The following article is based on my own interpretation of the said events. Any material borrowed from published as well as unpublished sources has been appropriately referenced. I will bear the sole responsibility of anything that has been found to have been copied or misappropriated or misrepresented in the following post.
Ashes Roy – EMBA – 2015-2018 – Vinod Gupta School of Management – IIT Kharagpur.
Last month, Volkswagen, the German Car manufacturer found itself in the midst of a controversy when the United States Environmental Protection Agency (EPA) identified that Volkswagen cars have a sophisticated software installed which allows the car to fake the emissions test. In short, it means that whenever the car is put under various emissions tests, (mandatory for every car), it produces the stats within the accepted norms. EPA found that those cars, actually produce 40% more emissions on road.
As the news hit stands, all hell broke loose. Volkswagen shares crashed. Worldwide Volkswagen cars’ demand slashed, overall impacting their business. As the pressure mounted on them, the Volkswagen management conceded that around 11 million cars have been sold since 2009, with fudged emissions stats. The CEO, Martin Winterkorn tendered his resignation and at the time of writing this post, Volkswagen was facing criminal charges and a potential fine of $18 billion.
So the questions arise. Why did they do this?
Per various newspapers as well as independent investigating agencies, Volkswagen was lagging behind the sales when it came to diesel cars, in the US where the acceptable emissions norms are quite stringent. While promoting clean diesel cars, Volkswagen had to compromise on the emissions stat. Europe,on the other hand, was the major market for diesel cars due to its fuel efficiency and less stringent measures on the emissions stat. In order to cover up for the losses in sales, Volkswagen started installing the softwares and the fudged up ratings ensured the cars sold like hot cakes.
How did it come out ?
Mr. John German of the ICCT (International Council Of Clean Transportation) and his team were working to identify the emission stats (particularly NOx i.e. Nitrogen Oxide) of diesel cars in the US. They were hoping to utilise the data in Europe where the accepted norms are pretty relaxed, compared to the US. Much to their amazement, when they tested the emissions of those cars on road, each one of the cars failed. Once they confirmed the results weren’t fluke, it went to the regulatory authorities. At first, Volkswagen management weren’t budging from their initial stand of them being fair, but as soon as the skeletons started tumbling from their cupboard, they gave up.
So, what next?
Volkswagen have been notified to remove those cars from the market. They face huge amount of fine as well as criminal charges in the courts of law. Deserving praise, the regulatory authorities have shown their strong resistance to malpractices when it comes to pollution and health of the human beings. We sincerely hope, this becomes an eye opener for all car manufacturers when it comes to safety and environment.
Are the Indian counterparts listening??