- "Dieselgate". (heavy suspenseful music)
The very mention sends shivers down the spines
of car executives across Germany.
But we're in America,
and we didn't make headlines
for cheating US emission standards.
So, no need to fear the fall-out
from a scandal, right?
Not the billions of dollars of fines
or the massive recalls
or the prison time for company execs, right?
But what if Volkswagen was just the start?
(upbeat music)
What if, after their cheating scheme was discovered,
other major manufacturers were caught
using similar technology?
Companies you know and love
like Chrysler and Mercedes
and oh boy, if you thought
they threw the book at Volkswagen
with those massive penalties,
just wait until you see what happened
to those other guys.
You will be extremely underwhelmed.
Yep, despite the deep crud VW got themselves into,
this wasn't some horror movie
where the killer is always on the lookout
for the next victim.
It turns out none of the companies
that did basically the same stuff as Volkswagen
got in all that much trouble.
Today on Wheel House,
why was Volkswagen's punishment so steep?
Was what they did really that bad,
or does someone just hate Jettas that much?
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(atmospheric music)
- "Dieselgate". No, it's not the entrance
to Vin Diesel's mansion.
Well, it's not just the entrance
to Vin Diesel's mansion.
It was also a huge scandal.
It all started back in 2014 when scientists
at the International Council on Clean Transportation
discovered that several Volkswagen diesel engines
performed differently during emission testing
than they did on the road.
At the time, VW was really pushing an alternative
to hybrid vehicles that they called
"clean diesel technology".
"Clean diesel", which is kind of an oxymoron
since diesel fuel inherently burns sootier
than regular gasoline.
(car engine revving)
Diesel engines technically release less CO2 per mile
than gasoline engines,
but diesel emits more nitrous oxide
and particulate matter,
both of which are very bad.
Volkswagen claimed to have developed
a nitrogen oxide trap
that helped their engines get good gas mileage
while meeting ever tightening emissions standards.
International Council of Clean Transportation scientists,
who had been commissioned
by the California Air Resources Board,
discovered that during road testing,
VW's diesel engines exceeded
the US nitrogen oxide emission standards
by up to 40 times.
So much for "clean diesel".
The ICCT's initial results were so crazy
that the scientists literally thought
they had screwed up the testing,
but the results held on subsequent tests.
So, in May of 2014,
the California Air Resources Board and the EPA
opened an investigation into Volkswagen.
What the heck was going on?
Well, it turns out,
the system didn't actually work.
What Volkswagen actually did
was had the engine programmed to switch
into a low emissions mode
when it detected an emissions test situation.
When driving normally,
the computer switched back to a separate mode
with significantly different fuel pressure,
ignition timing and exhaust gas recirculation.
Volkswagen was slow to respond to the accusations.
Then in December of 2014,
the company announced it had fixed the problem
and would be recalling 500,000 affected vehicles.
But CARB continued with additional testing.
And in 2015, a German magazine reported
that at least 30 people
at management levels in Volkswagen
had known about the emissions cheating scheme for years.
Finally, after months of VW
trying to dodge responsibility,
no pun intended,
the EPA decided several of the company's diesel models
would not be certified for American sales in 2016.
And that was the straw
that finally broke Vin Diesel's gate.
Volkswagen admitted to having knowingly installed
a quote "sophisticated software algorithm"
that could sense test scenarios by monitoring speed,
engine operation, air pressure,
and the position of the steering wheel.
Between 2009 and 2015,
the software was installed
in about 11 million vehicles worldwide
split between VW and two of its subsidiaries,
Audi and Porsche.
Now, Volkswagen's execs and stockholders
were about to pay the price.
Volkswagen CEO, Martin Winterkorn,
was quickly forced to resign
and eventually charged in the United States
with fraud and conspiracy.
In April of 2016,
the company announced plans
to spend $18 billion dollars
on repairing the affected cars.
Nine months later,
Volkswagen pled guilty to criminal charges
brought by US Attorney General Loretta Lynch,
and was fined $4.2 billion dollars.
To date, Volkswagen has paid
around $35 billion dollars total in fines,
penalties, financial statements, and buyback costs.
And while it's difficult to calculate
the total effect on stock prices,
in the scandal's first two months,
the company lost 46% of its shareholder value
for about $42.5 billion dollars. Damn.
There was also the damage done to dealers.
Volkswagen paid its US dealers $1.2 billion
to compensate them for losses.
But again, the total impact can't really be calculated.
And then there's the 30,000 jobs
that Volkswagen eliminated
in the wake of the scandal.
There's no reason to think
the penalties are over, either.
In September of last year,
German prosecutors announced charges
against eight more employees.
Winterkorn's trial hasn't even begun yet.
And a couple of months ago,
Volkswagen lost a ruling in court
that clears the way
for them to be sued by the State of Ohio.
Volkswagen admitted that they had been basically treating
EPA regulations as a suggestion to be ignored.
