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  • In the Wake of the VW Diesel Scandal

    November 9th, 2016

    I should feel lucky. I’ve owned several VWs over the years, but never considered a diesel option. Not that I had any prejudice against a different kind of engine — I owned one of Mazdas original rotary engine cars in the 1970s — but the value proposition just didn’t make much sense to me.

    Here’s why: A car with a diesel engine costs several thousand dollars more. Depending on fuel prices, diesel fuel may cost more too. Right now, we’re talking of up to 15 cents per gallon more than regular here in Arizona, although that state of affairs can be reversed as prices change. The picture may be very different where you live.  So in Europe, it’s more advantageous to buy a diesel car.

    Supposedly diesel engines last longer, but a VW service writer I have known for a while told me that scheduled maintenance is more expensive. Recent VW diesels also require that you also add a diesel exhaust fluid, usually called urea, at regular intervals to help control emissions. Despite routinely getting more than 40 miles per gallon on the highway, the diesel engine proposition is not as economical as it seems to be for a passenger car or SUV.

    Indeed, it may well be that the initial refusal to set up a system requiring urea is why VW engineers decided to cheat the system beginning in 2009. So when the vehicle was placed on a dynamometer to test emissions levels, the vehicles would pass with flying colors. But the software was designed to turn off emissions controls under normal use, thus emitting up to 40 times the legal limit.

    Outrageous!

    And it wasn’t just for VW vehicle sold in the U.S. Millions of cars around the world were also programmed to cheat the system, and VW has been forced to pay through the nose for its transgressions. The fixes are less severe in Europe and are already being performed, but the authorities in this country wanted to exact blood in the form of a settlement exceeding $15 billion. It means that people who bought the offending vehicles can sell them back to VW, or break their leases without penalty. They will also receive up to $10,000 in good will payments. In addition to fines, VW must invest billions to develop electric cars. But that’s where the industry is moving anyway.

    Those who want to keep their cars can still get the free fix from VW — when and if it’s approved — and still be eligible for the goodwill payments. U.S. dealers are also getting chunks of cash to help compensate for lost business. So far this year, sales in this country down over 13% for the first 10 months of 2016 compared to the previous year. But that’s not as bad as it seems, because 25% of VW’s U.S. sales were diesels before the ax fell.

    While it appears most customers will take the settlement, some will, and can, opt to sue, and individual states can also take separate legal action. So far, it doesn’t seem any other car company has pulled a similar stunt, although some, such as Ford, Hyundai and Kia, have been accused of faking fuel economy ratings.

    To be fair, I think VW should be forced to pay billions of dollars to European customers too, but that might be enough money to sink the company, thus leaving hundreds of thousands of people out of work, and abandoning tens of millions of loyal VW customers. So the eye-for-an-eye approach isn’t practical.

    But even after the settlement is history, VW will have to find ways to keep customers with an expanding lineup that is meant to appeal to changing tastes. At a time where regular passenger cars aren’t doing so well, VW has announced the Atlas, a three-row SUV that will debut in the U.S. next year. It’s designed to appeal to a class of customers that VW has not, as yet, been able to reach, but represents a major growth segment of the market.

    And what about those responsible or this outrage? Well, VW initially claimed it was all the fault of some wayward engineers who confronted a problem not easily solved, to tame diesel engines to meet tightening emissions requirements around the world. But it’s hard to believe key executives didn’t sign off on this scheme — even though they deny it. So the corporate bloodletting may not be over, but if some executives have to be fired, or imprisoned, because they cheated customers, so be it. Large corporations are generally treated far-too-lightly when it comes to breaking the law.

    But what about the cars themselves?

    Well, VW still has a lineup of unique vehicles that have an offbeat appeal. Believe it or not, they still sell a car labeled Beetle, but it has only a passing resemblance with the rear-engined classic that made the company famous. The version sold in this country, dubbed A5, is built in Mexico and based on the Jetta compact. It’s actually a pretty good car, though hardly space efficient if you need to carry passengers in the rear seat. It has a starting price of just under $20,000, but prices can soar to over $32,000 for the fancier R-Line SEL.

    I nearly bought a Beetle once, several decades ago, when it cost around $2,000. That car had a manual transmission and forget about air conditioning. As I recall, even the radio was optional.

    I’ve owned two Passats, VW’s midsized family car, over the years. I’ve also spent some time riding — and occasionally driving — a friend’s Passat. As I wrote last year, Robert, a client, last year bought a closeout 2015 Passat Limited, a special configuration that was available briefly until the 2016 models arrived.

    Now the American Passat is a special version, assembled in Chattanooga, TN, which is larger and a little softer riding than its European counterpart. Thus it loses a tad of its sporty Teutonic appeal.

    The other day I called Robert to see if a recent problem with his MacBook Air had returned. The discussion moved to cars, and he told me that his dealer offered him all sorts of discount incentives, and a generous trade-in allowance on his car, so he opted for a 2017 Passat SE. His monthly payments were essentially unchanged for a car that cost a couple of thousand dollars more.

    The SE offers such extras as a moonroof and a blind spot monitor plus support for Apple CarPlay and Google’s Android Auto. The blind spot feature flashes amber in the sideview mirrors as cars are passing beside you before they reach your field of vision. I wonder how many accidents will be avoided that way. I spent a few minutes looking it over, before he let me take him to a nearby fast food restaurant for a light lunch. VW has spruced up the exterior somewhat, made it more slippery in wind tunnel testing, and, with a few other tweaks, improved fuel economy ratings slightly. The interior is also less plain than before, giving it a little more of the allure of a low-rent Audi A6. Otherwise, it feels and drives about the same as its predecessor.

    In short, it’s a pretty good car.

    So I do hope VW can now begin to move past its self-generated scandal and get back to building great cars. I also hope the authorities will be checking all auto makers more carefully than ever, just in case another company tries to pull a stunt that cheats the system, and customers.



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