Almost 60 000 Porsches were recalled a few weeks ago over a possible design flaw that would lead to fuel leaks. The news come hot on the heels of a string of scandals involving Porsche’s carmaker, German-based Volkswagen, who up till recently were touted as the worlds no.1 manufacturer of automobiles. Another car giant, Toyota, had faced some serious legal troubles a while back over a faulty accelerator system, while General Motors had been in hot water earlier over ignition lock-out problems. Every major car firm had seen its fair share of headline-making mishaps. Is this one any different, though? Will the industry benefit from one carmaker’s mistakes?

Of the 60 000 recalled luxury cars, around 21 000 were sold in the US, says Porsche Cars North America, a subsidiary of VW. Unlike its mother company and brand, Porsche doesn’t have to face any additional trouble for the recall, as the issue is far less damaging to the company’s image than what happened just last month.

The Scandal

Eleven million VW cars were involved in a recent scandal that broke out after the EPA, a US agency monitoring the way companies impact the environment, have gone on record that VW had falsified its emissions test results. The EPA was alerted to the existence of the problem by another independent body, ICCT (International Council on Clean Transportation), a watchdog for emission standards for vehicles. They, in turn, asked West Virginia University research centre to conduct research into the issue as far back as in May 2014. It took VW more than a year to finally admit to any wrongdoing, which they did in August of this year… and not willingly, either. The EPA had to threaten holding off certification of Volkswagen’s upcoming 2016 models, before the Wolfsburg-based company agreed to issue public admission and start doing right by its customers.

In a nutshell, the allegation was that over a million cars were sold by VW to the American market under false pretences as green, ecologically friendly vehicles. Initial testing corroborated advertised ecological standard set out by the US government in the Clean Air Act. However, subsequent investigation revealed that Volkswagen installed a so-called „defeat device” programming into their emission controlling systems. This device detected when a car was being tested for harmful emissions and reduced the level of nitrogen oxides pollution artificially for the duration of the test. As a result, VW cars appeared much safer for the environment than they actually were, leading many to buy the car for its promoted green-friendly image.

Once the news broke out, it quickly became apparent that this was not just your average marketing ploy. The tampering, it seems, had likely been motivated by the way US regulates imported cars. America has pretty stringent laws regarding the amount of harmful chemicals an automobile can emit while operating. Diesel cars are notorious for being a lot less eco-friendly than other types of internal combustion engines, so VW intended to market its diesel cars as more fuel efficient and greener than its competitors. The „defeat device” made it possible, lowering the amount of emissions substantially. The diesel-powered cars that had that device installed actually release 10 to 40 times the pollution when operating normally. The device works by severely limiting the power and fuel consumption of the car, making it ecological, but unacceptably low on horsepower to an actual user.

Further examination uncovered the full, terrifying scale of the problem. As it turns out, over 11 million cars produced by the German auto-giant are affected, covering many diesel versions of the popular brands: VW Beetle, VW Jetta, VW Golf, VW Passat and from the upper shelf, Audi A3, all made between 2009 and 2015. The German automaker hasn’t issued a full recall (only select cars, to around EUR 6.7 bln total money allotted for that purpose), but there is also a program to repair the emission systems in place.

In the wake of the scandal, the carmaker’s shares plummeted by 38 percent just two days after the news hit the headlines, making this about the costliest misstep in the company’s almost 70-year history. But that’s nothing compared to the industry-wide image of VW as a German-made car, a symbol of precision, efficiency and sustainability. At least that last part is in question now, and someone had to pay the price.

The execs and PR of the company were initially very cautious in admitting full responsibility, first stating that it wasn’t an actual, deliberate way to cheat the eco-tests. The then CEO Martin Winterkorn was rumoured to get the boot, but the company’s spokesperson dismissed the idea as ridiculous out of hand…

Until just a few days later, when Martin Winterkorn stepped down willingly, accepting the blame. He said, „I am shocked by the events of the past few days. Above all, I am stunned that misconduct on such a scale was possible in the Volkswagen Group.” He added that he accepts the responsibility for the „irregularities” in diesel engines, but an actual apology along with admitting the problem was there by design, not by accident, followed a bit later. As for the resignation, the vice chairman of the board Berthold Huber clarified that „Herr Winterkorn had no knowledge of the manipulation of emissions level” but that VW have the „highest respect his willingness to assume responsibility” nonetheless.

