Volkswagen lied. But Elon Musk is dead wrong about diesel cars

28 Sep 2015 | Author: | No comments yet »

EU may change emissions tests laws.

Volkswagen has been rocked by a diesel-emissions scandal that has shaken its executive suite and prompted investigations by governments around the world.Volkswagen’s big push in the United States revolved around making Americans love driving a diesel car again — a challenging task given the poor image diesel had endured since the 1980s.The German carmaker named company veteran Matthias Mueller as new CEO on Friday in an attempt to get to grips with a crisis that its chairman described as “a moral and political disaster”.

Matthias Mueller pressed the Volkswagen AG board to move ahead with a reorganization he helped devise before the carmaker was caught up in an emissions-cheating scandal, as the new leader seeks to put his stamp on the company.After early positions at Audi, the outgoing and incoming Volkswagen AG chief executive officers spent the next 20 years hopping between development roles in the carmaker’s 600,000-employee empire. Its answer was a 2-liter, 4-cylinder turbo-diesel engine that could run seemingly forever on a single tank while offering great acceleration and meeting even the most stringent environmental standards.

The appointment came as Swiss authorities said they were suspending sales of Volkswagen brand diesel vehicles that could contain devices capable of cheating emissions tests, including Audi, Seat, and Skoda vehicles built between 2009 and 2014. The former Porsche boss wanted the new strategy to remain on the agenda of the Friday meeting in Wolfsburg, Germany, according to a person familiar with Mueller’s thinking, who asked not to be identified because the discussions were private. But so far the diesel-emissions scandal hasn’t involved any of the products Volkswagen makes with its joint-venture partners in its biggest single market. The supervisory board of the troubled parent company Friday named Mueller to replace Winterkorn, who stepped down two days previously amid a widening scandal over rigging emission-test results. That someone with such a similar background was picked to clean up the mess shows the insularity and clannishness of Germany’s corporate governance structure, said Charles Elson, director of the University of Delaware’s Weinberg Center for Corporate Governance. “I’m not surprised they went with an insider,” he said. “The company may say ‘Who else can take charge?’ and that’s a fair point.

According to IHS Automotive, China produced just 9,046 diesel cars in 2014, a paltry tally in the country where total passenger vehicle sales reached 19.7 million last year. To deliver its point, Volkswagen has spent $77 million this year to promote its diesel cars, often in a humorous way, a figure that represents about 45 percent of its total for television ad spending of about $165 million, according to the measurement firm iSpot.tv.

Volkswagen said Friday that more authority will be given to individual brands and regions, a departure from the centralized structures that kept key decisions in Wolfsburg and the chief executive officer’s inner circle. Diesel is crucial to the Chinese economy, widely used in sectors ranging from manufacturing, agriculture, power generation to industrial transport, though diesel is currently plentiful because of the country’s economic slowdown.

In one, they argue about the car’s smell. (It turns out that it comes from the dog, not the diesel.) In another, they disagree about whether the engine is turned off. (It’s on.) In a third, one of the women asks, “How do you like my new car?” Another jumps in with, “Isn’t diesel dirty?” The first woman ends up holding a white scarf under the tailpipe to show how clean the emissions are. Berthold Huber, interim chairman of the company’s supervisory board, said in a statement that Mueller is “a person of great strategic, entrepreneurial and social competence.

He knows the Group and its brands well and can immediately engage in his new task with full energy.” Mueller was picked by the company’s 20-member supervisory board, 17 of them German or Austrian. The ads’ mantra of clean diesel that combines high performance with high efficiency came with a bonus for prospective car buyers: The cars were also relatively affordable.

Friday’s meeting, which took place in a newly constructed office building within Volkswagen’s main plant, started before noon and stretched into the evening amid wrangling over who knew what and when. For about $30,000, consumers could get a Jetta or Golf 2-liter TDI engine that can be driven 600 miles on a tank of gas and still meet stringent emissions standards. Since Volkswagen admitted a little more than a week ago that it had lied about the performance of its diesel technology and had sold 11 million cars equipped with a device that cheated on emissions tests, the company has removed its clean diesel ads from its YouTube channel. German environment minister Barbara Hendricks said the European Commission and member states were considering stricter rules. “We are working on new, honest measuring methods in Brussels,” she told Handelsblatt newspaper. “We can’t just rely on tests in the lab,” she said, adding future tests should focus more on normal road conditions. Boards at most big German companies are predominantly male and lag behind companies in countries such as the U.K. and Sweden, which don’t have quotas for women, as well as Norway, which does.

