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by Cedric Hughes, Barrister & Solicitor with regular weekly contributions from Leslie McGuffin, LL.B.   

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Engineering a Way Around Pollution Regulations

Article Number: 
737

Volkswagen’s alleged decision to risk fooling regulators using software that enabled their diesel cars to pass emissions testing while failing in ‘real-world’ driving have always begged for some broader context assuring such risk-taking would likely be ‘OK’.

Now, writing in the July 22, 2017 edition of Forbes, Bertel Schmitt, a long-time auto industry expert claims that Volkswagen’s ‘dieselgate’ followed from a secret cartel “far beyond Volkswagen” and he quotes Der Spiegel: “Audi, BMW, Daimler, Volkswagen, and Porsche colluded for years in more than 1000 meetings,”

News source Handelsblatt’s echoing report, and Reuters confirmation that EU antitrust regulators are investigating this allegation.  “Today,” Mr. Schmitt writes, “we may begin to understand the true enormity of a scandal that involves a cabal of carmakers and politicians.  I said begin, because the scandal is way too big to wrap our heads around it in one go.”

Mr. Schmitt’s article focuses on the alleged collusion regarding diesel engines, and provides background noting that the diesel engine was “Europe's answer to CO2 curbs” because as a more efficient fuel it produces less CO2.  However, it also produces Nitrogen Oxide (NOx) a gas the European Environmental Agency somehow claims leads to the premature death of 72,000 people per year.

An agent called AdBlue effectively neutralizes NOx but requires storage in a tank— the bigger, the costlier.  Mr. Schmitt claims the minutes of one of the “secret meetings” show the car companies determined that agreeing on “a moderately sized AdBlue tank” would save them all “up to 80 EUR [$93] per vehicle”—which, as he puts it “quickly turns into real money when you make 10 million cars a year.”  He goes on:

“After several meetings, … Daimler, Audi, BMW, and VW agreed in September 2008 on an 8 liter tank for all vehicles. The trouble was: if the nasty NOx is properly neutralized, that 8 liter tank did last for not more than 3,700 miles. To last the usual 10,000 miles between oil changes, “a tank of at least 19 liters” would be needed, Der Spiegel quoted a document authored by Audi. The document noted that “Daimler, VW, and BMW concur.” A few years later came stricter regulations both in Europe, and the U.S., requiring more AdBlue. “Nobody had the obvious idea to mount bigger AdBlue tanks,” notes the report.  Just the opposite happened: Audi warned against an “arms race of tank sizes, which we should continue to avoid.”  Bigger tanks were not needed, says the report, because automakers “had long started to dupe regulators and customers about the true emissions of the cars.” Once cars were out of the testing labs, exhaust treatment was mostly turned off, sparing customers the AdBlue hassle, and OEMs [Original Equipment Manufacturers] the expense for bigger tanks.” [Emphasis added]

 The fallout from ‘dieselgate’ has been much less severe for Volkswagen in Germany than in the US, and, in this alleged collusion, Volkswagen may escape censure altogether, having been the first to make voluntary disclosure.  For the others, however, Reuters reports that, “Companies found guilty of breaching EU cartel rules face fines of as much as 10 percent of their global sales.”

Cedric Hughes

huges & company law corporation vancouver

 

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