Volkswagen's Fix For European Diesels Gets The Green Light (But Will Owners Get The Shaft?)

November 24, 2015

It's been more than two months since news of Volkswagen's emissions-test cheating software first began to make headlines, and we still have no concrete details about how the company plans to fix more than 11 million vehicles affected by the Dieselgate scandal.

That could soon change -- at least in Europe, where Volkswagen's proposed fix has been approved for 90 percent of its illegally rigged, smaller diesels.

GEARING UP FOR REPAIRS

Without question, Europe has been hardest hit by Dieselgate: it's there that roughly 77 percent of the 1.2-, 1.6-, and 2.0-liter vehicles equipped with Volkswagen's illegal software are registered.*

Yesterday, Volkswagen's still-new CEO, Matthias Muller, announced that the company's plan to fix 2.0-liter diesels in Europe had been approved by German regulatory agency KBA. A second plan for 1.6-liter engines has been agreed to in principle. The fix for 1.2-liter vehicles will be presented to KBA within the week. 

While none of the plans have been described in detail, the fixes center on software updates. (The 1.6-liter vehicles may also require minimal changes to the air filtration system.) The cost of the recall in Europe had previously been estimated to be as high as 16 billion euros, but since it appears that hardware won't be affected in any major way, estimates have now been scaled back to 10 billion euros.

PICKING AWAY AT PERFORMANCE

What Muller hasn't yet discussed is how the proposed fixes will affect vehicles' performance -- specifically fuel economy. As we've seen in tests, Volkswagen's illegal software has a direct effect on efficiency, and in some cases, it improves acceleration, too. When the software is disabled and the full suite of emissions control systems engage, diesels fail to earn their advertised fuel economy.

That fact is causing plenty of headaches for Volkswagen in the U.S. Regulatory authorities like the Environmental Protection Agency have already levied huge fines against Volkswagen for its installation of emissions-test-cheating software. Now, the EPA, the Federal Trade Commission, and other agencies could slap the automaker with a second set of fines for false advertising. In short, Volkswagen said that its diesels offered low emissions and high fuel economy, but without the illegal software, the vehicles may not be able to live up to such promises. It's a costly catch-22.

And the costs for Volkswagen in the U.S. don't end there. Consumers have already begun filing lawsuits, asking for real damages, punitive damages, buy-backs, and more.

Those fines and legal fees may be causing Volkswagen to take an especially cautious approach to its American fix.

ACROSS THE POND

In Europe, however, indicators suggest that Volkswagen isn't planning for mass uprisings or class-action lawsuits.

One of those indicators is that Volkswagen hasn't substantially increased its estimate of legal costs associated with the scandal. As Bloomberg reports, the automaker has only upped that sum minimally from 6.5 billion euros to 6.7 billion, suggesting that Volkswagen believes the costs can be contained.

Another indicator is the lack of any consumer loyalty initiative, like the gift card program launched (and subsequently lambasted) here in the U.S. In Europe, owners have gotten nothing

It's possible that Volkswagen's attitude toward European owners stems from an assumption that current customers will remain brand-loyal, regardless of the news headlines. It's also possible that Volkswagen simply can't afford to treat the huge number of European owners the same way it does folks in America.

Either way, though, it appears that folks in Europe are getting the short end of the (dip) stick.

* Other Volkswagen vehicles now under investigation include 85,000 illegally equipped 3.0-liter diesels in the U.S. and 800,000 European vehicles identified by Volkswagen as having higher-than-acceptable CO2 emissions. Those problems -- and their fixes -- are separate from the ones involving 11 million 2.0-liter and smaller diesels.

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