Three and a half years may have passed, but ‘Dieselgate’—which rocked the Volkswagen Group in 2015, and altered public perception not only of the VW brand, but also its Group siblings, the reputation of the German automotive industry and even other unrelated automakers and suppliers—has never gone away. And this month it made a spectacular return to headline news when prosecutors in the German city of Braunschweig pressed criminal charges against former VW Group Chief Executive Martin Winterkorn in connection with the diesel emissions test defeat device scandal.
The Volkswagen Group suffered heavily in the months and years that followed the emissions cheating revelations, but it rode the devastating damage, quickly regrouped and continues to go from strength to strength. Indeed, it has used its response to the scandal to its advantage, seeking to leverage its major investments in electrification to leapfrog its competitors in the e-mobility race.
“E-mobility is the only way forward to achieve climate targets,” VW said at a recent Societe Generale roadshow. The company also noted that battery electric vehicles, “are first choice as the most cost effective solution for CO2 reduction,” and has set itself the target of a CO2-neutral fleet by 2050.
Global automotive industry growth is slowing, however, with industry trends changing, the climate change discussion heating up, and—ominously—pressure on the top decision makers is now greater than ever
But what VW refers to as the ‘Diesel issue’ has been costly; “Diesel special items” booked to date total €29bn (US$32bn), according to the same presentation, and the company has made significant payments. Already, it says, it has paid out €24.4bn, and expects payments of a further €2.2bn in 2019 and €1.5bn in 2020. Beyond the scandal’s financial penalties lie the custodial: former Audi Chief Executive Rupert Stadler spent four months in German custody in 2018 on charges relating to the emissions scandal, forcing him ultimately to resign his post, and two former VW managers have been jailed in the US.
Braunschweig prosecutors have reportedly collated 300 folders running to 75,000 pages of what they believe is sufficient evidence to bring charges against the man who was once the highest paid chief executive in Germany. When he stepped down in the heat of the scandal in 2015, Winterkorn denied any knowledge of wrongdoing relating to emissions testing and reporting, but the prosecutors appear to believe they can show he knew about it as early as April 2014, and the charges relate to events leading back to 2006. Winterkorn is one of five executives charged with alleged serious fraud and violation of competition law, with the threat of custodial sentences, the forfeiting of bonuses and possible further legal action by their former employer.
Winterkorn is expected to put up a robust defence during what are likely to be lengthy legal proceedings with high stakes: the charges filed against the five executives reportedly could lead to jail terms of anywhere between six months and ten years. Winterkorn has also been indicted in the US for fraud and conspiracy to violate the Clean Air Act. A warrant for his arrest was issued in the US in 2018, where he could face a 20-year jail term, but Germany has no formal extradition agreement with the US.
The criminal charges against ‘Wiko’ coincide with new charges brought against former Renault-Nissan Chief Executive Carlos Ghosn; in early April, Ghosn was arrested for the fourth time since November 2018, leading to a second period of detention
The criminal charges against ‘Wiko’ coincide with new charges brought against former Renault-Nissan Chief Executive Carlos Ghosn; in early April, Ghosn was arrested for the fourth time since November 2018, leading to a second period of detention. Bail of US$4.5m has reportedly been granted, along with a fresh charge of diverting funds for personal gain. As Japan heads into Golden Week, Ghosn will head to his lawyer’s office to prepare his defence. With Japanese authorities wrapping up their investigations, the case will move to the courts for a highly anticipated legal battle as Ghosn seeks to salvage his reputation. The magnitude of the charges, and the complexity of the alleged financial transactions are such that a trial is unlikely to begin before early 2020, and is expected to run for a number of years.
The two scandals have seen the spectacular downfall of three globally feted chief executives, sending shockwaves through their companies, and have directly impacted those companies’ strategies; in the case of VW Group, its renewed focus on electrification, and in the case of Renault-Nissan, the very relationship between those two companies. Yet at an operational level, these businesses push on in a growing and evolving global industry—as noted in the latest edition of the quarterly Automaker data book published by Automotive World, the global vehicle market will cross the 95-million-unit mark for the first time in 2019. Global automotive industry growth is slowing, however, with industry trends changing, the climate change discussion heating up, and—ominously—pressure on the top decision makers is now greater than ever.
