Clean diesel isn't a myth, but to look at the VW scandal that broke in 2015, one might naturally think otherwise. The scandal centered on over half a million "clean diesel" vehicles sold worldwide by Volkswagen AG between 2006 and 2015, all of which were equipped with a defeat device intended to fool emissions tests.
In essence, the cars were programmed with software that detected testing and altered emission levels to fall within acceptable limits. When the cars were operating in real world conditions, however, they reverted to much higher emission levels, estimated to be 40 times higher than during testing.
When the deception was revealed, the negative impact on the company was incredible; it continues to haunt VW to this day, with new charges from the SEC announced in March of 2019. Here's a brief look at how VW has been affected by this massive fraud.
The Immediate Aftermath
Within mere weeks of the VW "Dieselgate" scandal breaking, the company's share price dropped by 40% and CEO Martin Winterkorn resigned after eight years at the helm. While he continues to insist that he had no knowledge of the fraud, investigation by the U.S. and Germany have found that at least 40 individuals across four cities and three VW brands (along with tech supplier Robert Bosch) were involved.
The U.S. continues to push for indictment of Winterkorn, but since Germany has no extradition treaty with the U.S., this seems unlikely to prove successful. In September 2019, however, Germany filed charges against several top-level executives from VW AG, including former CEO Martin Winterkorn, Chief Executive Herbert Diess, and Chairman Hans Dieter Pötsch.
This follows the U.S. trial of Oliver Schmidt, the general manager of VW's Engineering and Environmental Office in Michigan, who, in 2018, was sentenced to seven years in prison for his knowledge of the fraud and his participation in the cover up. The sentence, considered a stand-in, was intended not only as a symbolic punishment for German executives beyond the reach of U.S. justice, but as a message of deterrence to other automakers.
Before stepping down as CEO, Winterkorn set aside $7.3 billion for recalls related to the emissions scandal, but that number turned out to be incredibly optimistic. To date, VW AG has paid out over $30 billion in restitution, fines, penalties, and lawsuit settlements, and they could be on the hook for even more.
In March 2019, three and a half years after the scandal first broke, new charges were filed by the SEC against VW AG, two subsidiaries, and former CEO Martin Winterkorn himself for "defrauding U.S. investors."
Although VW has shelled out billions of dollars in reparations, the ripple effects of the Dieselgate scandal are far from over, as charges continue to be filed and the company strives to recover and redeem its image.