The exposure of a con trick by giant car maker Volkswagen (VW) could be the biggest in the industry’s history. And considering the industry has repeatedly and systematically put profit and power before people and planet that’s quite an achievement.
In the banking industry’s rigging of the Libor interest rate, nine banks have so far paid out a total of £9 billion. VW could be hit for more than that in fines alone.
And there are countless law suits to come.
The company plan was simple if unoriginal—to make VW the world’s biggest car manufacturer by 2018. And its ambition to overtake Toyota and General Motors (GM) was succeeding. It was based on trebling sales in the US. And vitally by developing scams to lie about how clean the fuel was.
VW used a “defeat device”, a programme in its diesel cars’ software.
The programme identifies whether the vehicle is running on a rolling road in laboratory conditions and ensures the car is running in its cleanest mode, limiting particulate emissions.
VW was trying to show diesel was as clean as petrol alternatives. In fact VW diesel cars were emitting 40 times the amount of legally allowed levels of nitrogen oxides.
In an inevitably opaque corporate statement the company admitted to the software being in other VW Group diesel cars.
Those “discrepancies” affect some 11 million vehicles. The company confirmed “a noticeable deviation between bench test results and actual road use”.
VW has been fiddling the figures for years on both sides of the Atlantic. But so have other manufacturers. Tests run by one consultancy, Emissions Analytics, found that emissions levels in 395 out of 400 cars were higher than claimed.
Even when they don’t break the rules, it’s bad. Car manufacturers are allowed to submit heavily modified prototype cars into the EU’s fuel-efficiency and emissions-testing regime.
Weighty features such as a car’s sound system are often removed before tests.
Tyres are filled with a special gas to enhance the miles that can be covered per gallon of fuel. And cars are run at the maximum permitted temperature of 29C because engines are more efficient in hot conditions.
The car industry is a serial offender. Recent years have seen a series of scandals in which auto companies lied and cheated to cover up gross negligence or lawlessness.
For over a decade, GM hid a problem with ignition switches that resulted in engine cut-offs, the disabling of steering mechanisms and the deployment of air bags.
Some 2.6 million vehicles had the defect. GM did not begin to recall them until at least 124 people had been killed and 275 injured because of it.
Barack Obama’s administration in the US announced a deal with GM effectively foregoing any criminal penalties and imposing a fine.
Japanese supplier Takata equipped tens of millions of vehicles around the world with defective air bags. At least eight people were killed and more than 100 injured.
Toyota had to pay £800 million in fines in the US and recall millions of vehicles that accelerated on their own. At least five people died as a result of the defect.
People who defend capitalism and the market say scandal and corruption are down to a few individuals who get carried away.
But the problem is more fundamental. It is caused by the way capitalism works.
The logic of the system is to keep profits high and costs low. And that means that there is little need for bosses to issue specific instructions. But it does mean increasing profit makes cutting corners not just likely but necessary.
Firms expand production hoping to rake in more profit. Each wants to outdo its rivals.
Share prices soar on the expectation that profits will roll in.
These inflated share values mean companies can borrow heavily to expand their production even further—and we pay the price.
An industry that's bad for your health - and the planet
The motor industry is a major contributor to global warming—and premature death.
But many people use cars because public transport is unreliable, underresourced, overcrowded or expensive.
It’s estimated that some 50,000 people in Britain die prematurely because of nitrogen oxide emitted by diesel vehicles.
Diesel vehicles produce 15 percent less CO2 than petrol ones do, but four times more nitrogen dioxide pollution and 22 times more particulates.
These tiny particles can penetrate human lungs, brains and hearts. New research has shown that diesel fumes can trigger cancers and heart attacks. They can stunt children’s growth.
A European Commission agreement in 1998 committed passenger car makers to cut CO2 emissions by 25 percent over ten years.
Simon Birkett, director of the Clean Air London group, said this was “practically an order to switch to diesel”.
He said, “Britain, along with Germany, France and Italy, offered subsidies and sweeteners to persuade car makers and the public to buy diesel.”
Diesel was made cheap, encouraging people to choose diesel cars over petrol ones. In 1995 the market share of diesel vehicles in Britain was under 10 percent. By 2012 it had shot up to over 50 percent.
There are now nearly 12 million diesel cars in use in Britain.
The Volkswagen fiasco has been portrayed as a “mistake” made by politicians who put dealing with climate change over people’s health. The truth is those at the top care little for either.
We can protect human health and the environment.
But this would require pumping resources into expanding public transport, choosing renewable energy sources over fossil fuels and tackling the enormous waste of capitalist society.
Ding ding went the trolley
Scams have always been at the heart of the motor industry.
A group called National City Lines was formed in the 1920s to buy up streetcar systems around the US. It was made up of several firms including General Motors, Firestone, Standard Oil of California and Phillips Petroleum.
Although National City Lines was found guilty of conspiracy to monopolise public transit, it was only fined £3,500. But it had smashed the local public transport system across the country.
This set a method that still exists in transport today—including the last 40 years in Britain.
Spending on transport means building roads for private cars to go on. In reality it’s a multibillion dollar subsidy of the car industry.
The 'People's car' that never was
Before the Second World War, Germany was one of western Europe’s least motorised societies. This was partly because its public transport system, before the Nazis got hold of it, was quite good.
The car, Hitler declared, responded to the individual will, unlike the railway, which had brought “individual liberty in transport to an end”.
So he ordered the building of motorways and the government introduced The People’s Car—Volkswagen.
More than a quarter of a million people enrolled in the scheme to buy the new car. But not one saver got a Volkswagen—the money all went into arms production.
More than 200 managers dismissed by denazification tribunals had the verdicts overturned by the British.
Heinrich Nordhoff had worked for General Motors but he was banned from employment for using slave labour to make trucks for the Nazis. So the British put him in charge of Volkswagen.
The company had a head start on its rivals. And the Volkswagen became a symbol for post-war Germany.
Massive fraud lies at the heart of this corrupt system
- The Bank of Credit and Commerce International became known as the Bank of Cocaine and Criminals International in 1991 due to money laundering and widespread fraud. It went bust owing more than £10 billion.
- This year multinational Toshiba was plunged into scandal after it overstated operating profits by about £780 million. The company saw a drop in sales from £36 billion to £25 billion after the financial crisis and the Fukushima nuclear disaster. But it kept profits high by fixing the figures.
- Enron went bankrupt in 2001 after its obscuring of huge debts was revealed. The energy trader imploded—wiping out £49 billion of shareholder funds, and the pensions and jobs of thousands.
- In 2002 Tyco International’s bosses were found to have siphoned hundreds of millions of dollars out of the maker of electrical, healthcare and safety equipment. Much of it funded the lavish lifestyle of Tyco boss Dennis Kozlowzki.
- A £1.4 billion fraud at camera makers Olympus was unearthed in late 2011 after management had simply buried losses for 13 years.
- The credit crisis of 2007 and 2008 saw the biggest collective financial scandal. But the leaders of banks such as Royal Bank of Scotland and Lehman Brothers were deemed to be incompetent, deluded or victims of events. We’re still paying for the bailouts.
- Tesco, Britain’s biggest retailer, last year revealed it had overstated estimated profits by £263 million by overestimating revenues paid to it by suppliers.