VW emissions crisis: UK to retest vehicles as owners call in lawyers – as it happened

Here’s more from London-based law firm Leigh Day on the potential claims for UK customers following the VW emissions scandal. The firm’s Bozena Michalowska-Howells said:

If it emerges that these cars in the UK passed tests because of this software, with emissions higher than legally permitted on the roads, then this is not only a breach of contract but a flagrant breach of EU emissions regulations, which specifically prohibit the use of defeat devices. Consumers are thus entitled to bring claims for compensation directly against VW.

In the event of a UK recall, Volkswagen should initiate contact with its customers to make arrangements concerning a repair. Consumers could be entitled to seek compensation for any increased fuel costs, depreciation of vehicle value, out of pocket expenses and costs associated with future repair including potential increases in Road Tax.

Those drivers who were charged more for the ‘clean diesel’ version of a vehicle could also be entitled to a refund of the difference in price.

In the last two days we have been inundated by Volkswagen owners who bought these vehicles specifically because of their alleged reduced fuel emissions and who are outraged by the company’s actions. They are looking to form a group action.

And as a reminder, here’s our Q&A on how the scandal could affect you if you are a VW car owner:

On that note, it’s time to close up for the evening. Thanks for all your comments, and we’ll be back again tomorrow.

UK motoring organisation the RAC has welcomed the government’s investigation into emissions tests. RAC chief engineer David Bizley said:

While there is no evidence that other manufacturers have been seeking to defeat emissions tests, news that the Government is launching its own investigation should go some way towards restoring battered consumer confidence.

The VW revelation is now shining an uncomfortable light on the emissions testing system, parts of which have been recognised for some time by all parties to be well past their ‘sell by’ date.

A new EU test has been in the pipeline for some considerable time, and the expectations are that results will be much closer to real-world driving, but it is unrealistic to think a laboratory test will ever mirror completely a car being driven on a real road by different drivers.

As this is not due to take effect until 2017 all attention must now be put on ensuring the test cannot be defeated by software so that consumers can be confident in the emissions levels of the vehicles they are buying.

With shares in motor manufacturers falling – VW apart – and further declines in commodity prices due to worries about economic growth, particularly in China, it was another down day for stock markets.

In the US poor results from Caterpillar added to the gloom, ahead of a speech by Federal Reserve chair Janet Yellen. The final scores showed:

• The FTSE 100 finished down 70.75 points or 1.17% at 5961.49
• Germany’s Dax dropped 1.92% to 9427.64
• France’s Cac closed 1.93% lower at 4347.24, with Peugeot down 3.6% and Renault 1.8% lower

On Wall Street the Dow Jones Industrial Average is currently down nearly 190 points or just over 1%.

Here’s our report on the UK plans:

The British government is to set up its own inquiry into car emissions and testing – including rerunning lab tests on suspect engines and conducting on the road emission tests.

It had called on the European Commission to carry out a Europe-wide investigation into the industry in the wake of the VW test-rigging scandal.

The UK’s regulator, the Vehicle Certification Agency – a division of the Department for Transport – will work with manufacturers across the industry.

Transport secretary, Patrick McLoughlin, said: “The Government takes the unacceptable actions of VW extremely seriously. My priority is to protect the public as we go through the process of investigating what went wrong and what we can do to stop it happening again in the future.

“We have called on the EU to conduct a Europe wide investigation into whether there is evidence that cars here have been fitted with defeat devices. In the meantime we are taking robust action.”

He said the VCA would work with vehicle manufacturers to ensure that the issue was limited to VW and not industry wide. “As part of this work they will re-run laboratory tests where necessary and compare them against real world driving emissions.”

And here’s piece of video on the VW scandal, what the company did and why:

And the fallout continues. The European Commission has said there would be “zero tolerance” on car emissions fraud, while the Russian technical watchdog has asked for information from Volkswagen about its diesel engines.

