VW News: As the Diesel Emits: Volkswagen To Begin Cancel and Delay Non-Essential Investments

[William Maley]

Volkswagen CEO Matthias Mueller told a group of 20,000 employees today in Germany that the company will be cancelling and delaying a number of projects in light of the diesel emission scandal.

 

"Therefore we are putting all planned investments under review. What is not urgently needed will be scrapped or delayed. And therefore we will adjust our efficiency program. I will be very open: this won't be painless," said Muller.

 

Fixing around 11 million vehicles around the world that are affected by the rigged software is a costly prospect for Volkswagen. Muller says the $7.29 billion set aside for repairs will not be enough to pay for fines and lawsuits.

 

Volkswagen has been criticized for being an “incredibly inefficient” company. Last year, the automaker had set aside $17.4 billion research and development. That is higher than what Ford and General Motors spent on r&d combined last year.

 

“Where’s the innovation? Obviously not in diesel engines. There’s a culture of spending and a lack of focus on efficiency in favor of striving to be bigger,” said Arndt Ellinghorst, an analyst with Evercore ISI.

 

Source: Bloomberg

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[G. David Felt]

7.29 million?, should that be billion?

 

Either way, VW is going to see a big dark drain on their money and I expect this to hit 20 Billion + to make this right and eventually go away. I think VW will have to change internally as well as cut other places as well.

[ccap41]

I'm mostly intrigued by this line:

 

"Volkswagen has been criticized for being an “incredibly inefficient” company. Last year, the automaker had set aside $17.4 billion research and development. That is higher than what Ford and General Motors spent on r&d combined last year."

 

That's just nuts.

[G. David Felt]

I'm mostly intrigued by this line:

 

"Volkswagen has been criticized for being an “incredibly inefficient” company. Last year, the automaker had set aside $17.4 billion research and development. That is higher than what Ford and General Motors spent on r&d combined last year."

 

That's just nuts.

So the big question to ask is if they are so efficient, then why do they have to spend more than GM and Ford combined to develop auto's and yet they still have a sucky product line here in the US?

[ccap41]

 

I'm mostly intrigued by this line:

 

"Volkswagen has been criticized for being an “incredibly inefficient” company. Last year, the automaker had set aside $17.4 billion research and development. That is higher than what Ford and General Motors spent on r&d combined last year."

 

That's just nuts.

So the big question to ask is if they are so efficient, then why do they have to spend more than GM and Ford combined to develop auto's and yet they still have a sucky product line here in the US?

 

The quote said they are inefficient. Not efficient.

 

I cannot imagine the wasted money being thrown around if they are spending more than Ford and GM yet they aren't making anything that is twice as good as anything from those two companies. ESPECIALLY if you throw in Cadillac.

[William Maley]

7.29 million?, should that be billion?

 

DOH! 

Fixed it.

[G. David Felt]

 

 

I'm mostly intrigued by this line:

 

"Volkswagen has been criticized for being an “incredibly inefficient” company. Last year, the automaker had set aside $17.4 billion research and development. That is higher than what Ford and General Motors spent on r&d combined last year."

 

That's just nuts.

So the big question to ask is if they are so efficient, then why do they have to spend more than GM and Ford combined to develop auto's and yet they still have a sucky product line here in the US?

 

The quote said they are inefficient. Not efficient.

 

I cannot imagine the wasted money being thrown around if they are spending more than Ford and GM yet they aren't making anything that is twice as good as anything from those two companies. ESPECIALLY if you throw in Cadillac.

 

My bad, your right, I misread it.

 

That is a freakin waste of money.

[ccap41]

 

 

 

I'm mostly intrigued by this line:

 

"Volkswagen has been criticized for being an “incredibly inefficient” company. Last year, the automaker had set aside $17.4 billion research and development. That is higher than what Ford and General Motors spent on r&d combined last year."

 

That's just nuts.

So the big question to ask is if they are so efficient, then why do they have to spend more than GM and Ford combined to develop auto's and yet they still have a sucky product line here in the US?

