Volkswagen Clean Diesel Scandal

[BleedBlueGold]

This made news this past Friday (I believe) but it's even bigger than first suggested.

For those who aren't aware: A private company tested emissions in hopes to prove how clean VW diesel engines really are. They were shocked to find quite the opposite. Turns out, these vehicles are equipped with a software algorithm that can detect when it's being tested for emissions. During lab testing, emission output would drop into acceptable ranges, only to produce an output of 10 to 40 times the accepted levels in real-world conditions. VW came out today, saying 11 million vehicles are affected. Why do it? Costs. Performance/Gas Mileage. But still keeping that "clean" label that attracts people to VW TDi. It's currently estimated that VW could owe up to $18 Billion in fines. They've currently set aside a little over $7 Billion and stock prices have tanked. Criminal investigation, internal investigations, federal investigations, class action lawsuits...you name it. This company is in deep.

I own a 2010 TDi. I'm a little nervous as to what this means. Lots of speculation about resale values, performance and gas mileage decreases, etc. A recall is a certainty and obviously at VW's cost. But I bought this car based on environmental reasons and fuel economy (I drive about 150 miles a day) and paid more for it.

Berman says Volkswagen diesel buyers paid from $1,000 to $7,000 more for car equipped with the fuel-saving engines, compared to the usual gas engines

I'm very curious as to what will come of all this.

Your Guide To Dieselgate: Volkswagen's Diesel Cheating CatastropheÂMichigan

Volkswagen scandal widens: $7.3 billion cost, 11 million cars - Sep. 22, 2015

Volkswagen faces lawsuits over emissions deception

 

[Irish Insanity]

Should've bought a BMW

 

[Norcal Irish]

I bought a TDI two months ago of course.

 

[NDohio]

I bought a TDI two months ago of course.

I just dodged that bullet. I was close to purchasing one and something just didn't feel right in the deal. I ended up not buying anything yet.

I hate it for anyone that has one - this is a pretty big deal.

 

[Wild Bill]

Crazy story.

I think cheating emissions is a common occurrence in states that do not test the emissions of diesel vehicles (on the individual level, not something like this). Diesels are driven for so long, it's almost a certainty the oxidation catalyst goes bad and needs to be replaced at a huge cost. A lot of the time it's just cut out and welded back together without the part. It's illegal but worth the risk given the high cost of replacement and low risk of getting caught.

We bought a TDI a couple years ago and it's been a great car. My only concern is how they try to "fix" the problem. I'm sure it'll do something to the performance and increase the cost of ownership. I'll probably do my best to avoid their "fix".

 

[Rhode Irish]

This is a big deal and I don't want to be insensitive to anyone that got burnt by this, but is there anyone in finance here that has a read or a theory on what this might do to their retail pricing in the U.S. going forward?

I had a Passat 1.8T Wolfsburg as my first car out of law school, and I freaking loved that car. Loved it. I stupidly went away from German for my current car, and I would really love to trade in my car and buy an Audi in the next year or so.

Is there a chance that VW and Audi slash their prices in response to this in order to retain their market share or as a goodwill gesture for its U.S. customers? I know they are taking a beating on their stock price and this is going to cost them billions in cash, so maybe they won't be in a position to do that, but on the other hand if they don't they could see the U.S. market abandon them at least in the near term.

 

[kmoose]

Obama will strike a deal with them that gives them tax breaks for the next 100 years, and allows them to self monitor their emissions from now on. Trump will fall over dead from the resultant stroke.

 

[Booslum31]

Far-from-poopin'

 

[Buster Bluth]

The $18 billion is just the maximum EPA fine, right? The Justice Department and other countries could get in the game too.

There will certainly be class action and stockholder lawsuits too, no?

I'll be most interested in seeing if the people who made this call go to prison. It'd be a fine time for regulators to grow some balls and send cheating executives to prison.

 

[Rhode Irish]

The $18 billion is just the maximum EPA fine, right? The Justice Department and other countries could get in the game too.

There will certainly be class action and stockholder lawsuits too, no?

I'll be most interested in seeing if the people who made this call go to prison. It'd be a fine time for regulators to grow some balls and send cheating executives to prison.

Apparently the Justice Department's involvement signals the possibility of criminal liability, also.

 

[Whiskeyjack]

I'll be most interested in seeing if the people who made this call go to prison. It'd be a fine time for regulators to grow some balls and send cheating executives to prison.

Wouldn't count on it. Plenty of time for strategic campaign contributions.

 

[Wild Bill]

This is a big deal and I don't want to be insensitive to anyone that got burnt by this, but is there anyone in finance here that has a read or a theory on what this might do to their retail pricing in the U.S. going forward?

I had a Passat 1.8T Wolfsburg as my first car out of law school, and I freaking loved that car. Loved it. I stupidly went away from German for my current car, and I would really love to trade in my car and buy an Audi in the next year or so.

Is there a chance that VW and Audi slash their prices in response to this in order to retain their market share or as a goodwill gesture for its U.S. customers? I know they are taking a beating on their stock price and this is going to cost them billions in cash, so maybe they won't be in a position to do that, but on the other hand if they don't they could see the U.S. market abandon them at least in the near term.

A few weeks ago I was watching a segment on CNBC about the affects recent recalls have had on future sales foToyota and GM. In both cases, they were surprised how quickly they recovered and even mentioned that GM had a record sales quarter soon after their recall.

This one may play out a bit different for a couple reasons. 1. Given the alleged fraud that took place, this seems more like a scandal than it does a mere recall; and 2. Seems like the diesel market in the US may not be worth the trouble for German automakers. It's been a constant struggle to get these cars cleared in Cali and this disaster may have them re-thinking their strategy.

