note is interesting, because the commission had made defeat devices illegal already back in 2007, six years before the 2013 study was published…
In other words, the Commission was perfectly aware that Europe’s biggest car companies were skirting its regulations and breaking its laws but did absolutely nothing to address the issue. Asked why it had taken no action the Commission said that responsibility for enforcing emission rules was “in the hands of the member states.”
In the wake of the scandal the European Automobile Manufacturers’ Association (ACEA) has accepted that emissions tests should more closely resemble real-world driving conditions, but asked the European Union to implement the new standards progressively – a concession already ruled out by the NGO Transport and Environment (T&E).
The VW scandal has shown industry’s ability to cheat or manipulate the emissions legislation on an unprecedented scale. Manufacturers have also successfully delayed and tried to weaken the RDE proposals. It is now time for member states to ensure cars are as clean on the road as in the laboratory.
By Industry, for Industry
Despite all the furor over dieselgate, VW & Co are poised to have an even greater role in shaping regulation and legislation over emissions and other vital product and market issues – and not just in Europe but on both sides of the Atlantic.
If the Transatlantic Trade and Investment Partnership (TTIP) is signed – as its sister pact TPP was earlier this month – it will grant the transatlantic car industry just about every item on its extensive wish list, including cutting red tape and establishing the mutual recognition of standards across both markets. This includes the same testing standards, as CEO warns:
The danger with ‘mutual recognition’ of each others’ auto rules is that it puts the lower standard on an equal footing with the higher standard. It allows industry to pick the cheapest, less stringent option. And with a trade agreement such as TTIP, industry will be given all the chances in the world to prevent stronger regulation. Should one party want to strengthen control, it could be stopped by the other…
Considering how badly the EU has fared with its emissions rules so far, is it a good idea to put the entire testing regime on the trade negotiations table? As far as industry is concerned, it is.
Governance by big industry, for big industry, helped along the way by Commissioners who just can’t wait to get on the other side of the revolving door. This is the EU, a paradise for corporate lobbyists and money-grubbing apparatchiks. By Don Quijones, Raging Bull-Shit.
“Volkswagen has shafted us all.” Read… “Problems Likely to Snowball from Here,” at World’s Second Largest VW Factory
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Sure, VW has cheated the testing results.
But don’t tell me the other car makers are honest people.
In general, the new diesels are VERY clean and last at least for 250 K miles.
Another ineteresting sales record for the entire VW group in the EU for the
month of sept. 2015: PLUS 10%….. ! Go figure.
FYI: I do not drive/own a VW group car ( VW, Audi, Porsche, Skoda, Seat )
Given the almost universal adoption/use of the same electronics/firmware, across the entire spectrum of vehicle construction, if I was you I would not make a statement like that!!
Correct.
Only mentioned that fact to avoid comments like ” you must be a VW owner, or
share holder “.
As a satisfied Toyota driver, I am sure it will have some components that
will not pass the requirements of the ” Sierra Club & Co. ” members.
I am a FIRM supporter for a clean environment, but we should not go over board.
Where are the regular emission checks for airplane engines? Are we sure THEY are
as clean as the test equipment SHOWS? Come on…..
When mr. Climate Change himself, aka A.G. the ex Veep, flies in a private jet across
the big pond, to collect his Nobel Prize, I am not feeling guilty driving a clean diesel.
Nor worry about my carbon foot print….
Yes, I recycle, do the composting, re- use grey water for toilet flushing, garden watering.
Sure, we should give advice ( NOT money ) to African countries, the Indian sub continent.
But…don’t tell me that the Indians & Chinese do NOT know they are polluting their OWN
countries and are subsequently killing their own people. Their governments know, but they
( seem ? ) not to care. Their history will teach them….like it did us, in the West.
You are absolutely correct about turbine engines used in aviation. In fact some of the newer ones have a pre-designed specific oil consumption so oil changes are no longer necessary. Just keep adding toxic third generation oil when the level goes down. You and I are breathing it today.
