Why It Seems Like Open Season on Car Companies: QuickTake Q&Aby and
Sometimes it can seem like the entire automotive industry is under investigation. Volkswagen is still making amends for the tricks it played to enable its diesel-powered vehicles to pass emissions tests. Audi -- a VW unit -- is now accused of similarly rigging gasoline-fueled cars. Fiat-Chrysler is being sued, and Mercedes parent Daimler faces an investigation and lawsuits over similar allegations. Mitsubishi admitted doctoring fuel-economy claims. Takata must replace 70 million faulty airbags linked to 17 deaths worldwide. The General Motors ignition-switch debacle is blamed for the loss of at least 120 lives and led to $2.1 billion in fines and legal settlements with more potentially coming.
1. Why are so many companies in trouble?
Most of the cases deal with stringent emissions standards put in place by the Environmental Protection Agency in 2001. Carmakers were given until 2010 to comply. Chrysler and the maker of its engines bet they could beat the competition to market. They did so, in 2007, but with a truck allegedly incapable of meeting those standards over its lifetime, according to a consumer lawsuit, which says Chrysler’s diesel Dodge Ram trucks from 2007-2012 were rigged to cheat smog tests.
2. Then why is VW the poster child for emissions cheating?
Chrysler is accused of having done it first, but VW has already admitted fault and agreed to pay $15.3 billion in a settlement covering most of its diesel models in the U.S. The German automaker will have to buy back cars and compensate owners and also fund pollution-reduction projects. VW added another $1.2 billion to its cheating costs for a settlement with dealers and still faces additional claims in the U.S. and Germany as well as criminal probes.
3. Is this the first time carmakers have been caught cheating?
Emissions cheating dates back to at least the 1970s, when carmakers were rolling out automobiles that turned off anti-pollution systems when the air conditioning was on. Others had sensors to activate pollution controls only at testing temperatures. In 1973, U.S. regulators accused VW of cheating. It settled with a $120,000 fine. GM paid $45 million in 1995 after being accused of circumventing pollution controls.
4. Is emissions the only issue?
Not by a long shot. In addition to Takata’s exploding airbags and GM’s faulty ignition switches, lawyers and government investigators in recent years have delved into Toyota’s stuck accelerator pedals, Honda’s underreporting of fatal accidents and injuries, incomplete safety recalls by Fiat-Chrysler and overstated fuel-economy standards by Hyundai Motor and Kia Motors. GM hid changes the company made to its faulty ignition system only to have the undisclosed fix revealed in a deposition by a trial lawyer. Federal safety regulators discovered it later. Similarly, Takata and Honda had settled lawsuits before issuing widespread recalls of the airbag inflators.
5. What do the different scandals have in common?
Lawyers. Though researchers first uncovered the cheating by VW in September 2015, it was lawyers who followed up with their own investigations of carmakers -- first VW, then its Audi and Porsche units, then Mercedes and now Fiat-Chrysler. Some of the same lawyers behind the diesel VW case also filed the Audi gasoline-engine lawsuit and the Chrysler case. Meanwhile, the researchers at West Virginia University who first detected VW’s excess emissions continue to search for pollutant-spewing automobiles.
6. What’s this doing to the auto industry?
With clean diesel’s credibility now in question, carmakers are putting more resources into electric-drive vehicles. That kind of retooling is expensive, and the fines they’re facing are potentially huge. VW just agreed on a deal with employees that will slash up to 30,000 jobs globally to save 3.7 billion euros ($3.9 billion) to aid its recovery efforts. With consumer confidence shaken and profits waning, VW increased how much it plans to spend on fines, legal costs and repairs related to the scandal by 400 million euros to 18.2 billion euros. The pressure on the industry is very real.
7. How do consumers know whom to trust?
Carmakers have won back customers after previous cheating scandals, just not right away. VW, which had thrived on a global reputation as automotive royalty, has been tarnished by its self-professed deception. The question for consumers will not only be if or when to trust these automotive brands, but whether to trust new technologies. That’s exactly why it’s so important for VW and other carmakers to figure out their path forward in a future of lower emissions and higher scrutiny.
The Reference Shelf
- A QuickTake explainer on the slow road to cleaner cars.
- A QuickTake Q&A on Volkswagen’s long way back from scandal.
- A deep dive into Takata’s 60 million car bombs.
- How handing Chevy keys to their daughter led to her death.
- VW seeks to clear air in its next settlement.
- An investor lawsuit against VW has a lot riding on it.
- A Bloomberg View column on why VW didn’t have to compensate Europeans.