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2015, Nov - Dec

Engine with a split personality puts VW on the hot seat 

By Cliff Leppke

An illegal software algorithm that duped EPA emissions testing is VW’s biggest crisis since World War II. Now, the Think Small company must Think Big, Very BIG. It’s in a colossal jam. The power of its German engineering that gave us “clean diesels” was a sham. If this diesel-dinging saga were a movie, its title could be “The Smartest Guys in the Room” (Enron); “All the President’s Men” (Watergate); or “Catch Me if You Can” (Frank Abignale’s mastery of deception). 

Should VW come clean and do it on a grand scale, the latter story, which explored the crook’s redemption, might fit. Marquette University public relations professor Daradirek Ekachai says VW was a respected brand. She says it could stage a comeback but only if it is straightforward. She says VW Group CEO Martin Winterkorn’s apology after the world heard about VW’s breathtaking betrayal of the public’s trust struck her as ineffective. He had to go, Ekachai says, and he did.

VW admits that it cheated: its EA 189 2.0-liter turbocharged clean-diesel four-cylinder engine has a split personality. On laboratory test dynamometers (treadmills for cars) a software “switch” makes these mills squeaky clean — besting the EPA’s targets for the bane of diesel engines: smog-producing nitrogen of oxides, that murky air that makes it hard to see and for some people to breathe. 

We’ll call this the Dr. Jekyll, the smiley side of VW’s diesel engines, as lovable as the Bug and sunny as a Microbus. On the road, however, they become Mr. Hyde with a road-mode “switch” that lets them emit 10 to 40 percent more particulate filth than the EPA permits. 

How did VW do this? Simple. Consumer Reports’ Douglas Love tells the Autoist that most new cars have test-mode software. It turns off stability programs so cars can run on dynamometers. VW used data such as steering wheel movement, rates and durations of acceleration, deceleration not only to turn on the test mode, but also tweak the emissions-system performance to meet emissions mandates. 

Evidence gathered by West Virginia University’s real-world investigation of diesel-car emissions is significant. It led investigators to discover VW’s dirty secret. VW’s TDI engines aren’t just a bit worse than expected, they’re a lot worse. Bad enough, according to the Associated Press’ consultants, that based on epidemiological studies, the extra 1,300 tons of NOx produced by VW’s cars could contribute to 16 to 94 deaths annually in the United States. 

USA Today’s Chris Woodyard, however, tells the Autoist that while pollution is bad, the situation is far more serious because VW intentionally broke clean-air laws. That’s like BP’s Deepwater Horizon oil spill and the Exxon Valdez gusher wrapped into one nasty mess, ignited by shame: People at the people’s-car company deliberately spewed filth. VW admits to wrongdoing and does not dispute health concerns. It put a stop-sale order on its new and used diesel cars. 

On one hand, VW’s diesel engines comprise fewer than 1 percent of the vehicles on American roadways. Therefore, their environmental impact is less than some other pollution sources. And diesel cars consume less fossil fuel than comparable gas-powered ones, reducing carbon emissions. On the other hand in USA, where VW has struggled for relevancy, the discovery of diesel deceit has hurt its reputation. That’s the tip of the iceberg. VW also admits it fudged European air-pollution regulations, plus its errant power trains are in about 11 million vehicles sold worldwide. That’s a whopper.

VW’s use of what the EPA calls a defeat device (auxiliary emission control device) is illegal and subjects the firm to steep fines and criminal prosecution. The tab: $37,500 for each of the 482,000 vehicles sold or about $18 billion. Marquette law professor Michael O’Hear tells the Autoist that the EPA’s regulatory power under the Clean Air Act reaches further than the National Highway Safety Administration—the agency that investigated Toyota’s flawed throttle pedals and GM’s defective ignition switches. Violating the Clean Air Act puts VW into an even hotter seat than GM or Toyota. And unlike Ford’s recent misrepresented fuel economy figures or Hyundai’s gaming the same, VW cannot skirt responsibility; there’s no interpretive wiggle room: Its defeat device had one purpose, deception. That’s a crime.