Ask yourself…why do German and French cities (particularly Paris) have such horrible air pollution?….the answer is Diesel! What sad hypocrisy, that a fuel touted for it’s enviro credentials turns out to be a complete fraud — a government subsidized fraud at that. Frankly, as we all must breath the same oxygen, we must demand better than blatant fraud.
Surprise! The car industry is rotten to the core! Who could have possibly guessed?
The car industry kills 1.2 MILLION human beings every single year. There isn’t a peep about this anywhere: media, business, government. “Cost of doing business.” The military doesn’t kill that many.
The car fueling industry has burned through 1.2 TRILLION barrels of non-recoverable petroleum since 1900 … what do we have to show for it? A: nothing; ‘used cars’, potholed roads and toxic gases circling overhead like gods making ready to smash us and our descendants.
The car fueling ‘guarantee’ industry — the military — kills and ruins additional millions worldwide. The car finance industry has put the US $60+ TRILLION dollars in debt = 350% of GDP. Can the cars pay that debt off? A: driving the car cannot pay for the car, nor can it pay anything else. Driving is a recreational activity.
Cars are toys, modern fetishes little different from Tiger tanks and nuclear power stations … only deadlier.
Cars and the ‘car habitat’ that goes with them = a paved area in the US larger than the state of Georgia. Our cities have been gutted to make room for cars. The area nearest our cities has been paved over to create our auto ecosystem: some of the best farmland in the world lost … 40% of the world’s animal and plant species have been sacrificed to auto-centric ‘development’. The oceans are becoming more acidic; the world’s trees are dying due to NOx- and ozone emissions from automobiles. A handful of executives have become richer than Croesus … those that can be gotten hold of should be taken out and shot.
Happily, fuel shortages are both real- and amplified by the onrushing bankruptcy of precious drivers => One way or the other the car business is finished. We have a choice, to kill it before it destroys everything … or we can keep denying the problem and let the industry murder itself.
Steve, no debt can ever be paid of, by its very definition. Blaming cars on every post dealing with them gets really, really old after a while.
Unfortunately, even Wikipedia only treats the “earning” at a compounding rate, not the fundamental “owing” that which does not exist, and owing it at a compounding rate. You simply cannot find anymore (there used to be) a source dealing with the accumulation of debt anywhere on the Web, all sources deal with “earnings” nowadays:
https://en.wikipedia.org/wiki/Compound_interest#Compound_interest
Look at it this way, instead of how it is twisted upside down during a credit bubble:
F = What you owe at time “t”
P = What has been emitted initially
i = nominal interest rate
n = compounding frequency
t = time
Cars or not, arithmetic does not care. People realized this long before Jacob Bernoulli made it into an equation, and various factions throughout history tried to outlaw the making of promises using tokens, but never succeeded. Not even the seventh circle of hell does not dissuade people from promising the impossible and believing it can be delivered, until the moment it becomes obvious it can’t.
Cheers!
… we can keep denying the problem and let the industry murder itself.
Yup that.
@Steve.
What year are you living? 1990 ties?
Hello, this is 2015.
The air has NEVER been cleaner, the rivers, the beaches.
I was sailing the Great Lakes during the late 1960 ties. Lake Erie was dead ( red tide )
Houston ship canal, better don’t talk about it.
Smog in LAX, remember..? All cleaned up.
Stop talking about Climate change please. Sea Level increase. Wake up to the real world.
Stay with the subject. Diesel engine cars are better and cleaner than ever.
VW will fix the problems, they will pay the price for their cheating.
What’ s next?
Concur: much of the US has gotten a LOT cleaner. I swim in the San Francisco Bay almost every day, year-round. The water – though still tainted with mercury, other heavy metals, and biohazards to the point where they close the beach from time to time (after heavy rains, LOL) – is nice! All swimmers ingest water, so water quality is important. Old-timers at the swim club tell us stories of how it used to be in the 70s and 80s … gruesome stories.