Meanwhile Moody’s is the latest ratings agency to change its outlook on the company to negative.

A reminder of what VW has actually done and how its defeat device managed to cheat emissions tests:

Volkswagen needs to change its corporate culture according to the company’s works council (which at this point seems a pretty self evident comment.)

In a letter to employees, the council said it would discuss with management how to cope with the costs arising from the scandal, and how to accelerate its efficiency drive. But it says it will do everything possible to make sure jobs will not be affected.

On the new chief executive to replace Martin Winterkorn, the council said it would only accept someone with technical and entrepreneurial expertise, who would consider the needs of both the company and the employees.

If you have bought a VW car in the UK, the company has so far said very little about how the emissions scandal could effect you. Dealers are telling customers it is business as usual. But should you be worried? Here’s our Q&A:

France is planning to carry out tests to make sure cars on its roads are not equipped with the software which VW used to fake emissions tests.

After a meeting with carmakers Renault and PSA Peugeot Citroen, the country’s environment minister Segolene Royal told BFM television:

Random tests will take place to establish cars are not equipped with fraudulent software.

The tests are expected to involve a random sample of around 100 vehicles.

Volkswagen adverts routinely used to boast about the company’s reliability and efficiency, which looks a bit ironic now. Here’s some of the best from the archive:

Volkswagen could have its long term credit rating downgraded in the wake of the €6.5bn charge the company has set aside to deal with the crisis, says Standard & Poor’s.

The agency has put VW’s A rating on creditwatch with negative implications, and said it anticipated the company would face substantial penalties and costs to resolve the problem.

There is also the matter of any legal costs following an expected barrage of lawsuits.

Here’s our report on the possible payoff for the former VW boss who quit on Wednesday:

The former chief executive of Volkswagen, Martin Winterkorn, will net a €1m (£740,000) annual pension from a €28.5m pot held with the disgraced carmaker, and could be in line for a €3.2m payoff after quitting on Wednesday.

Winterkorn, who was one of Europe’s highest-paid executives, with a salary of €1.6m boosted to nearly €16m last year with bonuses and loyalty payments, finally fell on his sword as the extent of the emissions test-rigging scandal emerged.

Winterkorn is entitled to 70% of his fixed salary, according to Volkswagen’s annual report, from his staggering €28.5m pot. He may also be entitled to two years’ salary severance pay if “membership of the board of management is terminated for cause through no fault of the board of management member”. Winterkorn stressed when he resigned that he was “not aware of any wrongdoing on my part”.

Full story here:

Italy has also opened an investigation into whether VW’s manipulation of emissions data affected cars in the country, the latest probe into the company. It was launched by the prosecutor’s office in Turin.

VW has admitted 11m of its cars around the world could be involved.

Meanwhile Italy has launched a study into possible health risks associated with diesel emission filters used in cars throughout the EU.

The worries pre-date the current VW scandal but they add to the general mood over uncertainty over diesel. Reuters reports:

The concern over the filters, raised by an Italian prosecutor, pre-dates the Volkswagen emissions scandal and relates to devices which were installed by various car makers from 2008 onwards.

The health ministry decided to investigate the matter after Rome’s chief prosecutor wrote to the government in July, referring to expert opinion alleging the filters increased the risks to health of diesel emissions rather than reducing them, and saying they posed an “extreme danger”.

The letter, obtained by Reuters, was sent by Prosecutor Giuseppe Pignatone to Italy’s ministers for health, transport and the environment. It said the filters reduced the size of pollutant particles, making them more easily absorbed by humans.

The letter is critical of all three ministries and says that the environment ministry has not conducted any studies into the impact of the filters on air quality or human health.

An Italian health ministry spokesman told Reuters the ministry had asked the Superior Health Institute to conduct a study into the matter after receiving Pignatone’s letter.

Germany’s main stock index, the DAX, has now slumped by 200 points, or 2.1%, to 9,407, as the Volkswagen scandal hits confidence in German industry.