The EPA’s outrage is only the beginning. Individual states, such as California with its Air Resources Board, can sue VW. Even Texas has charged VW/Audi with breaching the state’s consumer protection law. Harris County, Texas, sued VW for $100 million, while West Virginia’s attorney general is seeking restitution payments and civil penalties. Scores of people who bought TDIs, who thought they were buying clean cars, are hopping mad. They’re suing for damages. False advertising is another charge. Meanwhile, VW and those who bought its clean-diesel cars received tax credits for buying and selling so-called green cars. VW got at least $51 million under one federal benefit. It’s now clear that VW’s green cars aren’t green. In fact, they’re producing red ink. 

WHO BROKE THE STORY? An examination of VW’s dirty-secret scandal could start with the EPA’s Sept. 18, 2015, letter to VW. It charged the firm with violating the Clean Air Act. In that letter, VW is cited as admitting to duping the EPA with the use of a defeat device. For the most part, the focus was on VW/Audi’s EA 189 TDI engine (model years 2009-2014). Nonetheless, VW’s new-for-2015 EA 288 2.0-liter turbocharged four-cylinder diesel is also problematic. 

VW disclosed its use of a defeat device to the EPA at a Sept. 3, 2015, meeting. Before that meeting, the EPA and the California board confronted VW with evidence from a West Virginia University study released in May 2014. It discovered that VW’s clean diesels did not meet air-quality NOx targets. Three light-duty diesel vehicles were compared in real world driving on the West Coast using portable gear developed to evaluate heavy-duty diesel engines that historically have played a big role in producing smog.

Previously, the EPA cited Cummins, Caterpillar and Volvo (1998) for using defeat devices to fool emission testing. Non-diesel vehicles have also been nabbed for hoodwinking-defeat devices: GM paid a $45 million fine in 1995 for selling 470,000 Cadillacs from 1991-1995 with 4.9-liter engines that incorporated a device that increased carbon monoxide emissions when the climate control was on. The EPA, at the time tested, cars with the HVAC off. This led to the first court-ordered vehicle recall for environmental concerns. 

Other violations include Honda and Chrysler products with onboard software designed not to  register engine misfires. Ford got nabbed for an emissions defeat device on its 1997 Econoline vans. And in 1974 VW settled an EPA complaint that it failed to disclose the existence of two devices that modified emissions controls on 25,000 1973 model-year VWs. 

The WVU study financed by the nonprofit International Council on Clean Transportation, didn’t seek to catch a crook, says professor Arvind Thiruvengadam. Project leader Daniel Carder couldn’t be reached for a comment, but  Thiruvengadam said they thought they’d be the first to publish academic papers about real-world testing of late-model diesel cars. Their study was designed to compare two of VW’s EA 189 mills, a 2012 VW Jetta SportWagen with a lean NOx trap, a 2013 VW Passat with a Selective Catalytic Reduction system (urea injection/AdBlue) and a BMW X5 diesel with SCR. 

VW’s diesels were significantly worse than the target figures; they varied from the norm (10-40 percent more) depending their emission systems and driving modes, which included highway and city situations. The NOx-trap Jetta fared worse than the SCR Passat, yet neither vehicle met the EPA’s guidelines. In contrast, the BMW did. 

When first confronted with these findings, VW cited several technical issues. It later recalled TDI cars in December 2014 for a software patch. The California Air Resources Board and the EPA quickly determined that the recall did not work, leading researchers to suspect an illegal defeat device. 

I asked a Jaguar rep, who’s launching that firm’s first U.S-bound diesel-engine cars, what VW’s trickery does. Reducing NOx emissions, he said, cuts fuel economy (the chief diesel selling point), reduces engine performance and increases consumption of AdBlue, a solution used for the correct operation of an advanced pollution control technology installed in the exhaust system. 

