Monday, December 14, 2015

NYTimes analysis: Volkswagen corporate culture enabled unlawful behavior.

The New York Times (12/14, Ewing, Bowley, Subscription Publication, 11.64M) reports Volkswagen’s “cutthroat and insular” corporate culture “is coming under scrutiny as potentially enabling...lawbreaking behavior,” according to experts and current and former employees. One high-level Volkswagen executive described management style as: “Be aggressive at all times.” The company stresses a lack of open criticism or admission of flaws and absolute obedience. The Times suggests that this aggressive corporate culture is in part responsible for the recent emissions fraud scandal.
        VW’s sales likely to decline for first time since 2014. The AP (12/11) reported that Volkswagen’s global sales declined 2.2 percent year over in November, from 852,900 vehicles in November 2014 to 833,700 last month, the company said on Friday. US sales dropped 15.2 percent to 45,300 units, and there were even bigger drop offs in Brazil and Russia, but sales were up 2.6 percent to 270,400 units in western Europe and up 5.5 percent to 329,000 in China. Group deliveries declined 1.7 percent to close to 9.1 million units over the first 11 months of 2014, compared to 9.26 million during the same period in 2014.

        Bloomberg News (12/11, Behrmann, 3.4M) reported that deliveries of the VW brand are declining for the first time since 2004, as consumers move away from the Passat sedans and Golf hatchbacks “tainted” by the emissions cheating scandal. Sales fell during the first 11 months of 2015 4.5 percent to 5.34 million vehicles, and Juergen Stackmann, the VW brand’s sales chief, doesn’t expect to be able to surpass last year’s 6.12 million automobiles. 

Friday, December 11, 2015

VW says emissions cheating began in 2005.

Coverage of the Volkswagen emissions scandal continues, with news of Volkswagen’s supervisory board chairman Hans-Dieter Pötsch’s revelations about the company’s internal investigation receiving significant coverage. In a lengthy article, the New York Times (12/11, Ewing, Subscription Publication, 11.64M) reports that Pötsch acknowledged Thursday that the decision to cheat on emissions tests began in 2005 because the company’s ambitions in the US conflicted with air quality rules that were more stringent than Europe’s. VW opted to install a technology called lean NOX traps over a more expensive technology called selective catalytic reduction (SCR), and even “sidelined” some of its executives who had argued for SCR. However, the lean NOX traps were less reliable at controlling emissions, so engineers introduced software that would lower emissions during testing after realizing that the diesel vehicles could not meet US standards. Pötsch said, “It proves not to have been a one-time error, but rather a chain of errors that were allowed to happen.” The Wall Street Journal (12/11, Boston, Varnholt, Sloat, Subscription Publication, 6.23M) reports that Pötsch added that the investigation showed the need for change in testing procedures in the engine development department, which allowed individuals who designed the procedures to sign off on the results without a second opinion. Despite Thursday’s admission, the Journal says VW failed to answer who ordered the software to be installed, when the order was made, and who was behind the long term cover-up. The company believes only a select few carried out the deception, and said that nine managers have been suspended in relation to the fraud, though it remains unclear whether they were actually involved in the wrongdoing. Fortune (12/10, 4.24M) contributor Geoffrey Smith similarly argues that the news conference was “a near-complete anti-climax” in which executives provided very little information and “refused to discuss who was responsible for hiding the true level of harmful emissions.”
        Washington (DC) Post (12/10, Rising, Sopke, 7.78M) adds that Pötsch also “did not say if any VW models from before 2009 had the cheating software in the United States,” nor would the EPA “comment on whether any more model years are under investigation.” Pötsch also reiterated that the investigation, which has “so far analyzed data from laptops, phones and other devices from 400 employees,” is ongoing but has so far turned up “no indications that board members were directly involved.” According to Reuters (12/10, Cremer, Prodhan, Potter), the company will work to improve oversight of software development in light of the findings and hopes to reach an agreement soon with US environmental regulators to begin recalling affected vehicles there. USA Today (12/10, Bomey, 5.56M) reports that Pötsch pledged that the company will partner with independent auditors for emissions certification in the future and create a new committee that will approve new emissions software. The AP (12/10), Ars Technica (12/10, Gitlin, 1.15M), Bloomberg News (12/10, Rauwald, 3.4M), the Los Angeles (CA) Times (12/10, Hirsch, Masunaga, 3.6M), and MarketWatch (12/10, Boston, 758K) offer similar coverage of Pötsch’s comments, while CNBC (12/10, 2.08M) and Reuters (12/10) provide video of the press conference.
        Jalopnik (12/10, 627K) contributor Jason Torchinsky asserts that the company is “enduring this colossal failure because its culture didn’t let employees fail enough before,” prompting them to fudge solutions when they were “unable meet the U.S. tough diesel emissions requirements.” Torchinsky condemns the “idea of not being ‘allowed’ to make mistakes” in corporate settings as “absurd” and criticizes VW for not embracing failure as opportunities to learn.
        VW CEO: No reason to sell assets. Bloomberg Business (12/10, Nichols, Rauwald, Reiter, 3.4M) reports that VW CEO Matthias Mueller said, “in his first television interview since the scandal broke in late September,” that the company has “no reason whatsoever to get rid of these assets” – referring to the company’s twelve brands – in the wake of the scandal. According to Bloomberg, Mueller’s comments suggest that the company “has the financial means to pull itself out” of the scandal without selling off assets. In Europe, the company is likely to face “6.7 billion euros in diesel recall costs,” plus “regulatory fines and potential damages from hundreds of lawsuits,” in addition to “as much as $9.4 billion” in recall costs in the US, according to Bloomberg Intelligence. Meuller also told CNBC (12/10, 2.08M) that the company is not prepared to reduce prices and discussed how the company intends to rebuild lost trust with customers. To that end, according to NPR (12/10, Ydstie, Greene, 1.78M), officials said the company plans to compensate vehicle owners for the lost resale value of the cars but declined to elaborate further. In a column for Bloomberg Business (12/10, 3.4M), Chris Bryant speculates about whether the company has surmounted the highest hurdles in the scandal, concluding that the company appears confident and “has resources to call on before bond investors would face any pain.”

        Consumer attorneys nominate Ken Feinberg as settlement master in VW suits. Bloomberg Business (12/10, Fisk, 3.4M) reports that Kenneth Feinberg, who “handled General Motors Co.’ ignition switch fund” and “compensation for victims of the Sept. 11, 2001 terrorist attacks and BP Plc’s 2010 Gulf of Mexico spill,” has been nominated as a special settlement master in the federal consumer lawsuits against VW after U.S. District Judge Charles Breyer requested suggestions for names on Wednesday. The request doesn’t necessarily mean that the case will be settled but is “likely a recognition that an experienced neutral should be able to facilitate a fair and just resolution of the claims whether that is early or at a more advanced stage of the litigation,” according to Blair Nicholas, a lawyer for the plaintiffs. 

Wednesday, December 9, 2015

NHTSA raises scrutiny of Jeep Wrangler electrical issue.

The Detroit News (12/8, Burke, 545K) reports that on Tuesday, NHTSA announced that it is “upgrading an investigation into nearly 630,000 Jeep Wrangler SUVs for an electrical wiring” issue, which may “cause air bags to not work properly.” According to the article, NHTSA said it is initiating an “engineering analysis” into the SUVs after launching a preliminary investigation earlier this year.