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VW scandal and impact on German economy


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VW scandal and impact on German economy

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  #21 (permalink)
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I wonder if the result of this will be that one could get a perfectly-compliant gasoline powered Audi at a steep discount, due to halo effect.

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  #22 (permalink)
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PeakGrowth View Post
You literally know everything @Fat Tails it's almost scary.

I think VW will go under, or broken up and sold for parts.

This is bad, I got 3 VW's in the family and one of them is diesel, my almost 3 yr old niece rolls in the diesel

This could be the end of diesel, if every authority around the world retests all diesels from all manufacturers in real world tests (and not on rollers) and they find they are all doing it - I wouldn't be surprised if they all are to some degree.


I don't think VW will be broken up. On the contrary I think that the scandal will be a major catalyst for manufacturing cleaner cars. There is a case pro Diesel and there is a case against Diesel.

Also it is no accident that Volkswagen was caught in the US. The US legislator seems to be more or less indifferent to climate change (global warming, mainly a consequence of CO2 emissions), but has its focus on reducing toxic emissions in urban areas.


Pro Diesel

The fuel efficiency of US vehicles is a desaster, when compared to internationals standards. As a consequence current CO2 emissions are around 120 g/km in Europe, while they are over 180g/km in the US.

Attachment 193857

Diesel cars are generally more fuel efficient than gasoline cars, which contributes to the relatively low CO2 emissions in Europe. CO2 emissions in the US were 17.0 metric tons per capita. Compare this to 8.9 metric tons in Germany and 9.3 metric tons in Japan. Other countries like the United Kingdom (7.0) or France (5.2) haven even lower emissions.

The USA are by far the worst contributor to greenhouse gas emissions in the world.


Contra Diesel

The case against Diesel motors are the toxic emissions which are a by-product of the combustion process. Main problems here are particulate matter (soot) and NOx. In Europe focus was less on NOx, but on soot which is known to be cancerous. Also the main source of NOx emissions in urban areas are trucks and buses, not passenger cars. But let us look at the figures.

Brussels has introduced NOx limits of 40 micrograms per cubic meter. Meanwhile there is an hourly reoprting available via internet where you can check air pollution for the current day. The hourly reporting has layers for O3 (ozone), NO2, CO, SO2 and PM 10. You can find it at

EEA :: NRT Viewer

The screen map below shows the NOx concentration in Germany, UK, Belgium, Austria and Northern Spain over the last hour. The light green and yellow (London) points show the areas where the EU limit for the annual average of 40 micrograms per cubic meter (20 ppb) is currently exceeded. There is also an hourly limitt of 200 micrograms per cubic meter (100 ppb).



The US national ambient air standards have the limit set a 53 ppb (or 106 micrograms per cubic meter) which is 2.5 times higher than the European limit. Both limits refer to an annual mean. There is also an hourly limit at 100 ppb (200 micrograms per cubic meter) for the 98% percentile. I could not find accurate data for single cities, but the document below suggests that NOx concentrations in US cities are slightly lower than in their European counterparts.

VW scandal and impact on German economy-no2coso2.pdf


Both greenhouse emissions and NOx emission are twice as high in the US compared to Europe

Nevertheless, if you look at emissions of NOx per capita or per GDP, total emissions in the US are about twice as high as in Europe. The United States remains the dirtybird of the world.

VW scandal and impact on German economy-nox-emissions-per-country.pdf

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  #23 (permalink)
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The financial impact for VW is immediate and severe

1) the ECB has put VW on a black list

2) the CDS (Credit default swap) prices have soared. This is the price one has to pay as an insurance
against insolvency. Insolvency for the next 5 years are now priced on 19% chance

3) bond prices have fallen and result in the return shooting up from 2.3 to 3%
this is still low one can think
but keep in mind that this is in a near zero rate environment
so VW is paying a huge premium on its debt
In a not so distant history VW debt paid 1%

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  #24 (permalink)
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rleplae View Post
The financial impact for VW is immediate and severe

1) the ECB has put VW on a black list

2) the CDS (Credit default swap) prices have soared. This is the price one has to pay as an insurance
against insolvency. Insolvency for the next 5 years are now priced on 19% chance

3) bond prices have fallen and result in the return shooting up from 2.3 to 3%
this is still low one can think
but keep in mind that this is in a near zero rate environment
so VW is paying a huge premium on its debt
In a not so distant history VW debt paid 1%

Clearly, there are both immediate and long-term potential consequences.

In addition to the above list, which looks pretty severe to me , VW has also set aside several billion (as I recall, over 6 billion in Euros, or over 7 billion in dollars) as a reserve against various losses, including fines and lawsuits. That comes to about half of a full year's profit (!).

I would say that it is likely not going to be enough, particularly in the face of the most serious of both the short and long-term consequences: loss of sales due to loss of trust. That is what will sink them, if anything does.

We may see a merger or a sale before this is done. It may be the best, or only, way to get out from under the blow to their reputation, as well as to recover some value for the stockholders -- who may, in fact, demand it if things start to really go badly financially.

