Recall to Nowhere

vwVolkswagen has agreed to pay $10.2 billion to settle its U.S. emissions scandal case, according to the Associated Press, citing two anonymous people briefed on the matter, in what would be one of the largest payouts by an automaker in history.

The case stems from the carmaker’s 2015 admission that 11 million vehicles worldwide had cheating software designed to get around emissions tests. The settlement will compensate owners of 482,000 vehicles with two-liter diesel engines that were programmed to turn off emissions measurement data outside of laboratory settings. The German automaker will pay owners between $1,000 and $7,000 per vehicle in compensation and promised to fix the cars free of charge to keep them from spewing 40 times the legal limit of harmful nitrogen oxides, according to the AP. Of the $10.2 billion, about three-fourths would go to car owners, with the rest paying off government fines.

U.S. District Judge Charles Breyer has imposed a gag order on settlement discussions. “This should be a wake up call that cops need to be on the beat and the government needs the resources to stay on top of these issues,” said John M. DeCicco, a research professor at the University of Michigan Energy Institute. “What came out in the course of the current diesel scandal is a history of scofflaw attitudes on the part of Volkswagen in regards to emissions that dates back to the 1970s.” The $10.2 billion settlement, if approved by the court, far exceeds other payouts by carmakers and nears some of the largest settlements reached with the government of all time.

BP in 2015 reached a $20.8 billion settlement over the 2010 Deepwater Horizon oil ring explosion, funds that were paid out to businesses, victims, local governments, clean-up efforts, and other entities. It separately agreed to pay another $4 billion in a criminal case. Toyota paid $1.1 billion after in 2012 after its gas-pedal recall. General Motors in 2015 agreed to pay $900 million after an ignition-switch defect. Volkswagen’s decision to equip 11 million vehicles with devices to cheat emissions tests worldwide has sent the company into an acute corporate crisis in recent days. But on Dec. 2, 2014, the company assured U.S. and California regulators that its engineers had a straightforward solution. Volkswagen told officials then that a software change would remedy the overflow of pollution emitted by its diesel cars, according to state and federal letters to the company. At the time, Volkswagen proposed a “voluntary recall” of about 500,000 vehicles. State and federal officials approved the plan. That fix was either a technical failure or, some officials said, another ruse.

By May of this year, California tests showed that “the recall calibration did reduce emissions to some degree but NOx [nitrogen oxide] emissions were still significantly higher than expected.” The extent of the recall, which is discussed in letters between government and company officials, is unknown. Company officials wouldn’t say this week how many recall notification letters Volkswagen issued to consumers, and how many consumers brought their cars in for the purported fix. But the incident is one of the highlights in what federal and state officials have likened to a cat-and-mouse game between regulators and one of the world’s largest automakers. “They basically ran out of excuses,” said Stanley Young, spokesperson for the California Air Resources Board. “They would say the tests weren’t at the right temperature, or some other issue. We had them in [to our offices] several times.”By May of this year, California tests showed that “the recall calibration did reduce emissions to some degree but NOx [nitrogen oxide] emissions were still significantly higher than expected.”  Environmental Protection Agency administrator Gina McCarthy said on Tuesday that the agency would step up efforts to look for cheating by other manufacturers, though she suggested that Volkswagen was an “outlier” in the extent of its cheating to defeat emissions standards.

 

“We are not going to sit around and worry about whether or not there are other devices. We’re going to find it,” she said. “So right now we’re upping our game in terms of going out and doing the work to take a look at what we need to do with other vehicles.” The company’s dire diesel troubles have erupted over just a few days, but they were a long time in gestation. The regulations that shaped the design of the diesel engines were put in place more than 15 years ago, when the EPA finalized rules that raised the emission standards for diesel cars. After a years-long grace period, the tough standards were phased in between 2004 and 2007. At the time, the government acknowledged that meeting the standards for NOx, or nitrogen oxide, as well as soot, would be difficult. “Manufacturers have expressed concerns that diesel-fueled vehicles would have difficulty meeting NOx and particulate matter levels like those contained in today’s rule,” EPA officials wrote in issuing the new standards. “Clearly, these standards will be challenging.” For a time, Volkswagen and other automakers stepped back from the U.S. diesel car market. It was a time to retool. Experts said the challenge of making a diesel engine clean enough for the U.S. standards — without compromising how the engine works — is very difficult.

“NOx is more of a challenge for diesel engines than it is for gasoline engines,” said John Storey, distinguished research and development staff member at Oak Ridge National Laboratory. “The strategies companies use to clean them up all have an impact on performance, fuel economy and maintenance.” The engineering hurdles in controlling diesel emissions are high enough, some experts said, that they may provide an incentive for companies to skirt the rules. “I can’t say I’m surprised,” John M. DeCicco, a research professor at the University of Michigan Energy Institute, said of the recent revelations. “The temptation to game the system with a defeat device is definitely high because of the technical challenges.” The extent of the recall, which is discussed in letters between government and company officials, is unknown. Company officials wouldn’t say this week how many recall notification letters Volkswagen issued to consumers, and how many consumers brought their cars in for the purported fix.

Because prosecutors found Volkswagen’s violations worse, any settlement would dwarf previous penalties, said Carl W. Tobias, a professor of law at the University of Richmond. “The regulators and the courts must hold Volkswagen fully accountable for its polluting practices. If accurate, these early reports suggests the settlement is getting closer to holding Volkswagen accountable, but not close enough,” Sierra Club California Director Kathryn Phillips said in a statement.

“Volkswagen’s deceit is as dangerous as the smog left behind by its vehicles’ tailpipes — some of which may still be left on the road. If that’s true, it’s doubly important that penalties in the settlement are high enough to make a difference. The money needs to be spent in a way that communities hit hardest by Volkswagen’s pollution — those located along highways and other busy traffic corridors — feel the benefit.”