Ironically, VW remains the only riser on the index, with BMW still the top faller despite denying manipulating emissions tests.

Some analysts are speculating that authorities have been deliberately turning a blind eye to emissions tests for years, due to the importance of the sector.

Mike van Dulken, head of research at Accendo Markets explains:

Shares in BMW are weak again today on speculation that its diesel emissions test results may also have been doctored to appear eco-friendly and thus saleable in the world’s second largest but arguably the most important car market; the US. While this adds to this week’s VWgate revelation, confirmation of yet another major carmaker having potentially been ‘at it’ will hardly come as a surprise for such a highly competitive industry.

As more details emerge about the extent to which VW, BMW and likely others may have gone to pull the wool over regulators’ and of course the public’s eyes, it begs the question of how ‘polluted’ the industry will turn out to be.

Today’s fall in BMW’s share price shows that investors are very nervous about “diesel engines, compliance and future regulation,” Arndt Ellinghorst, head of Automotive Research at Evercore ISI, told Reuters.

Pressure is growing on the UK government to follow up its call for a European Commission inquiry, after the Guardian revealed that the Department for Transport had been lobbying in private for less rigorous tests.

Environmental law organisation ClientEarth has written to the DfT demanding it take action to establish whether VW’s use of “defeat devices” was part of wider industry practice, and to release all information held on the real-world emissions performance of cars licensed for sale on UK roads.

James Thornton, CEO of ClientEarth, said:

“Five days into the diesel emissions scandal the government has taken no action to reassure the public that cars on our roads meet even the lax standards required by EU law. The industry has shown it cannot be trusted. We cannot wait for action from the EU.

First responsibility for protecting our health lies with our own government. The public must know the full scale of the problem and urgent action must be taken to fix it.”

Here’s our full guide to the potential candidates for the toughest job in industry today – steering Volkswagen out of the crisis.

Matthias Müller, the CEO of Porsche, is odds-on to become the new boss of Volkswagen.

He’s followed by four company insiders, led by Herbert Diess, who runs Volkswagen’s passenger car brand.

Here’s the latest odds from Ladbrokes:

• 1/2 Matthias Muller
• 4/1 Herbert Diess
• 5/1 Rupert Stadler, the chairman of Audi
• 5/1 Andreas Renschler, who runs Volkswagen’s commercial vehicles arm,
• 6/1 Winfried Vahland, CEO of Škoda

Volkswagen could begin firing staff tomorrow over the emissions scandal, Reuters reports.

An internal investigation is underway to find who was responsible for programming VW diesel cars to emit lower levels of nitrogen oxides.

Reuters adds:

Top managers could also be replaced, even if they did not know about the deception, with U.S. chief Michael Horn and group sales chief Christian Klingler seen as potentially vulnerable.

Germany’s stock market has hit its lowest level since late August, dragged down by reports that some BMW cars have failed emissions tests (details here).

Emmanuel Macron, the French economy minister, has said there is no evidence that the big French car makers – Renault and Peugeot – are guilty of fiddling their emissions tests.

He also warned against an over-reaction that could put jobs at risk.

Speaking at a breakfast at the French embassy in London ahead of an inward investment conference, Macron said VW had betrayed customers and governments.

“At the moment it seems to be restricted to VW, due to the pressure of the market and the pressure they put themselves under.

“We have to be careful that just because somebody lied we don’t kill all the others. We have to be careful that we don’t put at risk a lot of jobs because of the misbehaviour of one player.”

Unsurprisingly, Volkswagen’s image among consumers has been dented by the emissions scandal.

Polling firm YouGov has found that the public’s perception of the VW brand has slumped since last week:

Our Buzz score measures whether a respondent has heard anything positive or negative about a brand in the last two weeks.