Bob.

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  #25 (permalink)
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The charges in US for the 500k cars with that motor software are calculated up to 18 billion Euros.
Not included the consumers who want some money back...
Even higher will be the punitive damages (US legal) that can have a leverage of 200.

In fact - the 500k cars in US are not the big deal: there are more than 11 mio cars with the same
motor software sold in Europe... The type of motor is Typ EA 189.

As first country taking action we have seen Switzerland forbidding to sell NEW cars of this type
immediately. This means that parts of the sent fabrication have to be modified...
But the license is void - as long no proof is on the table that the motors are working within the limits.

One last point: The software is coming from german Bosch company. They handed it over to VW
several years ago - saying that it is illegal and only for testing use. But VW took it to put it on all
diesel motors from 1,2l 1,6l and 2l sold for vehicules built in many countries.
The known brands using this motor are VW, Skoda, Seat as well as Audi (with models A1, A3, A4, A6).

As we see that not only VW brand is in difficulties - the weight coming from other manufacturers
than VW will have a special impact.

Finally - the money set aside by VW (6 billion EUR) does NOT cover even a part of all the costs
flowing in for the next 5 years for all the legal side.

Just think of US is stopping the license on all 500K running cars: every such car would have to be
parked and no longer used...

So - VW is in a most difficult situation right now.

GFIs1

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  #26 (permalink)
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A short glimpse on the technical side:

Diesel motors are emitting Nox. On a bigger motor some good technical processes can
bind the Nox and eliminate to push it into the air. The larger cars with bigger motors
are not concerned: even trucks are not having the problem as there a product AdBlue
(liquid urea) is used to filter and bind the Nox.
But smaller motors (the niche of VW models) have a bigger problem - as the motors do not
have efficient Nox treatment. VW wanted to lessen Nox whith a AdBlue tank. But in
the driver had to fill up AdBlue on every 3rd tank of diesel.
As the gas stations in USA are not so dense and not selling AdBlue for the small percentage
of Diesel cars - VW decided to go the way of cheating - just blowing out Nox to not fill
up the catalisator.
Now this illegal way has found a sudden end.

GFIs1

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Germany:

The ministery for vehicules (Kraftfahrtbundesamt) has given a limit until 7th october for VW to show
their masterplan how to deal with the vehicules with cheating software at clients and on stock.
If the plan is not coming or is not good enough then the license will be cancelled.

Italy:
The government announced today to make tests on 1000 VW cars from next week. Every test will cost
8000 Euro per test. They will not wait for numbers given by german VW. So Italy has own results within
3 months.

Belgium:
A belgian importer of VW has taken out 3200 cars with said motor from the showrooms. He says that in Belgium
(which is a Diesel country) around 500000 cars are involved in this VW scam running in the streets.

Taking action means putting new software into the engines - at least.
And for the consumer it means MORE diesel consumption and less power.
On every single vehicule...

GFIs1

source: https://www.spiegel.de/wirtschaft/unternehmen/volkswagen-konzern-plant-rueckrufaktion-fuer-diesel-a-1054964.html

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Former CEO of VW Mr. Winterkorn who stepped down this week was the manager with the highest salary
per year in Germany: measly 16 million Euro.
He will probably get another 16 million for 2016 as his contract will end by then...
But for his future as pensionist the company has set aside another 28 million Euro for him.
Plus a car for mister Winterkorn with driver.
And an office in VW central building for a lifetime.

Any words?

GFIs1

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  #29 (permalink)
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Quoting 
As we see that not only VW brand is in difficulties - the weight coming from other manufacturers
than VW will have a special impact.

The issue that I'm most curious about is which other manufacturers besides VW might be sweating bullets, right now, waiting for the shoe to drop on their defeat devices. If any other manufacturers were trying to pull a fast one, there's some really cheap puts to be purchased.

I've actually done some preliminary research into doing some real life scuttlebutt, e.g. doing emissions testing myself/or hiring a 3rd party, but as near as I can tell, it's an endeavor beyond my resources and abilities. Perhaps some car nerd with too much time on their hands did a DIY and posted the results on some unnoticed out-of-the-way car forum somewhere on the web...

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  #30 (permalink)
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GFIs1 View Post
Former CEO of VW Mr. Winterkorn who stepped down this week was the manager with the highest salary
per year in Germany: measly 16 million Euro.
He will probably get another 16 million for 2016 as his contract will end by then...
But for his future as pensionist the company has set aside another 28 million Euro for him.
Plus a car for mister Winterkorn with driver.
And an office in VW central building for a lifetime.

Any words?

GFIs1

I think they should replace him with Bill Belichick.
He will get it sorted for them LOL.

Now that the dirty old ladies are out of the commercials they can bring in
Tom Brady to be their new spokesman. He can explain how it's a big misunderstanding.

The problem- you see is that the Firestone tires on these cars were under inflated.
The fix is simple- No problemo.

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