Volkswagen to Pay Heavy Price for Diesel Auto Computer Trickery

By Wayne Rash  |  Posted 2016-06-28 Print this article Print
VW Diesel Settlement

For older cars, the fix would require installation of emissions control equipment, perhaps including the urea system. That might not be possible and even if it is technically possible, it might not work well. In any case, it's a lot more than just new software.

The FTC, meanwhile, recognizing the difficulty for Volkswagen owners, required restitution that would help compensate them for the diminished value of their cars, and for the future cost in performance. The restitution formula is fairly complex, and it varies depending on the vehicle and mileage, but it ensures that owners will receive compensation of $5,000 to $10,000 per car.

At this point, the settlement is still in the proposal stage, which means that the federal judge overseeing the government's litigation has to approve it. Then the parties involved need to start implementing the process of buying back cars and making compensation payments. At this point, it's not clear whether Volkswagen's proposed fix to the diesel emissions will be approved by the EPA and until it is, fixing the cars isn't an option.

For Volkswagen, it presents a massive financial and administrative problem that will only get worse when the buybacks begin. While VW can repair the cars it buys back, it must do so in a manner approved by the EPA. Until then, the company can salvage the cars and sell parts, but that's all. They can't be exported to places where air pollution regulations are more lax because the EPA requires the cars to be repaired to meet U.S. emissions standards before they can be exported.

For owners, the pain will continue for a while. The earliest that buybacks can begin is October 2016, and it may take longer than that, but it doesn't end there.

Criminal probes have begun in the U.S. and Germany. VW is required to take action to offset the pollution it's already allowed. The company must implement new service and warranty coverage for people who keep their diesels.

Other repercussions will continue indefinitely as well. Volkswagen may not be able to start selling diesel cars in the U.S. Diesel cars from other companies including BMW and Mercedes Benz will operate under a cloud of suspicion, even though they've been found in compliance with diesel emission regulations.

It's hard to understand why a global industrial giant like Volkswagen decided that it was a good idea to use a bit of clever programming to deceive U.S. regulators and car buyers under the foolish assumption it would never be discovered.

As a result, Volkswagen stockholders are hurt. People who have breathed dirtier air are hurt. There's more pain and expense yet to come and it's likely that criminal prosecutions are in the future of the responsible executives and engineers. It's questionable whether Volkswagen's market reputation will ever recover and the enormous expense will drag down the company's growth and earnings for years.

All of this happened over a chunk of computer code that surely could have been fixed anytime over the past six years, but now it's a $15 billion chunk of code.


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