A dramatic drop in Buzz score is present in both markets. In the US, there has been a drop of ten points from +10 to 0. In the UK, VW has seen a decline from +5 to -3 in the last few days. It is now the lowest ranked car brand in the UK in terms of Buzz (out of 34). This is a fall of 31 places in a week.

More details about exactly who at VW was involved in the scandal could come tomorrow:

BMW’s share price is swerving around today, dropping 4% at one stage to become the biggest faller on the DAX.

They had been 3% higher in early trading, in what the FT calls “a very skittish mood”.

The Volkswagen diesel emissions scandal could be as serious as BP’s Gulf of Mexico oil disaster, warns professor Baback Yazdani, dean of Nottingham Business School.

Professor Yazdani, a former director of Product Development Operations at Jaguar Land Rover, believes the financial consequences could be immense:

“This could be an unprecedented loss for VW, which became the world’s largest automaker this year.

This may be at the same scale as BP’s Gulf of Mexico disaster, or worse, proving that responsible management and leadership is of prime importance to all companies.

The financial consequences are too early to calculate as the warranty costs will be combined by loss of consumer trust and potential fines in North America, Europe and beyond. The resignation of CEO Martin Winterkorn is an attempt to draw a line and make rapid changes.”

In July, BP agreed to pay a record environmental fine of .7bn over the Deepwater Horizon disaster; VW has now hired the legal firm which BP used.

VW shares are continuing to climb this morning, and are now up almost 7% at €119.

Clairinvest fund manager Ion-Marc Valahu says investors in Frankfurt are welcoming the departure of Martin Winterkorn.

“They’ve kicked out the CEO. The company and its shares should be able to stabilise.”

(via Reuters)

Shares in Japanese carmakers fell today, on fears that they could be hit by the emissions scandal.

Mazda led the selloff, down 6.8%, followed by Mitsubishi (-5%), Honda (down 3%), and Nissan (-2.5%).

Manufactures of car parts were also hit. NGK Insulators, which makes diesel particulate filters, fell almost 7%.

That all helped send the Nikkei index down by 2.7%, as traders returned to their desks after a three-day holiday

Toyota was less affected, only falling by 1.85%. It could benefit from the scandal, if more consumers buy electric cars such as its Prius.

It has emerged overnight that Volkswagen told customers in California five months ago that their emissions software needed upgrading.

Reuters has the story:

In April of 2015, Volkswagen of America sent letters to California owners of diesel-powered Audis and Volkswagens informing them of an “emissions service action” affecting the vehicles.

Owners were told they would need to take their cars to a dealer for new software to ensure tailpipe emissions were “optimised and operating efficiently.”

The company didn’t explain that it was taking the action in hopes of satisfying government regulators, who were growing increasingly sceptical about the reason for discrepancies between laboratory emissions test results and real world pollution from Volkswagen’s diesel cars.

However, the fix did not address those concerns, regulators say.

This raises even more questions about how long Volkswagen has been aware of the issue, and how high up the management chain the concerns went. Here’s the full story.

The Volkswagen crisis has shown that corporate governance at the carmaker failed badly, and other company bosses must be worried.

Nick Anderson of Henderson Global Investors tells Bloomberg TV:

Every CEO in Europe must be thinking about the culture in their business, and their whistle-blowing policy.

Henderson predicts that Volkswagen could lose 3 to 4% of market share, based on previous car scandals, and also lose pricing power – meaning new VW’s will be cheaper.

The Volkswagen scandal could even hurt growth across Europe, if other carmakers are drawn in.

Rabobank strategist Jane Foley believes it could even hurt the value of the euro – if investors are scared away from Europe.

She told Bloomberg TV:

We don’t know that other carmakers aren’t going to be drawn into this scandal, we need to see how this develops.

One in six people in Germany are employed in the auto-related sector, by some measures, she adds, making them vulnerable if German exports suffer.

Foley warns:

It has the potential to spread. If it does, it certainly could affect European growth, and then the euro too.