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5 "Tells" that the Stock Markets Are About to Reverse

Merkel’s Next Big Headache: Volkswagen’s ‘Defeat Device’

Companies / Germany Sep 22, 2015 - 12:11 PM GMT

By: Raul_I_Meijer

Companies

Angela Merkel has another huge headache on her plate. She seems to attract those these days. And given how she’s been dealing with the last few migraines coming her way, perhaps she deserves them.

For now, it’s a story of one carmaker, Volkswagen. And in one country, the USA. A country in which the diesel engine is somewhat of an orphan, making up just a few percent of the total car market. But the “defeat device” scandal will not stop there.


In Europe, diesel accounts for about half of all vehicles sold. And there’s no reason to presume VW didn’t use the same software tricks in Europe that it did in America. Nor, for that matter, does it seem reasonable to think VW is the only carmaker to apply sleight of hand to its emissions tests. The competition would have had to be profoundly asleep at the wheel not to know about the “device”.

What Volkswagen has been caught cheating on concerns emissions of nitrous oxide. As for its CO2 levels, who knows what can, and maybe will, be found? The crucial question perhaps is, are we ever going to know? 

Volkswagen spent the past few years as the biggest carmaker in the world. It’s safe to put that in the past tense now. But given the size of the company, it’s equally safe to assume that Merkel’s people are cooperating with the company on damage control. Whoever may come down hardest on VW, it won’t be Merkel. There’s too much at stake, economically and therefore politically.

Perhaps France, where way more than half the cars are diesel powered, will see an opportunity to bash VW in order to provide a boost to its own automobile industry. But Merkel would see that coming from miles away, and threaten Hollande into submission. Moreover, how ‘clean’ are French engines? Can Hollande be confident about that?

Perhaps this will not go anywhere unless private investors and citizens align in massive litigation, class action suits. That might work, but it also might take many years to move through court.

The EPA has acted at least somewhat faster, though not as fast as you might think. It has forced VW to recall 500,000 cars in the US, and suspend all further sales. However, it took over a year of EPA pressure for Volkswagen to even admit to what it was doing. 

And it took a while before that for the EPA to pick up on research conducted by the California Air Resources Board. Who in turn had joined up with studies already underway at West Virginia University and the non-profit International Council on Clean Transportation, which started ‘investigating’ diesel emissions two years ago.

The fact that the EPA has ordered recalls of vehicles dating back as far as 2009 is an indication of how long’s it’s taken to get this thing to the surface.

Sales of diesel luxury cars are set to plummet; not only Volkswagens, and not only in the US. Which is a big headache, too, for the likes of Mercedes, Renault, Peugeot-Citroën, and a handful of Japanese carmakers.

It’s time for everyone, government agencies, environmental groups, to engage in very thorough testing. We at least know what to look for, and at, now. Or let’s say we know at least one thing that requires severe scrutiny.

But this risks turning into one big political game, being conducted from Merkel’s offices in Berlin. Carmakers are powerful corporations, as of course are diesel producers.

We must first of all look at the reasons why Volkswagen went as far as to develop specialized software systems to hide real emissions. Surely it must have tried to develop engines that would not emit the 10-40 times legal limits they have been found to do at present, before turning to its programmers to ‘solve’ the issue. 

And if Volkswagen couldn’t make those engines, why should other carmakers be able to? They all have the ability to take each other’s vehicles apart and find out exactly how they function. It’s not an industry that has too many secrets lying around. Once your product’s on the market, your secrets are too.

Investigators should go talk to the programmers who wrote the software, see what they have to say about why they did it, and who ordered them to. There must be pockets of deep shame and guilt, and fear of repercussions, among programmers and engineers alike. Someone’s bound to give up the goods.

If anything, this could be a good test of the transparency of our societies, our legal systems, and the political clout of major corporations. And that last bit should temper our expectations.

By Raul Ilargi Meijer
Website: http://theautomaticearth.com (provides unique analysis of economics, finance, politics and social dynamics in the context of Complexity Theory)© 2015 Copyright Raul I Meijer - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Raul Ilargi Meijer Archive

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