Daily Management Review

Volkswagen not the First German Company to Face Emission Allegations in the US


Volkswagen not the First German Company to Face Emission Allegations in the US
After the revelation of the Volkswagen emission scandal, the auto world has been shaken up. But experts and old hands at the auto market say that this is not the first time that a German auto maker has been charged with similar allegations.

While the German companies have a reputation for cutting-edge technology but Volkswagen’s incident is not new to the US regulators.

In the not so distant past, seven heavy-duty diesel-engine makers, including industry heavyweight Caterpillar Inc. and Cummins Inc. settled similar accusations in October 1998 in a $1 billion agreement.
Therefore while the existence of the German car maker is being questioned by some, the past experience says that this should not be a problem

The US Environmental Protection Agency and the Justice Department have estimated that the German car maker might have to pay up $18 billion for trying to cheat the EPA and the o the regulatory authorities with its software.
In their complaint against Volkswagen, EPA noted: “The defeat devices allow engines to meet EPA emission standards during testing but disable the emission control system during normal highway driving. The Clean Air Act prohibits any manufacturer from selling any new motor vehicle engine equipped with any device designed to defeat the engine’s emission control system. The engines meet the emission limits when they run on the EPA’s 20-minute Federal Test Procedure, but when the engines are running on the highway, up to three times the limit of [nitrogen oxide] emissions result”.
Even as the company issued an apology over the weekend for violating customers’ trust, Volkswagen shares made a bid to recover some of that lost ground Wednesday in Frankfurt after a two-day rout that subtracted nearly a third from the company’s market valuation.
The software that has been alleged to have violated and fooled US emission norms  as fitted by the company used a sophisticated software algorithm that detected when cars underwent emissions tests, turning on full emission controls only during the tests but not during normal driving conditions.
There are however some differences with the complaints filed in 1998 where it was alleged that the engines produced up to three times the nitrogen oxide allowed while in the most recent case of Volkswagen, the EPA contends that the Volkswagen engines emit nitrogen oxides at up to 40 times the standard.

While the German company estimates that more than 11 million vehicles maybe affected world-wide, the EPA allegations cover 482,000 diesel cars sold since 2008.
The similar case in 1998 did not create such a ruckus as the number of vehicles with the defective engines was just 1.3 million.  Another difference is that the companies that were involved in the 1998 settlement did not admit wrongdoing while Volkswagen admitted to their guilt on Monday.
While a Caterpillar spokeswoman denied that the company used any type of device to evade EPA tests in 1998, a company official had told the Chicago Tribune that the company went along with the settlement to avoid litigation even as the Caterpillar never conceded to the allegations.
What was the largest such fine for an environmental violation, a total of $83.4 million in was paid in civil penalties by a combination of the companies accused in 1998. They also agreed to spend $850 million to produce significantly cleaner engines and $109.5 million for additional environmental projects, including the development of new emission-control technologies.

Other companies like Detroit Diesel Corp., Mack Trucks and its business partner, Renault Vehicules Industriels, Navistar International Corp and AB Volvo’s  Volvo Truck Corp. were also part of the litigation in 1998 apart from Caterpillar and Cummins.