Like a sign that says
"Employees must wash hands".
So it makes sense
that the government decided
it might be time for a crackdown.
The EPA massively expanded its vehicle testing.
And, as I so expertly foreshadowed,
it turned out Volkswagen wasn't the only cheaters.
(upbeat music)
In January of 2017,
the FEDs issued a notice of violation
against Fiat Chrysler,
alleging that over a hundred thousand
of their diesel SUVs and trucks
were also using software
to exceed nitrogen oxide limits.
Similar cases were found in diesel cars
made by Nissan and Opel.
And Daimler admitted just last year
that some Mercedes diesel vehicles
also had been programmed
to cheat emissions tests.
Volkswagen even bumbled their way
into another scandal
when it was revealed that they had colluded
with Mercedes and BMW
to limit diesel emissions treatment technology.
In simple terms, the three German companies
agreed to use technology
that met the minimum legal environmental standards,
but it was not as good as it could have been.
Probably to save money.
Hyundai and Kia were fined
for overstating the gas mileage
on 1.2 million vehicles.
Ford is currently facing
a $1.2 billion dollar lawsuit
for lying about the fuel economy
of the Ranger and the F-150.
Yep, the auto industry
is just like the Chris Evans - Scarlett Johansson
cinematic classic, "The Perfect Score",
in which they steal the SATs.
Pretty much everyone is cheating on their tests.
But remember the 35 billy that it cost Volkswagen?
Fiat Chrysler's scandal cost it
a comparably small $800 million dollars
in fines and recalls.
And meanwhile, Daimler paid around $2.2 billion
for their emissions cheating scandal.
And they didn't have to pay anything at all
in the collusion case
because they were the ones
that ratted out BMW and Volkswagen,
and it was barely a blip in the news.
So, why did Volkswagen take such a huge punishment
while the auto world's many other uber polluters
got off fairly scot-free?
Fair or unfair,
there are actually a bunch of reasons.
First and most important
was the scale of Volkswagen's shenanigans.
In 2013, VW-owned brands
sold over a hundred thousand diesel cars and SUVs
in the US, more than 75% of the diesel market.
So they face stiffer penalties
based on the sheer number
of offending vehicles on the road.
That number also made their recall cost a lot more
and increased their liability and lawsuits.
Volkswagen was also pretty darn flagrant
in breaking the rules.
Other companys' cars didn't run as differently
during testing as Volkswagens did.
So, the penalties they faced weren't as bad.
Meanwhile, Volkswagen was explicit
in their attempts to evade emission standards,
and they did it by about 4,000%.
It's like the difference in punishment
between a guy who steals the Mona Lisa
and a guy who steals a poster of the Mona Lisa.
Politics also played a role here. Surprise.
Volkswagen's scandal happened primarily
during the more environmentally focused Obama government,
while subsequent scandals happened
mostly during the Trump administration
when the EPA made a sharp pivot
to business friendly and climate skeptical positions.
The Trump administration was, unsurprisingly,
less inclined to punish corporations.
A final big difference, Volkswagen was first.
"Dieselgate" was a headline-grabbing scandal.
"Fiat Chrysler gate" isn't even a word.
It makes sense that the authorities
would use Volkswagen to set an example,
especially when it's the American government
going after a foreign company.
I can already hear some of you guys
in the comments being like "Oh, so what?
Who cares about any of this? This is my 402nd day of asking
for up to speed on the unicycle."
But this stuff has real world consequences.
Nitrogen oxide has been linked to asthma,
bronchitis, emphysema, and heart disease.
A study published in 2015
estimated the excess pollution
caused by Volkswagen's phony "Clean Diesel" vehicles
would cause 59 premature deaths.
Another study calculated the cost
at 45,000 disability life years,
which is a measure of years lost due to illness,
disability, or early death.
But here's the thing.
There's no easy solution to any of this.
Volkswagen's shenanigans were discovered,
400,000 cars were forced off the road.
That's good. But about three quarters
of those cars are still sitting in parking lots
around the US waiting to be disposed of.
That's not exactly an environmentally friendly alternative.
Luckily though, the future of green cars
looks pretty bright.
Thanks to new, tighter EU emissions regulations,
even VW themselves announced
that they'll no longer sell gas vehicles
in Europe by 2035,
with phase-outs in America and China to follow.
I think a scandal like this
will be less likely in the future
as more automakers switch to electric power.
We all know that electric cars are zippier
than most gas cars anyway.
- [Driver] Ready?
- [Cameraman] Yep.
- [Driver] Oh! (beep) (beep) (beep)
(men laughing)
- [Driver] Holy (beep)
- [Announcer] Ladies and gentlemen,
(audience applause) James Pumphrey.
- Today, we honor a lost innovation.
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Let us remember its rising light.
Though no longer with us
due to safety regulations,
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Here with a special performance from Epidemic Sound,
please welcome Nolan Jason.
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