Dieselgate: FCA and VW Executives Charged; Daimler Fined USD 1 Bn

• Emanuele Palma, a senior manager at FCA, was arrested in the US on September 17.
• Bosch software that was used to manipulate testing was allegedly concealed from senior officials.
• Volkswagen’s senior executives face trial in Germany for withholding facts from investors.
• Daimler has been slapped with a $1 billion fine in Germany; it also faces lawsuits in the US.

Four years after it first broke, the Dieselgate scandal refuses to die as new names and charges continue to emerge from the US and Europe. This month, four current and former VW executives were charged with concealing crucial information from investors. In the aftermath of the emissions test-cheating scandal, other automotive manufacturers have been found cheating or bribing to circumvent emissions regulations. One Fiat Chrysler Automotive (FCA) executive was arraigned in Michigan for multiple violations, while Daimler has been fined nearly $1 billion in Germany and faces lawsuits in the US for selling cars with cheat devices.

FCA’s Senior Manager of Diesel Engine Calibration, Emanuele Palma, was arrested from his Bloomfield Hills residence on September 17. He had been under surveillance for the past three years. Indictments against Palma in the Court of Michigan’s Eastern District include - violation of the Clean Air Act, wire fraud, false statements, and aiding and abetting FCA’s efforts to defraud buyers from 2010 to August 2017.

Subsidiaries of the company used software to manipulate emissions on one lakh diesel pick-ups and SUVs. This January, FCA paid $800 million to the US Justice Department, the Environment Protection Agency, the California Air Resources Board, and the US Customs and Border Protection. In addition, fines totalling $72.5 million were paid to 52 local jurisdictions in 49 states, Puerto Rico, Guam, and Washington DC. A separate settlement of $280 million was paid to the buyers of 2014-16 Jeep Cherokees and Dodge Rams who bought the 3-litre V6 diesel models. Each individual is expected to get nearly $2,800 from FCA.

Bosch designed the systems responsible for the fraud. They had to pay $27.5 million to plaintiffs, while $2.7 million was paid to Michigan alone.

Volkswagen executives are facing the wrath of prosecutors in Germany. A court in Braunschweig near Wolfsburg indicted CEO Herbert Diess, Chairman Hans Dieter Poetsch, and former CEO Martin Winterkorn. Matthias Mueller was added to the list by prosecutors in Stuttgart.

Daimler has been fined €870 million (nearly USD 1 billion) after a probe into its diesel cars. While the company has paid hefty fines in Germany, Mercedes-Benz still faces a number of lawsuits in the US.

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The US EPA has some of the world’s strictest emissions norms for diesel passenger cars. Volkswagen’s cheating was caught by scientists at West Virginia University who received a grant from the International Council on Clean Transportation to check emissions on the VW Passat, Jetta, and BMW X5. They used portable emissions measuring equipment to compare laboratory readings with real-world data.

The Dieselgate scandal exposed Volkswagen’s decade-long use of emissions test-cheating devices. Cars could detect a test event and alter the engine map to pass assessment. After a smorgasbord of lawsuits, arrests, and fines amounting €30 billion, Volkswagen has tried hard to move on from the scandal. During the recent Frankfurt Motor Show (IAA), it launched a new brand identity as well an all-new range of electric vehicles starting with the ID.3.

In addition, Volkswagen has planned to quit production of diesel engines altogether and has invested heavily in the research and development of new electric vehicles. Mercedes plans to add 130 vehicles in multiple variants to their lineup by 2025. Organised buyback and repair schemes have helped affected car buyers to upgrade to more efficient vehicles. We hope the move will bring sustainable innovation to our shores soon.

Source: Bloomberg, Detroit News, Reuters