 

The quote said they are inefficient. Not efficient.

 

I cannot imagine the wasted money being thrown around if they are spending more than Ford and GM yet they aren't making anything that is twice as good as anything from those two companies. ESPECIALLY if you throw in Cadillac.

 

My bad, your right, I misread it.

 

That is a freakin waste of money.

 

No biggie!

 

CRAZY how much money is being wasted.. unless they have something MONSTEROUS rolling out in the next couple of years which they have been DUMPING cash into that is revolutionary.. then they need to learn how to spend money much better.

[hyperv6]

If they spent that kind of money last year odds are good it is to fix the sucky cars and we have yet to see the fruit of this investment.

 

To me it is like giving Cadillac the 12 Billion last year. I was not expecting to see much for 2-5 years after the investment.

 

Just being fair here.

 

VW has been working out of an already well known image problem for quality and has been looking to spark the line up with new products and more SUV and maybe a truck. I expect much of this money was for this and could all be delayed till they get a final price tag on the recall, penalties  and lawsuits. I expect this will set them behind 2-4 years.

 

At least they will still have good income from their other brands that are nearly all  ultra high profit models.

 

Keep in mind too that they had issues on the 911 engines just a year ago too. German engineering is showing some weakness of late.

Edited October 7, 2015 by hyperv6

[El Kabong]

Four hundred bucks a car, times 11 million cars worldwide.

That's a lot of cash.

[hyperv6]

Four hundred bucks a car, times 11 million cars worldwide.

That's a lot of cash.

It's not if you get caught.

Do you think anyone a head of VW would have taken that much risk. Granted the money save in the near term was much but by the time they get out of this and lost sales the savings will have vanished.

There is no way anyone who created this scam expected it to never be found. It really was an old hot rodders trick that the Feds stopped a few years back.

Casper used to make a O2 Simulator. You replaced your O2 sensors with this simulator and it would read perfect on the computer for emissions no matter what you did to the engine. It was intended to keep the light on the dash off but it also would trick emissions testing. What VW did here was on the OE level but much the same.

I can not see anyone at the head of VW approving this from the start as they knew the cost of getting caught were going to be much more damaging than the money saved. Now that is not to say they may have learned later and may have had to go along as it was too late to stop.

I still think some mid level engineers did it to save their hides when they could not get results. They could take a risk like this as what would happen to them they lose their job? That was going to happen anyways. If the company gets caught they are either gone to another company or just lose the job they saved 10 years before. Now that is real incentive with little risk.

The truth is like at GM so much time has passed and if there is no paper trail the truth may never be found.

The damage done here to the VW diesel will be akin to the Old Diesel. Look at how long GM paid for that as even today it is difficult for them to sell a Diesel outside a full size truck. Think about the income lost because they saved some money by doing the Old Diesel the cheap way.

You have to look big picture here. What is obvious is not always the truth or motive.

I expect the fines from all the countries will be at lest 50-100 billion. I expect the lawsuits to be in the billions. The repair cost will be every penny they saved and more. The lost revenue for the death of their diesel market for the year it will take to regain trust will be in the hundreds of billions. Then factor in the PR, marketing and advertising you will need over a decade to rebuild the segment. the cost over savings would be insane.

In the end the net gain will be in the negatives.

One would be hard pressed to find a CEO willing to take that kind of risk Knowingly. The odds of getting caught and the losses are just too great to take this kind of risk.

Edited October 7, 2015 by hyperv6

[El Kabong]

Guy... just stop.

Volkswagen thought that they could swindle pollution control agencies and save billions of dollars. Of course they thought they could get away with it.

[hyperv6]

Guy... just stop.

Volkswagen thought that they could swindle pollution control agencies and save billions of dollars. Of course they thought they could get away with it.

Easy for you to say. Now Back it up with proof!

Even the best investigators out there will be hard pressed to prove this unless some smoking gun documents come to light or someone talks. I expect neither will be found.