However, these diesel-powered vehicles accounted for nearly 70% of all nitrogen oxide and more than 90% of all particulate matter emissions from China’s motor-vehicle sources in 2013, latest data from the Ministry of Environmental Protection show. Chancellor Angela Merkel’s chief of staff, Peter Altmaier, called on Volkswagen to take action to restore public trust in the industry. “We need a guarantee that cars of German manufacturers are in line with the norms, without manipulation,” he told Der Tagesspiegel . Now, the company that famously introduced the original Beetle as a “Lemon” and urged consumers to “Think Small” faces a public relations crisis, and a major challenge to restore its image. “It is one thing to make a mistake, it’s another to intentionally trick your customers,” said Sara Roen Brady, a crisis reputation manager based in Florida. “This is a really emotional issue because it’s about the character of the company and the character of their customers. The carmaker has said 11m vehicles worldwide were fitted with software similar to the kind that allowed the company to rig the US tests, but said it was not turned on in the bulk of them.

In addition to its lack of gender diversity, Germany’s corporate-governance system is held back by its cliqueishness, said Henrike von Platen, president of the Business and Professional Women advocacy group in Berlin. “If you meet someone on the board at one company, you happily take them with you to another one,” von Platen said. “Trying to break into that and improve diversity is tough.” Supervisory boards in Germany are supposed to act as a check on their management boards and look broadly when seeking top talent. While they’re changing, they still have plenty of directors who have overlapping business interests and they tend to choose insiders for the CEO spot.

Diesel emissions of nitrogen oxide contribute to the formation of ground level ozone, which also irritates the respiratory system, causing coughing, choking and reduced lung capacity. At VW and other German companies, supervisory boards are comprised equally of shareholder and employee representatives, though the chairman, usually from the shareholder side, votes in the event of a tie.

Reducing these emissions requires expensive equipment, such as a technology that uses urea, the same chemical found in urine, to reduce nitrogen oxide. The company claimed that the TDI models in its lineup offered up to 30 percent better fuel economy and up to 30 percent lower carbon dioxide emissions than comparable gasoline engines. Audi, part of the automotive group that includes the Volkswagen brand, targeted a bigger audience with its 2010 Super Bowl ad, drawing on a greener-than-thou image in a parallel world where overzealous “green police” hunt down environmental offenders who drink water out of plastic bottles, overheat their hot tubs or fail to compost properly.

German lawmakers earlier this year voted to require more than 100 of the largest listed companies to allocate 30 percent of vacant supervisory board positions to women starting next year. In July, Volkswagen boasted that a Golf TDI set a record — as measured by Guinness World Records — by being driven more than 8,000 miles and getting an average of 81 miles a gallon. China has offered generous incentives to encourage consumers to buy environmentally friendly cars in a bid to reduce pollution and curb its dependence on imported oil.

Volkswagen will create a North American group under Winfried Vahland, the head of the Skoda brand, in an effort to repair its reputation in a market where it has struggled for decades. After Paul Achleitner, a former executive at Allianz SE and Goldman, Sachs & Co., was named chairman in 2012, the bank announced the promotion of Anshu Jain and Juergen Fitschen to co-chief executives. The Bentley and Bugatti marques will be grouped with Porsche, while Audi continues to manage the Lamborghini supercar division and Ducati motorcycles. Eight of the 19 directors on the bank’s supervisory board have joined in the last three years, including two American women: former JP Morgan Chase CFO Dina Dublon and attorney Louise Parent. The board has played an active role, replacing Jain this summer with John Cryan and announcing that Fitschen will step down as co-CEO next year. “This shakeup at Deutsche Bank is among the first signals I’ve seen that a new form of corporate governance is taking hold in Germany,” said executive-search consultant Benson.

Winterkorn, 68, who had been due to get his contract extended on Friday before the widening scandal, had built a global champion that included subsidiaries ranging from Scania heavy trucks to Ducati motorbikes to Porsche sports cars. At the same time, key decisions were made at the Wolfsburg headquarters, and Winterkorn was known to get involved in the details, from design to engineering to operations. While his path to the top of Volkswagen isn’t unlike Winterkorn’s — both men are company veterans and worked for years at the Audi unit — they have markedly different styles. Winterkorn was more patriarchal and could come off as gruff, with a growling voice and an imposing frame adding gravitas, while Mueller has a cooler and more cosmopolitan air and has said his management style is more inclusive.

Stern-faced and unwilling to answer questions from journalists, Mueller still managed to offer a positive view of the week: the reform of decision-making and accountability could enable Volkswagen “to emerge from this crisis stronger than before,” he said.

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