This Time Volkswagen Really Did It Again

Volkswagen has a new high-tech Microbus concept car on display at the Detroit Auto Show, which is really cool (and I hope to see it at the New York auto show in April), and it's touting its new Atlas SUV, being introduced this spring (relax, I'll get to that later), but it still has to deal with the aftermath of the diesel emissions affair, the scandal that just won't go away.  The German automaker pleaded guilty to a conspiracy to hide cheating on emissions test - one count of conspiracy to commit fraud, one count on obstruction of justice, and one count of entry of goods by false statement.  This comes after it was discovered that top VW executives in Wolfsburg learned about the emissions-cheating software in TDI engines just before the scandal broke. Well, two months before the scandal broke . . . 

And what's more VW officials who did know about the scandal told engineers to destroy all documents related to the emissions-test-cheating software a short time ago.  Well, four or five years ago . . .   

Oh yeah, and a VW executive in charge of Volkswagen of America's environmental and engineering office was arrested in Florida for his involvement in the scandal.  He was one of six individuals who were indicted; the other five are in Germany and are as likely to set foot in this country as Roman Polanski is.

You know, VW could have saved itself a lot of trouble if Martin Winterkorn or whomever had gone to U.S. regulators as soon as this rogue operation was uncovered in-house before it became public knowledge.  Ironically, the $4.3 billion it must pay in fines - $1.5 billion for civil charges and $2.8 billion for criminal charges - could have been even higher had VW not agreed to the cough up $11 billion to fix the TDI vehicles it sold in the U.S.

This embarrassing news couldn't come for a worse time for VW.  Not only does it overshadow its new product in the United States (the Atlas and the Golf Alltrack wagon) , it also comes when most of its U.S. vehicles score shockingly low in quality and reliability ratings from Consumer Reports, and its 2016 sales were down 7.6 percent from 2015.  VW is trying to get its act together while also trying to sell cars without a price advantage over the competition and dealing with a lot of bad publicity over the diesel affair.  The best we VW enthusiasts can hope for is for the Volkswagen brand to at least survive in the United States.  Because the firm's "8 by 18" plan - selling 800,000 cars per annum (including Audis and Bentleys) by 2018 - was revealed to have been a pipe dream long before unimaginative journalists coined the term "Dieselgate."  

The Volkswagen Settlement

Volkswagen finally settled with American customers who bought its so-called "clean diesel" vehicles.  In a deal totaling $14.7 billion, the company will buy back its diesel-powered cars or repair the ones that owners choose to keep.  There's no such repair available, which is likely a moot point because it's not likely that any diesel-VW or diesel-Audi owners will actually want to keep their cars.  

Volkswagen is also paying  $2.7 billion for environmental mitigation and another $2 billion for clean-emissions infrastructure, according to USA Today.

Now Volkswagen's U.S. operations can move on from this scandal without incident.  But move on to what?  Denying its loyal customers the subcompacts and sports cars we've been petitioning the company to sell in America without success?  Pushing a midsize SUV to a mass market that couldn't care less?  Higher maintenance costs?  None of these things suggest a return to grace for VW in the American market.

The monthly sales reports in the U.S., in fact, suggest quite the opposite.  After a hiccup in Europe, VW sales rebounded there, showing that most European buyers shrugged off the cheating on diesel emissions that VW was involved in.  Volkswagen sales in the United States, though, are a different story.  Sales here were down 13 percent in 2016 in the period between January and August from the same period in 2015, August 2015 being the last complete calendar month before the scandal broke.  We Americans tend to be a forgiving bunch - we've forgiven athletes for bad behavior and poor sportsmanship, and we've forgiven politicians for lying about climate change (less so for lying about sex) - but we have a tendency to hold grudges against manufacturers that sell defective big-ticket products like cars.  That's a bridge too far for most of us Yanks. 

Anyway, Volkswagen has to figure out what sort of company it wants to be in the U.S. if it has a chance of getting the diesel scandal behind it.  Does it sell relatively inexpensive cars with a strong German flavor to a small and loyal base of customers that would, as journalist David Kiley once described VW loyalists, buy Volkswagens even if we had to assemble them ourselves in our driveways?  Or does it go mainstream and emphasize watered-down Jettas (sadly, the hybrid version is gone) and overdone sport-utility vehicles?  Does it continue to try to find a balance between satisfying the loyalists and the American mass market?  Is that possible?  Especially given the trust issue?  How is anyone who bought a Volkswagen and is not a die-hard VW loyalist ever going to trust VW again?  And I'm not just talking about only casual customers who bought a diesel-powered VW.  How about people who bought a gasoline-powered VW and are wondering about the integrity of their own cars?

These are questions that Volkswagen is going to have to answer.  If there's a bright side to this, Volkswagen has been in dire straits in America before and has always emerged standing.  Even this scandal hasn't been as bad as the collapse of the brand in the early 1990s, when it couldn't even sell at least 100,000 cars a year.

I'm confident that Volkswagen can find a way to get this scandal behind it.  And its latest new product, the all-wheel-drive Golf Alltrack wagon, is evidence that it's now on the right path.  But I hope that the folks at Volkswagen of America headquarters don't think that one or two new models - or another modern Beetle - are going to solve the problem all by themselves. :-(