Sometimes companies can face a large number of complaints about a particular issue affecting all of their products. This is likely to be the case with Volkswagen, unfortunately. How it deals with this situation could have serious implications for its future.
Over 11 million cars could be recalled following the disclosure that emissions tests may have been manipulated in the EU and US, damaging Volkswagen’s reputation and financial performance. Volkswagen’s shares fell by nearly 20% as investigations spread into revelations that hundreds of thousands of its diesel cars have software that secretly gets around pollution tests. It is not known how many other companies may have done the same thing.
A Guardian newspaper investigation suggests that the issue may be responsible for nearly 1m tonnes of air pollution every year, roughly the same as the UK’s combined emissions for all power stations, vehicles, industry and agriculture.
Volkswagen, which is the world’s largest carmaker said it had stopped all diesel vehicle sales in the United States during an investigation into the issue, which could lead to fines of more than 16 billion euros.
According to the US authorities, VW equipped 482,000 cars in the US with software that turns off pollution controls when driving normally and secretly turns them on when it detects that the car is undergoing an emissions test.
This allows the car to pass the emissions test, earning a certificate of good environmental performance. Once the test is over, the mechanism de-activates itself, releasing pollutant gases into the air, such as nitrogen oxides that are linked to severe respiratory ailments including asthma, causing medical costs in the countries concerned.
The chief executive Martin Winterkorn apologised, promising that the company would cooperate with authorities, but has since resigned. He stated that:
“The board of management takes these findings very seriously. I personally am deeply sorry that we have broken the trust of our customers and the public. We will cooperate fully with the responsible agencies, with transparency and urgency, to clearly, openly and completely establish all of the facts of this case.”
“We at Volkswagen will do everything that must be done in order to re-establish the trust that so many people have placed in us, and we will do everything necessary in order to reverse the damage this has caused. This matter has first priority for me, personally, and for our entire board of management.”
Volkswagen has been ordered to recall the vehicles concerned, which involves four-cylinder VW and Audi diesel cars built since 2008 and to fix the cars’ emission systems.
Also, Under the US Clean Air Act, fines of up to $37,500 may be imposed on each car, meaning VW could be fined more than $18 billion.
No doubt customers may also complain about the vehicles purchased on the basis of the emissions tests, or performance, which could lead to a large bill for Volkswagen.
Apparently 9 out of 10 Volkswagen drivers in Britain affected by the diesel emissions scandal believe they should receive compensation, increasing the pressure on the carmaker as it attempts to recover from the crisis.
Almost 1.2m diesel vehicles in Britain are involved in the scandal, and VW faces a large bill if it is forced to make payouts to motorists. The company has put aside €6.5bn (£4.8bn) to deal with the cost of recalling and repairing the affected vehicles, but it also faces the threat of fines and legal action from customers and shareholders.
There is a growing frustration among VW drivers in the UK over the lack of information about how their vehicle will be repaired, according to the consumer watchdog Which?. VW has sent letters to affected customers, arriving this week. However, the letters state that the company is still working on its plans and another letter will be sent when these are confirmed.
Paul Willis, the managing director of VW UK, told MPs on Monday that the recall of vehicles may not be completed by the end of 2016 and that it was premature to discuss compensation.
Richard Lloyd, the executive director of Which?, said: “Many VW owners tell us they decided to buy their car based on its efficiency and low environmental impact, so it’s outrageous that VW aren’t being clear with their customers about how and when they will be compensated.
“Volkswagen UK must set out an urgent timetable for redress to the owners of the affected vehicles. We also need assurances from the government that it is putting in place changes to prevent anything like this happening again.”
86% of VW drivers are concerned about the environmental impact of their car, while 83% questioned the impact on its resale value and 73% feared the performance of their vehicle would be affected. More than half of the VW customers said they had been put off from buying a VW diesel car in the future.
In future, consumers may be less tempted to buy a diesel car, knowing the true facts. The revelation that emissions tests were misleading will add fuel to the fire of those wanting to tax them more and impose congestion charges on their use. It is no exaggeration to say that this scandal is potentially as significant as those affecting the sales of cigarettes which were backed up by false science, as diesel fumes can kill. The issue will have affected everyone’s health.
Consumers may well complain to their car dealers if the performance of their cars was overstated and they have incurred higher fuel costs. It is estimated that the cost of petrol or deisel may be over £350 per annum higher than consumers were promised. Dealers would be well advised to remove misleading literature about diesel cars’ performance and car review sites and magazines should consider caveating their performance statistics. Consumers unhappy with a car purchase can complain via ProMediate’s certified ADR scheme.
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