VW’s faux-compliance with U.S.’s more stringent-than-Europe’s NOx pollution rules let it use a cheaper Lean NOx Trap on its Jetta, Golf and Beetle models. Consumer Reports’ Love tells the Autoist that CR dropped its recommendation of VW TDI cars until it can evaluate those that have been fixed. CR also simulated driving VW diesels in the “test” modes and found acceleration times slowed by about one second to 60 mph and fuel economy was off as much as 5 mpg. VWoA’s CEO Michael Horn says it’s possible to lower TDI NOx emissions and yet meet their EPA fuel-economy figures. Unless there’s a miracle solution, diesel owners will notice mpg drops further, increasing the “payback” calculation for VW’s more expensive but potentially thriftier TDI. 

Within hours of the EPA’s September letter, VW’s management changed. Winterkorn resigned. Just months earlier he survived a Ferdinand Piech-led effort to oust him. Although Winterkorn said he had no direct knowledge of the deception (he wasn’t VW’s top-dog, when the illegal software was developed), he did not handle the situation brewing in the USA well. 

Improving sales in the USA is a key VW objective. VW suspended its top engineers: Ulrich Hackenburg, Heinz-Jakob Neusser and Wolfgang Hatz. VW’s advisory board selected Matthias Mueller (from Porsche) to take Winterkorn’s spot. Meanwhile, the board realigned its brand management. For North America, Michael Horn (VWoA CEO) should get a new boss. The first one picked, Skoda Chairman Winfried Vahland, backed out on Oct 14. VW hired U.S. law firm Jones Day to investigate wrongdoing at VW. Some charge VW with relying too heavily on its own supervisory board. VW’s board filed a criminal complaint with German prosecutors. VW also hired U.S. Kirkland & Ellis (it handled BP’s oil-spill disaster) to deal with its scandal. 

On Oct 7, meeting a deadline dictated by the German government, Mueller announced sketchy details of a European recall plan for the firm’s EA 189 engines. It will involve not three (the number of engine/emission system types pegged by the EPA) fixes but thousands depending on car, engine, transmission and locale. Some cars might receive software changes while others will need different hardware too. He said the process would take one year commencing in January 2016. Meanwhile, Mueller warned of significant cutbacks at VW in order to finance the diesel pollution solution.

A day later, Horn testified before Congress. His prepared statement offered the ritual apologies we’ve come to expect when there’s corporate malfeasance. Several congressmen grilled Horn. Rep. Peter Welch, D-Vt., flat out said VW is the auto industry’s Lance Armstrong—referring to the Tour de France-winning cyclist who evaded detection and denied doping when in fact he had. 

Other congressmen began their inquiries by stating their fondness for VWs and their past or present ownership of its products. Rep. Morgan Griffith, R-Va., recalled his mother’s Squareback, his grandmother’s Super Beetle (he still has it), his 376,225-mile 2003 Passat and a 2012 Passat TDI. Their remarks revealed a sense of betrayal. They let Horn know that their ire was personal. Horn was widely attacked for not providing recall specifics. VW was deemed arrogant. Horn maintained that he didn’t know about the defeat device until the EPA meeting in September. He claimed that this form of deception was not a core VW value. Meanwhile in Germany, police raided VW’s HQ seeking evidence for prosecution. 

After further questions, Horn said it’s likely that VW’s American recall plan will take two years, involve significant hardware updates and take up to 10 hours on some vehicles to complete. Those reading between the lines think larger catalytic converters or NOx traps are necessary, but VW’s cars might not have space for this hardware. As mentioned earlier, VW expects recalled-and-fixed TDIs to maintain their EPA fuel-economy ratings. That sounds, however, like real-world VW diesel mpg might fall. Nearly all TDI VWs the Autoist has tested easily beat their EPA fuel economy estimates. 

VW also withdrew its certification application for its 2016 EA 288 engines (Jetta, Golf, Passat, Beetle TDIs), after admitting that these vehicles have an unapproved auxiliary emission control device. In EPA speak, a defeat device is an AECD, but Horn didn’t use those words. The EPA permits some AECDs—for example software designed to prevent overheating. On Oct. 13, 2015, VW confirmed that this AECD is a defeat-type device. VW says it’s working with the EPA to eventually get certification for its 2016-model year EA 288 engines. For now, scores of them are Gorilla-Glued to dealer lots.