The Fallout

The scandal is far from over, even after reshuffling at the highest level. VW announced USD 3.5 bln losses this quarter, but compared to the EPA fines, international investigations and further charges of misrepresentation and possibly fraud, the company stands to lose billions more over the next few years. One cited figure is USD 30 bln in damages for not letting other investors know about the testing rigging practices. Simon Dluzniak, of lawyers Bentham Europe, stated that his company and several other institutional shareholders of VW shares are almost finished making claims for not disclosing the critical information by VW. His estimates are more cautious and put the damages to around a few billion euros in total. Another law company, Leigh Day, has registered as many as 6500 disgruntled customers that may want to file a class action lawsuit for compensation, making it almost certainly a huge payout should the case end up in court.

Many other companies’ reputations are at risk as well, according to ShareAction’s CEO Catherine Howard. Her company helped coordinate the campaign to unite major investors in their call for greater transparency of the companies they’ve invested into, including – but not limited to – Volkswagen. She says, „The scandal has drawn attention to the need for investors to practice active stewardship over the companies they invest in, to avoid plummeting share prices as a result of reputational risk.”

And what about the actual people who have bought the „green lemons” from VW? Their situation is far from ideal. Many have bought the cars specifically because of the advertised reduced impact on the environment. More than 1.2 million cars that were bought in the UK alone will most likely have to be compensated, as one official stated, but drivers are far from reassured. Some blame valuation services, which place their car value far below what they paid for it. Others simply resign to the situation. Car-part chain Halfords reports a 300 percent increase in the amount of fuel additives sold. This means that drivers are eco-conscious enough to stay with their vehicle of choice, but make it greener.

There’re wider repercussions for the market and industry in general, though. Firstly, VW is clearly not the only carmaker rigging its results, and already across Europe there’s agreement that more stringent, real-world tests need to be conducted to assess ecological viability of the vehicles. UK Transport Secretary Patrick McLoughlin said, „What is important is that we got agreement for real-world emission testing right across the whole of Europe and this has been something which has been objected to in the past. We pressed for it in May. I am very pleased that we achieved it.”

But even though the government is already taking a firm stance, watchgroups and campaigners warn that the industry is rife with misreported and artificially lowered pollution figures. Others have actually carried out research into the artificially lowered emissions figures and counted the loss of life that can be attributed to the scandal. According to them, more than 50 people will have (or have) died due to the pollution emitted by the cars fitted with the emissions’ reducing software. Even if just one person dies, VW is to blame – more specifically, about 10 to 20 employees that apparently were at the heart of the conspiracy. Among them seem to be the executive of VW R&D and heads of Audi and Porsche divisions, who were all placed on temporary leave following the scandal.

The Future

But immediate concerns aside, the future is uncertain for the whole industry, not just VW. A lot of the research went into making diesel the engine of choice for the future, but that may not be the case if it continues to be so dirty. Professor David Bailey from Aston University explains. „The big issue is whether it heralds a shift away from diesel – and that’s going to take a while to play out. It’s a seismic moment for the industry and particularly the big European manufacturers who have done a lot of work on diesel: technologically, they have they made the wrong bet.”

Surprisingly, the company’s underlying sales are still good, according to the figures released by SMMT, the UK-based Society for Motor Manufacturers and Traders. This means that VW cars are still popular, against all odds. Though, of course, they can no longer dream of becoming no.1 global car seller by 2018, which was their bold plan back in 2010. According to that plan, there would be 800 000 VW-brand cars sold in the US alone, with further 9 200 000 sold across the globe. Current plans are much less ambitious, with new CEO Matthias Mueller reforming and reviewing the company to make it more transparent. His current goal is quality ahead of quantity. „Many people outside of Volkswagen, but also some of us, did not understand that our Strategy 2018 is about much more than production number,” he points out. To that end, some models will be removed altogether. „We will review in detail our current portfolio of more than 300 models and examine the contribution that each one makes to our earnings,” explains the new CEO.

