VW, and the automotive scandal of the decade

A Volkswagen product from a happier time . . .1967  (c) J E Robison

This week we have seen the revelation that VW engineers programmed their new diesel cars to sense when they were being tested for emissions, and when that happens to put the car into a special “low emission test mode.”

In normal mode the cars run better, but according to news reports the emissions can be 10 to 40 times higher.  Of course engine tuners have always known that truth – the tuning where a car runs best is very different from the tuning where it pollutes least.  Indeed, least pollution may equal minimal drivability in some cases.

VW owners have reacted with outrage.  They are particularly upset at the carmaker’s deliberate and premeditated action.  The brazenness of this goes beyond any automotive scandal in my memory.

At first the problem was thought to affect “just” 500,000 VW diesels in the USA.  Now VW has said up to 11 million cars worldwide may be affected.  Apparently they gamed the emission test system elsewhere in the world too.

The thing that sets this apart is VW’s seeming admission that they designed car software to deceive.  Ethically, that is a big step beyond overlooking a marginal design, or ignoring a flaw that would be costly to correct.  It’s like answering your cell phone from a brothel and telling your wife you’re in church.

The closest parallel to this situation that I can recall in the auto industry is the odometer tampering scandals of the 1980s.  In those years odometers were mechanical. They could be taken apart and altered with nothing more than a few hand tools.

At the same time, there was no system of checking odometer readings at state inspections, or even when ownership changed.  You could buy a car with 60,000 miles in one state, and sell it in the next state with 24,000 miles, with virtually zero chance of getting caught.  People in the trade called that job “clocking.”

Sleazy dealers were making fortunes; purchasing high mile lease cars at auction, shaving tens of thousands of miles from their odometers, and selling them at auctions in other states.  A truckload of cars altered in that way might earn the dealer ten thousand dollars or more, and there was almost no limit to how many cars could be clocked.

The situation became so bad that the FBI got involved in a big way.  They busted one dealer after another in sting operations and by following cars from auction to auction as the miles fell away.  In most cases, the perpetrators went to jail.  It was Federal time.

I still remember an interview with an FBI agent, who was asked why clockers got multi-year prison sentences when there was no violence.  In many cases clockers were going to prison for as long as a street criminal might go away for armed robbery.

“It’s the cold premeditated nature of it,” he said.  “A robber or murderer can say his was a crime of passion or desperation.  Setting an odometer back is a planned deliberate act.  You can’t say you didn’t know it was wrong, or you didn’t know what you were doing.”

In those days the clockers themselves and the dealer principals went to prison.  The clockers for doing the deed, and the owners for ordering it done and profiting from it.

Will VW executives face a similar reckoning?  The premeditation is the same.  They knew is would not pass with the tuning used on the road, so they made a special tune for the test stand.  The financial loss to consumers is the same too.  With clocked cars, owners paid more than the car was worth thinking it had fewer miles on it, and more life left in it.  With a diesel VW consumers paid more for the “green” engine and now they have a car that is significantly devalued now that the “green” deception is exposed.

Millions of people bought VW diesels based on their performance that was gotten by cheating the emission laws.  If the cars are modified to comply with law, and the performance suffers, VW could find itself buying back a boatload of vehicles.  They’ll be salable at some price, but the cost to VW could be huge – billions of dollars in the US alone.  If the cars are modified and people keep them, there is still the issue of broken trust.  If they cheated on the emissions, did they cheat on crash safety?  The loss of future sales may cost billions more.

But before they can do that, they have to get the cars brought in for recall.  If the car loses performance and economy, what owner would voluntarily agree to do that?  State action may be required, and they will harm VW’s image even more.  Today less than half the owners whose cars are subject to recall actually get the recalls done.

VW says have set aside money to pay for a fix, and to compensate owners.  But is money enough?