The truth is this was done but it was never something that would remain a secret for ever. If some collage kids could find it someone else would have at some point. It was clever but not fool proof.

As for cheating to save money there is just no logic as worst case it would end up costing them more than they would ever make in more ways then one. It would have to take a really major fool CEO to do this and while I was not a fan of their CEO I do not believe he was that stupid.

In business even when you break the rules you factor in the gains and the losses.

Even in racing. You see team skirt the rules by a little because they know the penalty is small. But you seldom see them cheat big time anymore because they know the gain is not worth the risk of the penalty. Case in point Traction Control. NASCAR teams were playing with it a while back against the rules. Teams were cheating up the MDS box chips and some even were using remote systems to gain an edge. NASCAR came out and told them that they would not fine a team if caught but they would toss them out of the series. As of now they have not had any issue with traction control since. They still get the minor infraction here or there but that is it. In a case with so much money on the line a boot from the series was more loss than the money won.

Same with VW here as they will in the end pay out more than they would have ever saved. That $400 they saved has turned into $2000 per car if you factor in the $400 fix the labor, fines civil suits and loss of sales. That $400 could have been saved much easier many other ways with much less risk and no EPA violations. Hell I am sure GM saved more than $400 over VW on interiors in the 80's-08 in their cars and risked no legal infringement.

To take a risk this large you had to have someone desperate to keep their job for the time being and someone who had little to lose. If they pin this on a mid level engineer what are they going to do to him? Fire him if he even still works there?

As for the deposed CEO his fear is how long did he know and how long did it go on before they were caught that he knew. He has much more to lose here. He is the one who could face fraud charges for accepting the government funding under fraudulent circumstances. That is what puts people in jail. Kill someone probation, cheat the government go to jail.

Edited October 8, 2015 by hyperv6

[El Kabong]

The proof is that they DID IT IN THE FIRST PLACE.

Nobody conducts a criminal enterprise with the intent of getting caught. Even if they do, what do they hope to accomplish-did VW think that getting caught would highlight the supposed injustice of emissions laws, even though everyone else appears to be doing well by following them?

Edited October 8, 2015 by El Kabong

[G. David Felt]

I still think the email FYI notice from Bosch was a bit poor and that Bosch did build the software and modules so I think they are far more involved in this than they are letting on.

[El Kabong]

But Bosch was doing their due diligence by warning VW about using that test mode in normal use. Bosch can provide proof that the software was originally intended for testing purposes only, and they made that quite clear to VW. You could make the argument that Bosch may have done the math on how VW was pulling off what they were doing. But then you're running the risk of ratting out a customer without knowing if they really have solved the mystery of how to do something nobody else can.

[hyperv6]

Proof who did what? Did it come from the top did it come from just the engineers originally? Who knew what when and at what point? We know VW did it and we know at the end many people knew but where did this start and who was behind it. Prove that.

Bosch only made what they were told to supply. They said what it would do. I see them as no part of this. You can sell someone a pistol but if it was a legal sale they are not responsible for what the consumer does with it.

To me the Bosch warning proves this was not a fool proof plan if they figured it out. Hence it was a very risky move that at come point was going to be found.

It is like a kid who failed a test at School. He can come home as tell Mom and Dad I got an A. But at some point the report card will follow and flush out the lie.

Also Bosch like many other suppliers is not going to go public because of non disclosure agreements and also you have to consider the risk of losing VW as a supplier too. They did nothing wrong just supplied a part to VW spec and what they did with it was their responsibility.

Edited October 8, 2015 by hyperv6

[El Kabong]

From the regulator's point of view it matters little who did it. Somebody did it-ergo, the company gets hammered. Corporations are not nation-states, they don't need to find the smoking gun. No doubt blame will be assigned, and the big names shown the door already will wear much of that blame.

Any sane risk analysis from the get-go would have told anyone in charge at VW that it was a harebrained scheme. They forged ahead anyway.