Auto Industry warns of disruption if Supreme Court skips VW case

After Volkswagen’s emission scandal came to light in 2015, the United States Environmental Protection Agency (EPA) issued several notices to the company after finding a cheat device with their diesel engines. After affecting over 11 million cars worldwide, it was a sudden wake-up call for all automakers after announcing a fine of up to $18 billion. Soon after, several environmental protection committees announced a thorough investigation behind the scandal, opening its doors to test several other popular manufacturers including BMW, GM, Land Rover, and more to check for emission regulations.

Because of the scandal, Volkswagen eventually shied away from diesel engines, and most of their new models including the Volkswagen Atlas, VW Jetta, Arteon, etc. are only available with a gasoline powertrain. Just recently, the company revealed their plans of going all-electric by 2035 in Europe, and soon after in the US. Because of the severe impact of the diesel gate scandal, all manufacturers were put under tight watch for emissions. The international auto industry is now rallying against the US Supreme Court to reverse an appellate decision against Volkswagen and their subsidiaries, stating its effect on uniform vehicle regulations worldwide.

A recent decision by the US court allows lawsuits by two counties against Volkswagen. Fearing sudden regulation changes, the auto industry is warning of global disruption if the situation persists and different states can set their own regulations. Counties like Ohio are planning to move forward with their lawsuit against Volkswagen for the Dieselgate” scandal, stating that the brand should be held accountable for its actions.

The Alliance for Automotive Innovation also rallied behind the case along with other notable agencies like EPA, the California Air Resources Board, and the DOJ. If they go through with the settlement, the company should agree to perform several remedial measures to counteract the environmental damage by fixing the affected vehicles and paying fines that could amount up to several billions of dollars.

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The state of Ohio sued the company back in 2016 for conducting deceptive recalls for software updates that were sold in the state, reducing performance to regulate emissions. In their appeal to the US Supreme Court, Volkswagen stated that holding them accountable will create chaos among emission regulations because of overlapping authority by state and local governments.

The Ninth US Circuit Court of Appeals ruled in June of last year, stating that the company was liable for more damage lawsuits by the state and local governments dealing with the emissions fraud. Later, after spending more than $33 billion in settlements, VW asked the court to review the ruling and stated to take the case to the US Supreme Court.

Recently in April, the US Supreme Court asked President Joe Biden’s administration whether Volkswagen can be sued by local governments for damages caused by the scandal. Although the jury is still out on their decision, it could also shine the light on several other manufacturers like Daimler AG, FCA, and more who are facing similar claims.

So far, Volkswagen retaliated by claiming that the local governments cannot pursue these claims, as they have already settled with the EPA with a fine of more than $20 billion. Overall, the case could result in a $1 trillion judgment.

Later, in June of this year, a divided US appeals court ruled in favor of Volkswagen, giving them another chance to end the lawsuit.

If we consider a brief history of events, the company admitted to using illegal software to regulate emissions in 2015, and eventually pleaded guilty to conspiracy and obstruction of justice later in 2017. Sophisticated software was used to evade the nitrogen oxide test in particular in over 11 million models sold worldwide. When the EPA questioned VW about the same, it misled the organization by stating false claims.

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Volkswagen is also on the line for installing software updates on most of their vehicles without revealing their true purpose, which was to refine the software and cut down on emissions. Before the scandal came to light, Volkswagen had an impressive market share in the US, owning more than 70% of the market for passenger diesel cars. The company’s famous TDI line of diesel engines accounts for most of the emissions, and Volkswagen was one of the first companies to promote “Clean Diesel”, investing in diesel engines instead of hybrid and electric technologies like most other manufacturers.

The so-called “cheat device” can switch between two different modes, depending on a set of parameters. Whenever the test mode is activated, the cars will become fully compliant with federal emission levels by detecting if it’s on a rolling road. When driven normally, the system stitches to the regular mode which will change the complete map including the fuel pressure, ignition timing, exhaust gas circulation, and more to improve performance and efficiency. The most notable and dangerous pollutant from diesel engines is nitrogen oxide (NOx) which forms smog and can affect the lungs, leading to cancer. It was found that in the regular mode, the vehicles let out 40 times more pollutants than the federal limit depending on the engine.

Almost all models from the Volkswagen Group which include manufacturers like Audi and Porsche were also affected. The 2.0L TDI engine found in more popular models like the Volkswagen Jetta, Golf, Audi A3, and more is the most common diesel engine in the automaker’s lineup, while bigger capacity engines like the 3.0L V-6 TDI are also affected. After this conundrum, Volkswagen refrained from selling any more diesel models in the US and is instead focusing on all-electric drivetrains.

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The affected customers were given buyback and compensation offers, after the US district court approved the final settlement amounting to $14.7 billion in 2016, out of which $10 billion was for the buyback program. Even owners who want to keep their cars received $5,100 to $10,000 for diminished value along with a complementary fix. While the first recall focused on the smaller 2.0L TDI engines, owners of the bigger 3.0L models were part of another $1.2 billion buyback program.

Unfortunately, if you’re stuck with a TDI engine, almost all fixes by Volkswagen will hamper performance, causing a loss in efficiency or power. Although owners can ignore the recall and software update since the EPA and other agencies cannot force owners to do the update, several bills are circulating to ban registration renewals of affected cars that didn’t go through with the recall.

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About the Author: Cory Weinberg

Cory Weinberg covers the intersection of tech and cities. That means digging into how startups and big tech companies are trying to reshape real estate, transportation, urban planning, and travel. Previously, he reported on Bay Area housing and commercial real estate for the San Francisco Business Times. He received a "best young journalist" award from the National Association of Real Estate Editors.

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