Meanwhile, the closest rival of VW, Toyota, is doing remarkably well. The Japanese carmaker is now no.1 globally, even though they have courted significant controversy in the past as well (including, but not limited to a deadly defect with its accelerators a while back). Akio Toyoda, current top exec at Toyota, had the following to say about scandals and moving forward; „Toyota had quality issues in the past, and because of these problems, we have been able to restructure and reform. In that regard, we are strongly committed not to repeat the same mistakes,” he explained, adding, „The wrongdoing of one company should not dampen the efforts of other automakers on environmental issues.”

Hopefully, the VW debacle will make other companies learn from their mistakes and go greener. Perhaps some dirty little secrets of the industry are what will make it cleaner in the long run.

VOCABULARY

to recall (a product) – wycofac (produkt z rynku)
flaw – wada, usterka
fuel leak – wyciek paliwa
hot on the heels of sth – tuz po czyms, chwile po czyms
to involve sth – dotyczyc czegos
carmaker – producent aut
X-based – z siedziba w X, ulokowany w X
to tout sb as sth – okrzyczec kogos mianem czegos
manufacturer – producent
automobile – samochód
to face sth – musiec stawic czemus czola, stawac w obliczu czegos
faulty – wadliwy
accelerator – pedal gazu
to be in hot water – znalezc sie w opalach
ignition – zaplon
lock-out – tu: odlaczenie, wylaczenie sie
fair share of sth – spora ilosc czegos
to make headlines – trafic na naglówki
mishap – niefortunny wypadek
to benefit from sth – skorzystac na czyms
subsidiary – jednostka zalezna, filia
brand – marka (produktu)
damaging – szkodliwy
to break out – tu: rozpoczac sie, rozpetac
to impact sth – wplywac na cos, wywierac wplyw
to go on record (with sth) – oficjalnie cos oglosic/wypowiedziec sie
to falsify sth – podrobic cos, sfalszowac
to alert sb to sth – wskazac cos komus, uczulic kogos na cos
existence – istnienie
body – tu: organ, instytucja
council – rada
watchdog – organ nadzorujacy
vehicle – pojazd
in turn – z kolei
research – badanie, badania
to conduct – przeprowadzic
to admit to sth – przyznac sie do czegos
wrongdoing – naruszanie prawa, naganne postepowanie
willingly – chetnie, z checia
to threaten – zagrozic
to hold off (on) sth – wstrzymac sie z czyms
upcoming – nadchodzacy
to issue – wydac, wyglosic (publicznie)
to do right by sb – zachowac sie fair wobec kogos
in a nutshell – w skrócie
allegation – domniemanie
under false pretences – pod pozorami czegos, udajac cos (UK)
initial – poczatkowy
to corroborate sth – potwierdzic cos (teorie, zeznanie itp.)
advertised – oglaszany, reklamowany
to set sth out – wyznaczyc cos, okreslic
act – ustawa
subsequent – kolejny, dalszy
to reveal – ujawnic
so-called – tak zwany
defeat – porazka
device – urzadzenie
to detect – wykryc
harmful – szkodliwy
nitrogen oxide – tlenek azotu
artificially – sztucznie
for the duration – w trakcie (czegos)
ploy – podstep, sztuczka
stringent – surowy, rygorystyczny
regarding – odnosnie (do), co sie tyczy
notorious for sth – znany z czegos
internal combustion engine – silnik spalinowy
to intend – zamierzac
to market sth – sprzedawac cos, oferowac
fuel efficient – wydajny/oszczedny paliwowo
competitor – rywal
substantially – znacznie, w duzym stopniu
to release – tu: wypuszczac, emitowac
severely – ostro, powaznie
unacceptably – w sposób nie do przyjecia
horsepower – moc (silnika)
examination – badanie
to uncover – ujawnic
as it turns out… – jak sie okazuje
to affect sth – miec na cos wplyw, dotknac cos
allotted – przeznaczony, odlozony (o pieniadzach na jakis cel)
shares – udzialy
to plummet – gwaltownie spasc, runac
misstep – potkniecie
compared to – w porównaniu do
