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'Dieselgate' continues: Can VW overcome the scandal?

2016-09-16 06:51

YEAR-LONG BATTLE: It's been one year since news of Volkswagen's emissions-cheating scandal broke. AFP/ William West

Frankfurt - One year ago, Volkswagen's cheating on emissions tests for millions of its diesel cars erupted into public view, leaving the mammoth automaker battling an unprecedented crisis.

Barely a week has passed since that has not seen a fresh twist in the saga, which has tarnished Germany's proud auto industry and called the future of diesel as a whole into question.

Never-ending battle

VW has sought to make amends with mass recalls and a fresh focus on building cleaner cars, but a mountain of legal complaints and ever-louder demands for compensation have made it difficult for the auto giant to turn the corner.

The scandal "has had huge effects on Volkswagen and the whole sector," said industry expert Stefan Bratzel of Germany's Center for Automotive Management.

READ: VW emissions scandal - What does it mean for SA?

VW built itself over decades into Europe's car champion and now sells vehicles under 12 separate brands - from Seat, Skoda and Volkswagen to luxury brands Audi and Porsche.

The firm rakes in $225-billion in sales each year and employs 600 000 people globally.

The Wolfsburg-based group was rocked to its core when US regulators on September 18, 2015 accused it of deliberately skewing emissions data.

VW then publicly admitted it had installed so-called "defeat devices" in 11 million diesel-powered vehicles around the world.

False readings

The software is able to detect when cars are undergoing regulatory tests and lowers their emissions accordingly, giving them the appearance of being less polluting than really are.

In response to the revelations, former chief executive Martin Winterkorn fell on his sword while insisting he had known nothing of the scheme, leaving then-Porsche boss Matthias Mueller to take over the whole group.

READ: Emissions scandal: VW to fix 460 000 faulty cars

But no change of the guard could protect VW from a barrage of lawsuits and compensation claims from the authorities, customers and investors.

So far VW has put aside $20bn in legal provisions, which helped push the company to its first annual loss in more than 20 years last year.

When the crisis broke, investors watched in horror as VW stock lost 40% of its value in just two days - burning up $34bn of market capitalisation.

One year on, VW remains valued around 20% lower than it was before September 2015.

The scandal didn't trigger a collapse in sales for the group, but vehicles sold as VWs have suffered a knock - especially in the United States, where the brand was already limping.

Miles to go

"One year after 'dieselgate', VW has maybe gone 50-60% of the way, but there's still a lot to do," Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen told AFP.

In the US, the firm was able to reach a deal settling some of the claims, agreeing to pay almost $15bn in fines and in compensation to some 480 000 car owners.

READ: VW emissions scandal by the numbers

But VW still faces other legal claims in the US, as well as lawsuits and probes around the world, including in Australia, South Korea, Germany, France and Italy.

And European authorities are stirring in Brussels, animated by the charge that American VW customers are being treated better than EU citizens affected by the scandal.

So far, VW has refused to compensate Europeans or buy back their vehicles. Instead, it plans to retrofit the 8.5 million vehicles affected to meet emissions standards.

Experts predict the total bill for Volkswagen could reach between $28-39bn, leaving the firm once again raiding its piggy bank but not threatening its survival.

'Turning point'

Dudenhoeffer suggests that 'dieselgate' could in the end be a "boon for Volkswagen".

New CEO Mueller has adopted a bold strategy, promising dozens of new electric vehicles in coming years, as well as pushing into fields like car-sharing services and self-driving cars.

READ: Emissions scandal - VW managers refuse to forego bonuses

VW's cheating also seen the whole industry come under regulators' microscopes, shining a spotlight on the harmful effects of polluting engines.

The scandal has been a "turning point for diesel," Bratzel said.

From September 2017, automakers will submit vehicles for on-road testing as well as laboratory probes, forcing them to invest in more effective anti-pollution systems.

With time, European roads - where diesels have long held a larger market share than elsewhere - will see fewer such vehicles as the technology becomes more expensive, leaving an opening likely to be filled by electric cars.


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