On a late summer day in Detroit, Mich., a disgraced Volkswagen engineer named James Robert Liang left a courtroom after being sentenced to a 40-month prison sentence for conspiracy to defraud the U.S. Government as part of a global scandal that some believe has permanently besmirched and undermined diesel powertrains around the world.
So, is diesel dead? Bear with me.
First, consider the case of Liang. U.S. District Court Judge Sean Cox said VW was cheating and worked to cover it up. “The conspiracy perpetrated a massive … and stunning fraud on the American consumer that attacked and destroyed the very foundation of our economic system,” Cox said.
Yes, but Liang was not president of VW, or VW USA when he committed this crime. He never sat on VW’s management or supervisory boards and he never had operating responsibility for any large division of the global automaker. Indeed, no senior officer of VW has yet been convicted of a crime in this scandal.
Liang was a mid-level employee, as was Oliver Schmidt, a former manager of a VW engineering office in suburban Detroit. Schmidt will be sentenced in December after also pleading guilty to conspiracy and fraud charges related to the scandal.
VW itself pleaded guilty in March to defrauding the U.S. government and agreed to pay $4.3 billion (US) in penalties, on top of billions more to buy back cars. Other relatively low- and mid-level VW employees have been charged in the case are in Germany, so they are out of reach of U.S. prosecutors.
Earlier this year, Courts in Ontario and Quebec approved a class action settlement with Volkswagen Group Canada Inc. involving emissions from 2.0-litre TDI diesel engines in roughly 105,000 vehicles. And while affected VW owners were made eligible for payments ranging from $5,100 to $8,000, depending on the model and age of the vehicle, the class settlement is apparently not an admission of liability by Volkswagen.
But the scandal in Canada is not over. In September, Investigators for Ontario’s Ministry of the Environment and Climate Change raided the headquarters of Volkswagen Canada. They executed a search warrant as part of the international investigation into “cheat devices” meant to evade emissions regulations. So far, no official of VW Canada has been accused or charged with any wrongdoing.
And around the world?
To date, VW the corporation has agreed to settlements with consumers and government agencies around the world worth more than of $30 billion (US) and counting. These are costs shareholders ultimately bear. If you own a stake in VW, you are paying a price for the scandal.
VW, I should note, is not alone.
For example, in late summer, VW, Daimler and BMW agreed to upgrade around five million newer diesel cars in Germany and offer trade-in rebates on older models in a deal to avoid more costly remedies and salvage diesel technology and avoid driving bans in cities, Bloomberg reported.
But the Dieselgate scandal has not led to charges or convictions of a single senior executive or board member of any automaker. Not one. There have been resignations, but the only VW officials facing jail time are relatively junior executives and engineers – what you might call rank-and-file car company “grunts” working in the trenches.
The lack of accountability at the top of carmakers is itself a scandal. It strains credulity to think that no one in a senior position at VW or any other carmaker has had knowledge of the depth and breadth of the cheating and the cover-up that has affected millions of diesel passenger vehicles.
And this is a core reason why so many consumers lack confidence in diesel engines. They’ve seen how easy it apparently was to cheat the system and cover it up for years. And they recognize that the only heads to roll belong to workers in the trenches.
Into this environment, General Motors is making a renewed push to position diesel as a viable technology that is cost-effective and rewarding for consumers who want strong powertrain performance – performance that is particularly good for towing and long-range driving. Indeed, modern diesel technology offers more power while emitting about 15 per cent less carbon dioxide than equivalent gasoline engines.
Dan Nicholson, GM global vice president of global propulsion systems, argues that for the time being, diesels are well-positioned to “play a role in GM’s fuel economy efforts.” Diesel delivers 20 per cent more energy per litre, compared to gasoline, he notes. So it’s a more efficient fuel and current diesel pump prices make it significantly more economical than gasoline.
The question is, why should consumers believe that GM is producing and selling diesels that do not “game” emissions tests? It’s a fair question. And it is the perfect question to put to Nicholson. And as the penalties to Laing and Schmidt demonstrate, he is precisely the sort of car company employee most likely to suffer jail time in any cheating scandal.
“I have worked my whole career at GM, and I can tell you integrity runs through the leadership and individuals at this company,” says Nicholson. GM, starting with CEO Mary Barra, now enjoys the best leadership in the company’s history, he adds. From Barra down, leadership is committed to the highest standards of honesty and integrity. It’s easy for anyone who sees wrongdoing at GM to speak up, he says, insisting that what happened at VW can and will not happen at GM.
“Not all companies are like that,” says Nicholson, clearly alluding to VW. He adds that his own personal credibility and that of GM is at stake when he and other company officials say GM’s diesels meet the highest standards for emissions compliance, performance and quality.
“I am not willing to work at a company that does not back up its employees and I am not willing to go to jail and will bring up any issue” related to cheating or scandal, Nicholson says forcefully.
At GM, diesel is alive and well and it has an interim role in the long-range fuel efficiency and climate change initiatives at the big automaker.