If the last two big recalls give us any guidance about future sales or pricing, I doubt you'd find yourself a deal in the future. But, like I said, this one seems a bit more serious and they may be forced to drop prices to retain market share.

If you're willing to buy a used car, I think you could cash in right now if you bought an Audi diesel. Luxury car owners will be more likely to dump their cars at low prices, especially the SUVs, to avoid any future issues.

 

[IrishLax]

The crazy thing is that this isn't some boo-boo. This isn't BP messing up and releasing oil into the Gulf... this is 100% intentional. Someone had to actively install software for the purpose of committing globalized fraud.

 

[Pops Freshenmeyer]

The crazy thing is that this isn't some boo-boo. This isn't BP messing up and releasing oil into the Gulf... this is 100% intentional. Someone had to actively install software for the purpose of committing globalized fraud.

And many engineers had to know their engines did not meet emissions goals.

 

[IrishLax]

The $18 billion is just the maximum EPA fine, right? The Justice Department and other countries could get in the game too.

There will certainly be class action and stockholder lawsuits too, no?

I'll be most interested in seeing if the people who made this call go to prison. It'd be a fine time for regulators to grow some balls and send cheating executives to prison.

You rang?

Peanut exec in salmonella case gets 28 years

 

[kmoose]

It'd be a fine time for regulators to grow some balls and send cheating executives to prison.

But are these execs in America, or Germany? Extradition for white collar crime is probably a tough sell, especially for highly placed executives of a major corporation. Imagine if Thailand wanted us to extradite Coca-Cola execs for some white collar crime. How hard do you think our government would make that?

 

[Buster Bluth]

You rang?

Peanut exec in salmonella case gets 28 years

Good.

There's an important difference though, that was safety negligence and he ended up causing the deaths of nine people. Whereas Volkswagen's issue is one of those "victim-less" crimes, no?

 

[Buster Bluth]

But are these execs in America, or Germany? Extradition for white collar crime is probably a tough sell, especially for highly placed executives of a major corporation. Imagine if Thailand wanted us to extradite Coca-Cola execs for some white collar crime. How hard do you think our government would make that?

I didn't say American prisons.

 

[GoldenDome]

GM deadly non-recall on faulty ignition switches kills 87 people. No prison sentence. You guys really think this will result in sentencing?

 

[kmoose]

I didn't say American prisons.

IF there is a German law that they broke. They cheated their way around American standards, and it sounds like only California standards at that.

 

[Rhode Irish]

IF there is a German law that they broke. They cheated their way around American standards, and it sounds like only California standards at that.

They did commit fraud on a pretty massive scale and committed some unfair business practices with respect to their domestic competition. Germans are smart, I'm sure they could come up with something if they want to.

 

[GoIrish41]

This is a big deal and I don't want to be insensitive to anyone that got burnt by this, but is there anyone in finance here that has a read or a theory on what this might do to their retail pricing in the U.S. going forward?

I had a Passat 1.8T Wolfsburg as my first car out of law school, and I freaking loved that car. Loved it. I stupidly went away from German for my current car, and I would really love to trade in my car and buy an Audi in the next year or so.

Is there a chance that VW and Audi slash their prices in response to this in order to retain their market share or as a goodwill gesture for its U.S. customers? I know they are taking a beating on their stock price and this is going to cost them billions in cash, so maybe they won't be in a position to do that, but on the other hand if they don't they could see the U.S. market abandon them at least in the near term.

I bought a Camry on the heels of their sudden acceleration fiasco several years back and got a good deal and 0% financing.

 

[loomis41973]

Great time to buy VW.....bought some 2days in a row

 

[GoldenToTheGrave]

Good.

There's an important difference though, that was safety negligence and he ended up causing the deaths of nine people. Whereas Volkswagen's issue is one of those "victim-less" crimes, no?

Unless, you know, you breathe air. But yes.

 

[phgreek]

GM deadly non-recall on faulty ignition switches kills 87 people. No prison sentence. You guys really think this will result in sentencing?

Yea...my first thought was someone should burn for this...then I thought about GM...people actually died from their BS.

It will be interesting to see what is done here...

 

[phgreek]

Great time to buy VW.....bought some 2days in a row

...My thought too

 

[dublinirish]

Should've bought a BMW

VW drivers are BMW drivers in training

 

[T Town Tommy]

GM deadly non-recall on faulty ignition switches kills 87 people. No prison sentence. You guys really think this will result in sentencing?

Agree. GM committed the cardinal sin in auto manufacturing by knowingly having a safety critical issue and changed the design of the ignition switch. The problem was they didn't change the part number when the design changed. That is a major - and intentional - mistake on them. They tried to fix the issue internally without wanting to have a paper trail record of it. It was the internal email records that really caught them.

The issue with VW is a little different and I doubt it leads to arrests, prosecutions, etc. There will be a few sacrificial lambs offered up more than likely. Short and long term affects for VW? Short term they will feel the pain for sure. Long term they will probably be just fine. They are around the fifth largest auto manufacturer in the world with most of their sales outside the US. Much like Toyota and GM, they will recover from whatever fines, recall costs, etc., that they incur.

 

[BleedBlueGold]

As an owner, I'm more concerned about what happens to my mpg and re-sale value. These cars boast 46mpg highway and I get every bit of that and more sometimes. But a legitimate concern is that whatever the recall entails, it'll change the performance drastically. Many people bought these cars with that in mind (and paid more for it).

 

[T Town Tommy]

As an owner, I'm more concerned about what happens to my mpg and re-sale value. These cars boast 46mpg highway and I get every bit of that and more sometimes. But a legitimate concern is that whatever the recall entails, it'll change the performance drastically. Many people bought these cars with that in mind (and paid more for it).

I am sure there will be a class action lawsuit filed at some point. Just make sure you know and become a part of it.