sustainability – tu: zrównowazenie ekologiczne
exec – dyrektor, menadzer wyzszego szczebla
cautious – ostrozny
responsibility – odpowiedzialnosc, wina
deliberate – celowy
CEO (Chief Executive Officer) – dyrektor naczelny
rumoured… – o którym wiesc glosi…, o którym mówi sie, ze…
to get the boot – zostac wylanym
spokesperson – rzecznik
to dismiss sth – zlekcewazyc cos, odrzucic
ridiculous – niedorzeczny
to step down – ustapic (ze stanowiska)
blame – wina, odpowiedzialnosc
stunned – zaszokowany
misconduct – wykroczenie, niewlasciwe zachowanie
irregularity – nieprawidlowosc
apology – przeprosiny
by design – tu: celowo, z rozmyslem
by accident – tu: przypadkiem
resignation – rezygnacja (ze stanowiska)
chairman of the board – prezes rady nadzorczej
to clarify – objasnic
respect – szacunek
to assume sth – przyjac cos (np. odpowiedzialnosc za cos)
nonetheless – mimo to, a jednak
fallout – tu: skutki (czegos zlego, szczególnie dlugofalowe)
to reshuffle – przetasowac
quarter – kwartal
fine – grzywna
charge – oskarzenie, obwinianie
misrepresentation – falszywe przedstawienie, wypaczenie
fraud – oszustwo
to stand to lose sth – miec przed soba perspektywe utraty czegos
to cite – przytaczac, przywodzic
figure – liczba, cyfra
damages – szkody, odszkodowanie
to rig sth – sfingowac cos, sfalszowac
shareholder – udzialowiec
to make claims – roscic prawa (do czegos), wystepowac o odszkodowanie
to disclose sth – ujawnic cos (komus, o informacji poufnej)
estimate – wartosc szacunkowa
disgruntled – niezadowolony (np. klient)
to file a class action lawsuit – zlozyc pozew grupowy
compensation – odszkodowanie, rekompensata
payout – wyplata
to be at risk – byc narazonym (na cos)
according to – zgodnie z, wedlug
to unite – zjednoczyc
call for sth – apel o cos
transparency – przejrzystosc
to draw attention to sth – zwrócic na cos uwage, przyciagnac uwage
stewardship – przywództwo, kierownictwo
as a result of sth – wskutek czegos
lemon – tu: samochód-bubel
specifically – specjalnie, wylacznie
official – urzednik
reassured – uspokojony
valuation – wycena
to resign (oneself) to sth – ulec czemus, poddac sie
chain – siec (sklepów, restauracji)
additive – dodatek (substancja)
conscious – swiadomy
real-world – w warunkach swiata rzeczywistego, w realnych sytuacjach (tylko przed rzeczownikiem)
to conduct – przeprowadzic, wykonac
to assess – ocenic
viability – wykonalnosc, realnosc
Transport Secretary – Minister Transportu (UK)
to object to sth – sprzeciwiac sie czemus, opierac
to press for sth – nalegac na cos, zabiegac o cos
to achieve – osiagnac
to be rife with sth – byc pelnym czegos, szerzyc sie (o czyms)
loss of life – straty wsród ludzi
to attribute sth to sth – przypisac cos czemus
due to sth – przez cos
fitted with sth – wyposazony w cos
conspiracy – spisek
head – dyrektor, kierownik
division – dzial
temporary – tymczasowy
leave – urlop
immediate – natychmiastowy, bezposredni
concerns – obawy, niepokoje
uncertain – niepewny
to herald sth – zwiastowac cos
shift away from sth – odejscie od czegos
to play out – dokonac (sie), rozegrac
seismic – sejsmiczny, tu: przelomowy
to make the wrong bet – postawic na zlego konia, zle wybrac
underlying – lezacy u podloza, podstawowy
against all odds – pomimo wszystko, nie zwazajac na wszystko
bold – odwazny, ambitny
to review sth – przeanalizowac cos, ocenic
to that end – w tym celu
to remove – usunac
altogether – calkiem
contribution – przyczynek, wklad
earnings – wplywy, zarobki
remarkably – w niezwykly sposób
to court controversy – byc krytykowanym, wywolac kontrowersje
in that regard – pod tym wzgledem
committed to sth – zaangazowany w cos, oddany czemus
to dampen sth – ostudzic (entuzjazm), oslabic cos
debacle – fiasko, klapa

by Prochor Aniszczuk

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