VWoA has coughed up money to keep its dealers solvent. Its TDI vehicles were roughly 20 percent of its sales volume. Besides dealer money, consumers benefit too. Through early November, VW offered $2,000 loyalty money in addition to earlier incentives on many new gasoline or hybrid models. I priced a two-door Golf TSI. It lists for about $21,000. The deal: $16,875, attractive. 

WHAT OWNERS SAY: Many news accounts cite VW TDI owners who say they’ll never buy a VW again. Their faith in the brand is forever busted. Others, who bought their TDI for fuel economy or because they love driving diesels—TDIs are spunky—want VW to make things right but not take their mpg thrills away. The Autoist’s Tom Janiszewski, also the VWCA’s vice president, is in this camp. 

Tom’s view:

“As an enthusiast and a TDI owner, I’m extremely let down and embarrassed. Until this scandal broke, I was an ambassador of the TDI. Two years after buying my red Beetle Convertible, I still get positive compliments in the warm months from other motorists. I always made it a point to tell them it’s a diesel and that I consistently average 45-50 mpg. Now it feels like I’ve been cheating. 

“The special cartoon I penned for this issue illustrates the culture that seems to exist within Volkswagen wherein they don’t listen to anyone. The TDI issue for me simply adds to the frustration many of us have had with VW’s refusal to bring to the U.S. models that would fill market segments that other import brands either pioneered or are leading in. 

“I’m confident VW will fix my car, however I will not be happy if my performance or fuel economy are dramatically impacted. 

“Long-term, I’m disappointed in how this will impact future models. Will we never see an attempt at a proper modern Microbus? Frankly, I can’t think of a better big-picture solution to bring some excitement and positive feelings back.” 

Public surveys show that VW’s favorable rating dropped from seven out of 10 before the scandal broke to two out of 10. Those measuring public perception also note that far more adults surveyed heard negative rather than positive info about VW. Early auto auction data show prices of used VW diesels slumping: off 13 percent or $1,676 as of Oct. 2, 2015. Prices of VW’s gas-powered cars fell 2 percent or $222. Analysts say this drop is sudden. VW says it will not buy back TDIs. Previously, Ford and Hyundai owners, who bought cars with inflated mpg figures, got refunds up to $5,000. 

As it stands, VW’s TDI vehicles are safe and legal to drive. It’s VW’s responsibility to rectify its wrongdoing by fixing the cars, paying fines and other compensation. 

VW TALKS: This one’s difficult. The Autoist sent emails to VW’s PR department asking for clarification. One item was whether the new-for-2015 EA 288 diesel engine, which wasn’t tested for real-world emissions, was in hot water for illegal software. No answer. I had grave doubts about VW’s ability to talk straight until the October Midwest Automotive Media Association’s Fall Rally at the Autobahn Country Club near Joliet, Ill. VW’s Mark Gillies and Victoria Gagliardi were there with a Golf R and a Jetta 1.4-liter TSI. 

Gillies says no one at VWoA can discuss the dirty-diesel disaster with the press. He is not replying to emails. He will, however, answer his phone and politely direct one toward accurate sources. Prepared texts from VW’s top leadership were quickly dispatched. Gillies’ response was consistent with what other insider sources at VWoA have told the Autoist. 

Those working for VW realize that the diesel tumult raises questions about previous VW managers and the entire fleet of diesel light vehicles in Europe. A Leeds University study of drive-by tailpipe emissions found that none of the newest light-duty diesel vehicles designed to meet Euro 6 limits for NOx (0.08 grams per kilometer) did. Strangely, VW’s EA 288 TDIs fared better than most (35 percent less than comparable cars). And while VW’s EA 189 was 4.2 times the EU limit, other cars were worse. Nonetheless, growing evidence suggests that the European focus on reducing greenhouse gas-emissions (carbon emissions) and lowering the consumption of imported fuel, created a situation where carmakers faked NOx emission compliance and have gotten away with it. 

