Photographer: Patrick T. Fallon/Bloomberg

Emissions Tester That Checked VW Sees Opportunity in Trump

  • U.S. president may roll back fuel-consumption rules in review
  • Need for emissions test may increase as result, Opus CEO says

The Swedish vehicle inspector whose technology identified emissions discrepancies in Volkswagen AG diesel engines sees Donald Trump as an opportunity-in-waiting.

While it’s generally “not a good situation for us” when a government is not pro-environment, any decision by the U.S. president to roll back fuel-consumption rules put in place by his predecessor Barack Obama means vehicle manufacturers can “sell gas guzzlers for much longer time periods than previously anticipated,” said Lothar Geilen, who takes the helm at Molndal-based Opus Group AB next month.

“The need for emissions-testing programs may actually increase as a result of that because it will mean there will be a higher polluting vehicle fleet over the next 10 years than originally planned,” the designated chief executive officer said in a March 15 interview.

Trump vowed on the same day to reinstate a review of fuel economy and vehicle emissions by spending another year scrutinizing rules that call for companies to cut gasoline consumption to an average of more than 50 miles per gallon (5.6 liters per 100 kilometers) by 2025. The move countervailed the Obama administration’s assertion that the standards were affordable and effective.

When announcing the decision to a crowd of workers in Ypsilanti, Michigan, Trump told the CEOs of automakers including General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV that they needed to reciprocate by adding workers and building plants. Obama’s decision to preserve fuel economy rules “would have destroyed, or further destroyed, the auto industry,” he said at the time.

Remote Sensing

Opus provides vehicle-emission inspection in the U.S., including remote-sensing services measuring large volumes of vehicles as they drive past on the street. Late in 2014, about a year before VW’s emissions-cheating scandal became public, Opus and a team of scientists discovered that readings for VW and Audi vehicles with two-liter diesel engines were much higher than they should be, according to Opus’s website.

As one of the largest emission-testing companies in the U.S., Opus counts the country as one of its most important markets. The company has a market share of more than 40 percent in the government-contracted emission-testing business there, handling almost 25 million inspections a year. Opus competes with Japan’s Horiba Ltd., which makes auto emissions testing systems and played a key role in uncovering the VW scandal.

“The bottom line is that the higher the vehicles’ pollution and the more fuel they consume, the more efficient the emission-testing program is,” Geilen said. “Indirectly, Trump is actually helping the need of an emission-testing program in the U.S. for many more years.”

U.S. Reliance

Opus generated 64 percent of its revenue last year from the Vehicle Inspection International unit, which includes its U.S. operations. The rest came from the Vehicle Inspection Sweden segment. As part of a new five-year growth and expansion strategy, the company has plans to double sales to $400 million from $200 million from 2017 to 2021, and sees 46 percent of revenue coming from the U.S. by the end of that period.

Opus shares rose as much as 2.8 percent to 7.30 kronor in Stockholm on Thursday, giving the company a market value of 2.12 billion kronor ($240 million). Trading volume matched the daily average of the past three months after two hours.

Trump’s pledge means demand in the U.S. will “at least stay the same” rather than decline, which it may have done under Obama’s rules as emissions would then have fallen faster, Geilen said. While the CEO said he doesn’t know “what exactly Trump has in his pocket,” emission-testing programs are “probably not at the forefront of his concerns.”

“He is more worried about increasing the market position of the U.S. automotive industry, loosening up requirements for industry in terms of environmental requirements,” Geilen said. “All of that will lead to higher emissions and pollution in the country, eventually, and higher pollution will also lead to more demand for pollution-reduction schemes, like emissions-testing programs.”

— With assistance by Jamie Butters, and Craig Trudell

    Before it's here, it's on the Bloomberg Terminal.