The Volkswagen scandal is a very
interesting story.
The scandal was uncovered by an independent
study that was just looking at the Volkswagen emissions. It was not at all
trying to debunk the clean diesel story that Volkswagen had sold. However,
through the process, it discovered that in a real life drive scenario, the
diesel Volkswagen vehicle emissions was a lot higher than the emissions from
the regulator run tests. The EPA caught wind of the research and did a deep dive
into it. The EPA discovered eventually that Volkswagen had manipulated their
software so that emissions would be reduced in the test situation.
What was done was cheating at the highest
level. It means that diesel is not as clean as it was sold. Some may say “What
is the big deal, the car still works.”
But the consequences of cheating are always
huge. It is like a spouse being caught on Ashley Madison. These are some of the
consequences that I can see that stem out of the scandal
1)
The amount of the fines imposed
by regulators is unknown but is likely to be massive. This will not only be from
the US where it was discovered but also all the other jurisdictions where Volkswagen
has cheated in.
2)
The scandal kills the brand of
German engineering that has been built on quality. It will take years to
rebuild the brand.
3)
Customers that have bought the
product are unhappy because the resale value is lower.
4)
Although management has said
that they had no idea and the deceit was from a few engineers. This is
considered an incredulous story and it is likely that the culture of deceit is
pervasive in the company. To change the culture will be a mammoth task by
itself.
5)
The fact that diesel is not as
clean as sold will fundamentally change the auto industry. This scandal
questions the test outcomes of the other diesel cars in the industry. If clean
air is the direction that governments support despite the cost, then diesel
cars are going to be the death route for car companies.
The size of the scandal is larger than most
of us realise given the fragile situation of the Eurozone. It is large enough for the German
government to step in and even the Eurozone head Jeroen Dijsselbloem to comment on it.
The German economic minister has met Elon
Musk. The tampering of emissions data shows that diesel technology is limited
and showcases why Tesla as a company is so valuable.
Volkswagen Scandal shows that there is a
myth with blue chip stocks- that it is stable investing. The current age of
technology means that huge companies can easily lose their edge if they do not
work hard at innovating and when their only motivation is profit.