WRONG TURN IN 2006?: Those who know VW wonder whether a key moment when its managers made a wrong turn began nearly a decade ago. That’s when VW’s Wolfgang Bernhard lured Bernd Pischetsrieder from Daimler and set out to build a new diesel engine for the U.S. market named the EA 189. Both deny involvement in VW’s cheating scandal. Hackenberg and Hatz rebuffed Bernhard, who wanted to license Mercedes’ BlueTec diesel technology. By the end of 2006, Bernhard’s team developed an EA 189 prototype. In December 2006, Ferdinand Piech, VW’s chairman, replaced Pischetsrieder. Bernhard left in early 2007. 

By August 2007, VW canceled its BlueTec deal, opting for its newly minted turbocharged direct injection diesel (TDI). VW also introduced BlueMotion branding for fuel-efficient, reduced-emissions technologies used on both TDI and turbo gas engines. The EA 189 engine went into production in 2008, the emissions-cheating software installed sometime before that. Bosch, VW’s fuel/emissions equipment supplier, warned VW against emissions rigging in a 2007 letter. 

For this VW enthusiast, it’s difficult to believe that people working for VW put the firm in jeopardy. Does VW have an insular culture? Did its mangers not realize that real-world emission testing would reveal their deception? That strikes me as unbelievably stupid. As Horn put it: “VW screwed up.” 

It’s sabotage. It makes you wonder whether VW should have kept thinking small rather than pursuing big ambitions—goals such as becoming the best-selling car company. To be fair, VW executives said they sought clean factories, good workplaces and sales volume. But now a vintage VW ad tagline takes on new meaning: It’s ugly but it gets you there. Many of us endured pressure from others because we owned an imported VW. Lately, we’re chided for not driving a reliable Toyota. Now, we’re asked what’s wrong with VW? It’s not about the car but the people who designed and marketed it.

The financial fallout from VW’s fraud is financially frightening. Its moral implications are troubling too. Its sin crushed core beliefs. A regulatory environment that relies on self-compliance often shaped by the goals of industrial giants must change. The immediate backlash will undermine many things that those who worked for VW, Seat, Skoda, Audi struggled to achieve. VW will become a parable and a paradigm shift. The firm that upended complacency with its offbeat small car, groundbreaking advertising, continuous product improvement and efficient distribution system has now become a story of corruption about intertwined politics and profits. 

VW represented a national culture known for its high professional and personal standards, a love of nature and exacting precision. The shocking revelation that VW, of all firms, broke the rules is nearly incomprehensible. 

For those who are angry with VW and no longer trust the firm, I understand your pain. I argue that it makes sense to see whether VW will do right. It has a big mess to fix, far greater than recalling cars. VW must be fair providing proper compensation for all injured parties. Plus, a sincere effort must be made to offset years of pollution. While VW faces billions in fines, it makes sense for regulators tread carefully. Don’t hobble VW so much that it cannot afford to make good on its misdeeds, including those whose livelihoods depend on Volkswagen. Those who committed crimes should be prosecuted. VWCA

Cliff Leppke | leppke.cliff@gmail.com 

ALSO IN THIS ISSUE:

  • CORPORATE SLEAZE: Volkswagen wasn't the only company to shock consumers.
  • FEELING CHEATED: A terrific 2012 Golf TDI turned out to be too good to be true.
  • KRUISIN' IN KOKOMO: Oktoberfest in Indiana has something for everyone.

PLUS OUR REGULAR COLUMNS AND FEATURES:

  • Driver's Seat - VW news & views by Cliff Leppke
  • Frontdriver – Richard G. Van Treuren
  • Safety Matters - Tom Kravcar
  • Small Talk - VW and Audi news - quickly
  • Retro Autoist - From the archives
  • Parting Shot - Photo feature
  • VW Toon-ups - Cartoon feature by Tom Janiszewski

LOGGED-IN VWCA MEMBERS CAN CLICK ON THE COVER PHOTO ABOVE TO SEE THE ENTIRE MAGAZINE

 

 

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