This is what Charlotte, NC air looked like before the 2002 Clean Smokestack Act went into effect. Now, decades of polluting cars are off the road, and NC’s factory jobs have gone to Mexico and Asia. Who knew that exporting US factory jobs had an upside?
Forgot to include the link to Charlotte’s polluted air.
http://www.charlotteobserver.com/opinion/opn-columns-blogs/o-pinion/v62ofs/picture27323482/ALTERNATES/FREE_640/airpollution2
In the sixties the Hudson River in NYC was so polluted you could walk across it. Not anymore. They converted all the heating from coal to oil and gas, and the air pollution improved greatly too.
“Smog in LA, all cleaned up” ? Uh, nope!
VarAway, Just an FYI; everyone one of the “facts” that you cite are either gross exaggerations or just dead wrong– at least according to the scientists that measure and report on such things.
Not that science has every held any real sway with conservatives or their Ayn Rand crazed first cousins the Libertarians.
Climate change is the biggest threat mankind has EVER EVER EVER faced. Get informed or get out of the way. You’re polluting the discussion with wingnut booshwa.
When governments stop stealing, lying and cheating then they can go after the car manufacturer’s. Talk about the pot calling the kettle black.
For all of you who think the world has gotten better, I suggest that you take a trip to China and let me know what you see. You can actually see the pollution in the sky and rivers. The world’s pollution has merely moved from the USA because we are now a country of services rather a manufacturing country to China which is the new manufacturing empire.
Most of you are basing your observations on parochial observations rather than global reality including Wolf who should know better, but obviously, doesn’t.
We all know what’s going on in China in terms of pollution, David. But we don’t always have to mention it. It get’s old after a while. I even wrote about it a few times, including two years ago:
http://wolfstreet.com/2013/01/30/the-rise-of-coal-in-china-blackest-day-still-in-the-future/
That said, your observation that we shifted our dirtiest industrial activities to other countries … hits the nail on the head.
The main reason why industry has chifted is for cheap labour the side affect is cleaner water and air in the west
Thanks a lot to Mr Quijones for the data… now everything makes even more sense.
I only knew lobbyists at EU level employ more people than the EU and the ECB combined (41000 vs 38000) but those numbers help explain a whole lot of things I’ve seen in the past few years.
Most of you are probably unaware of this but Honda has been lobbying since the late 90’s to make combined braking mandatory on motorcycles in Europe.
Honda originally conceived the idea for endurance racing but it was shot down by the riders themselves. Instead of quietly scrapping the whole idea they started introducing the same system on their commercial models.
I owned a Honda equipped with said system. It was really bad and intrusive: apparently Honda engineers failed to take into account there are situation where one may wish to use the rear brake and the rear brake only. And I won’t say what a chore it was to bleed it properly: discouraging DIY maintenance was surely part of the idea.
Honda has been lobbying ferociously to get combined braking mandatory and finally managed to do so. Their original idea was to force the whole industry to buy patent licenses from them. Too bad Brembo of Italy and Bosch of Germany allied themselves and came up with a far superior combined braking system, which firms such as BMW, KTM and Piaggio now use in their models without paying Honda single cent in licenses and royalties.
But Honda has been going far further than this: for years they have been lobbying long and hard to completely ban the sale of two stroke engines. Very much like diesels, two stroke can be made clean. The technology exists and, ironically enough, it was partly funded by the EU itself.
But with Honda’s Sword of Damocles suspended over their collective head, other manufacturers have reduced their investment in clean two stroke engines to a trickle: no point spending money if you cannot sell it. You can still buy a two stroke dirt bike… for now. But knowing Honda, they’ll be back with a vengeance.
Honda’s attempts to obtain the same two stroke ban in the power equipment sector was nowhere near as successful: not only European manufacturers (chiefly Stihl of Germany and GGP and Husqvarna of Sweden) are large enough to throw their weight around, but other Japanese groups (chiefly Makita, Hitachi and Yamabiko) have so far refused to cooperate. They have learned their lessons and know very well Honda aims at nothing less than selling them either patent licenses or full engines… at a hefty price which in such a competitive environment would quickly eat into their already paper rice thin profits.
