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Now is the Winterkorn of our discontent | Roads-2-Roam.com

Now is the Winterkorn of our discontent

The front page of the Economist 23rd October edition

The front page of the Economist 23rd October edition

The repercussions of the Volkswagen emissions gets worse by the day. For those not following it:-

  • The CEO, Martin Winterkorn, has resigned just as he was about  to renew his contract for 2 years. He was known as “Mr Quality”. More executives are likely to resign or be fired. The big question remaining is who knew and who sanctioned it.
  • VW Stock market value has plummeted where it has lost 1/3rd of it value in just two days: ~$30B. Expect the stock to go much lower. You’d be foolish to buy with this amount of uncertainty.
  • VW has said that European diesel cars have same software to fool the test.  In terms of impact, Europe has around 11 million out there compared to 1/2 million in the US.
  • The talk remains about criminal charges. US Department of Justice, the EU and Germany prosecutors area all looking into it. Japan and India as also waking up.
  • As predicted,  law firms have started to file class actions lawsuites under the rational that the consumers were duped. Some are also using for the ’emotional distress’ angle. The used car value of Volkwagen diesel cars is a big unknown. Who would want them?
  • There is also likely going to a political fallout in Germany where it is being said that German Government knew about this back in July. VW, whose HQ is in Wolfsburg, are big political players in Germany due to the number of people they employ. The Volkwagon group that includes Porche and Skoda, were gunning for Toyota to be the biggest car manufacturer in the world.
  • The regulators themselves are also coming under scrutiny. Many are asking how they designed and blessed off on these tests and allow each car manufacturer to run the tests themselves. It took a presure group and University in West Virginia to identify this. Regulators (Federal, Californian/ EU) were oblivious.
  • The scandal is dragging BMW into the mess where it is also being reported that while it passed the ICCT test that busted VW, it’s cars are not as clean as their marketing is claiming.
  • Knock on  business effects are also being seen areas from the commodity price for platinum which is used as a catalytic converter to reduce emissions, to the weakening of the Euro.

While Volkswagen has set aside reserves for the US fine, the overall consequential damages may bankrupt them. Even if it doesn’t initially, the brand is trashed.  It looks as if we are seeing the death knoll of “Clean Diesel” for VW as well as other players.  Emissions standards are going to get tighter and performance will drop off. Thus even if they survive, the demand for the product may not be there as people paid a premium for their diesel cars.

There is no good news whatever way you look at it.