Dieselgate: Will It Ever End?

"shpuker" (shpuker) 03/09/2016 at 18:08 • Filed to: None

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Since over !!!error: Indecipherable SUB-paragraph formatting!!! Volkswagen has been under fire for trying to pull a fast one on the EPA and the rest of the world, and as we heard today !!!error: Indecipherable SUB-paragraph formatting!!! So where does this leave us moving forward?

Photo Cred: !!!error: Indecipherable SUB-paragraph formatting!!!

Lets quick throw around some stats to recap the extent of this fuck up.

Nearly 11 million cars built between 2009 and 2015 are impacted.

Cars in question have been shown in a few studies to produce !!!error: Indecipherable SUB-paragraph formatting!!!

VW could face fines of at least !!!error: Indecipherable SUB-paragraph formatting!!! and potentially as high as 46 million in the US alone.

Approximately 482,000 of the impacted cars were sold in the US.

So say VW decided to buy back all of the 11 million cars impacted by the software fix at say an average of $12,000 per car. That would set VW back a cool $132 billion... Considering the fact that VW’s operating income is around $11 billion and its total assets are somewhere in the neighborhood of $390 billion I don’t figure a complete buy back is even remotely possible.

What about the US alone? In order to recall all 482,000 impacted cars in the US at the same price would cost at least a still hefty $5.8 billion. Keep in mind this is strictly the literal cost of taking these cars back from their owners. VW would then still have to figure out what the hell to do with nearly half a million worthless cars. I wouldn’t shy away from putting a true cost to buy back all of the US cars closer to 10 times that figure.

So a buy back likely won’t happen, but what about the complete repair? Surely there’s a way to fix these cars. Well there is, but once again cost is a severely limiting factor. Lets assume that the total cost to VW to install a urea based system on the impacted cars is $1,000 including parts and labor (it would probably be significantly more). Once you add this up you’re looking at a more manageable $11 billion worldwide and just under half a billion in the US. Add in engineering costs and international fines though and the picture is about as bleak as the buy back option.

Well what the hell can they do then? We know a software patch will result in a drop in fuel economy and performance which I have no doubt would just instigate a lawsuit on the civil side, so what other options do they have? To put it bluntly, jack shit. Unless VW can come up with a magical new NOx eliminating technology that’ll be cheaper than their current urea injection system they’re shit out of luck.

If you’ve read this far then let’s make this more interesting. Lets look at why Volkswagen did what they did. Flash back to October 2008 in the middle of one of the greatest stock market crashes in US history, when !!!error: Indecipherable SUB-paragraph formatting!!! To keep it short this is basically what went down. VW was in the process of being bought out by Porsche, Porsche made it seem like it owned only a 43% share in the company when in reality they owned 74%. This combined with another 20% stake locked up left only 6% of VW’s stock available on the public market, despite the fact that 12%+ was being actively traded. This was obviously horrible news for anyone that thought they had been trading a stock they didn’t actually own. The resulting panic caused their shares on the European market to jump upwards of 500% giving Porsche a rumored £100 billion gain and some hedge funds near £4 billion losses. While VW’s stock dropped back towards its original level quickly, they took a quiet but significant hit in the US market. VW dropped from $105 a share in early September to $29 a share under 2 months later.

To throw some speculation, perhaps this crash combined with Porsche’s buyout of a significant portion of the company was enough to both push them to the point of needing a shortcut and give them a moral low ground just low enough to justify the consequences?

HammerheadFistpunch > shpuker 03/09/2016 at 18:19

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Don’t confuse the entire pot with the engines that can’t be fixed. Any engine with the Adblue system is likely going to be fixed very easily and cheaply with software. The CBEA/CJAA engine is the troublemaker

Cé hé sin > shpuker 03/09/2016 at 18:23

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Bear in mind though that legalising the EU5 compliant engines is relatively straightforward. The issue is with North America. The whole business has pretty much blown over elsewhere and while VW diesel sales are down in some markets they’ll recover.

crowmolly > HammerheadFistpunch 03/09/2016 at 18:23

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Yeah, my Passat is one of the recall cars and it already has the urea tank.

HammerheadFistpunch > crowmolly 03/09/2016 at 18:25

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yes, its included in the recall, but its not included in the list of “maybe not at all fixable” i.e. they just have to turn on the emissions controls and do that neat little air screen trick to get it into compliance (sorry about your adblue usage increase coming)

HammerheadFistpunch > Cé hé sin 03/09/2016 at 18:32

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Frankly, Im a little disgusted at the regulatory field day thats happening over here with this that has nothing to do with:

a. Reducing pollution

b. Helping consumers

This is political payday and nothing more and the end results will be bad for either the planet, the consumer or both...but hey, politicians win, so... hooray

Saracen > shpuker 03/09/2016 at 18:44

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They’re not buying back 11 million cars. Not even a small fraction of that.

HammerheadFistpunch > Saracen 03/09/2016 at 18:50

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My guess is that if a buyback were to occur it would be about 350,000 US cars and maybe another 500,000 elsewhere. 850,000 cars at a full market $25,000 means 21.25 billion. Given that the fines will be at least twice that...its odd to me they haven’t just offered to buy them back and get the government off their back with a gesture of faith.

Saracen > HammerheadFistpunch 03/09/2016 at 18:59

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It ain’t gonna be full market value either. No effing way. It’ll be fair market value based on year and mileage.

HammerheadFistpunch > Saracen 03/09/2016 at 19:00

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Yeah, I was going best possible case scenario...and hoping.

His Stigness > HammerheadFistpunch 03/13/2016 at 00:29

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They’ll probably also need to install a new NOx trap too as it’s probably not as effective as it can be. But that’s an easy fix too, and cheaper than buying the cars back.

On a related note, I think VW’s proposed fix of a different NOx trap for the CBEA and CJAA motors would have worked, but it would require CARB to trust VAG, and I’m sure it would require replacement within 100k miles, and we have no idea if VAG was going to offer a competent warranty on the repairs.