Plus, let’s be honest here: who would want to use a four stroke chainsaw? Honda, for all their bluster, has yet to come up with even a a prototype, while Stihl has already presented one of a fuel injected two stroke saw.
Back in the 70’s, before they were bought by Makita, German manufacturer Dolmar introduced a Wankel-engined saw. Despite being a marvel of engineering, it flopped in such spectacular fashion these days the KMS-4 is a true collector’s item such is its rarity. The chief problems were it weighed and cost far far too much despite the monster power. I have been cutting down trees all my life and using all sorts of power equipment and the idea of lugging around a four stroke saw, with added weight and complexity and reduced performances (cannot match a two stroke on 50-90cc engines running well north of 10000rpm) is not something I look forward to.
Well this is a fun topic. My professional career is directly tied to the internal combustion engine and the love affair that man has with his machines. I am a Porsche technician currently in Auckland NZ but I hail from Denver were I was a team member on a pro race team and Porsche tech as well.
Steve from Virgina brings up some interesting topics that get you thinking. The whole discussion of “climate change” can be a fun, enjoyable conversation if people don’t take everything so damn personal. I try and remain neutral and listen to all points of view. I believe that “Climate Change” and all the laws, fines, regulations etc are nothing more than a “credible substitute for war”. Think about it… If I were the master of puppets, how could control the masses and fleece them of their hard earned cash covertly? Without them fully being aware of it, or in the case of the Green movement, actually fight tooth and nail for it, for more laws, more fines,more regulations.
I got turned onto this idea from reading about it in the “the report from Iron Mountain”. With that, I’m not sure how to feel about the human impact on climate change, I feel we should be responsible and always treat the environment with the utmost respect. We all can agree something is going on, the world is changing from Climate point of view. But can MAN, be solely responsible for it? Should MAN be so arrogant to think we could alter something as complex and massive as the earths atmosphere and weather patterns? Maybe? Maybe not?
I grew up in the southwest corner of Colorado, Ridgway, Ouray, Telluride area. I would fight to the death if I truly felt that the health and integrity of that environment was at risk. The ever increasing Pine Beetle problem is concerning, but is a result of human activity? or just nature being nature, going thru a natural cycle. The recent mine tailing EPA debacle was upsetting, not sure were the blame should be placed on that one. Multiple failures at all levels I suppose.
So, we should all have the utmost respect for our home….Earth. But we should take a step back and take a hard look at who is in charge, who is making the laws and regulations. Do they have a hidden agenda? I try and employ this logic to all subject, that is why I am a huge fan of Wolfstreet! Because in the comment sections, mature adults can have meaningful conversations without getting our feelings hurt and taking everything so personal. Very refreshing!
Very intelligent folks contribute to this site, this is ground zero for a new culture, a new way of thinking, a new way to communicate the truth and ignore all the BS that the mass media produces 24 hrs a day. Sites like this are healthy, good for the mind. No FOX news zombies in here…
Cheers, keep up the good work Wolf and all your contributors!
Jeff
Funny how this was discovered just when VW became #1 car company in terms of sales world wide?
Was this just coincidence or carefully planned execution?
This was obtained chiefly by sending their Chinese subsidiaries into overdrive… common underlying cause is the same corporate hubris.
Officially speaking the driver behind the study which opened this can of worms was finding how VAG was managing to comply with US emission standards (tighter than European ones) without resorting to DEF-injection or affecting performances.
But the doubt there’s something else at work will always be there.
My lingering suspicion is this was an inside job: like in all corporations (or families) there’s always someone with an axe to grind. A former major shareholder wanting to settle a personal score, an ambitious junior executive, a fired engineering director out for vengeance… this same source attempted to feed the same data to the EU two years ago but ran into a brick wall and turned to the Americans.
It’s not that this person is a criminal mastermind pulling strings: all he or she had to do was just telling the people running the study exactly what to look for and let the scandal-hungry American press do the rest.