Volkswagen in trouble

Volkswagen AG’s former engineer James Liang has been sentenced to 40 months in prison by a federal judge in the US.

He was central to the company’s scheme in developing cars that could evade US pollution rules

Background

In 2015, US’ Environmental Protection Agency (EPA) issued a notice of violation of the Clean Air Act to German automaker Volkswagen Group. The automaker was accused of flouting rules for nearly 7 years in the region. VW had reportedly programmed a turbocharged direct injection. This enabled the diesel engines to activate emissions controls only during laboratory emissions testing. This programming was found from models that were introduced in 2009 to 2015. Reportedly, 11 million such cars were deployed across the world and 500,000 in the United States alone. The scandal that unfolded resulted in the resignation of then CEO Martin Winterkorn. A number of the company’s top executives stepped down as well as further details began to emerge.

There is growing concern that the performance of vehicles in labs are different from the performance in the real world. A study noted that diesel cars and trucks from 10 countries produced 50% more nitrogen oxide emissions than lab tests showed.

In July 2017, two other car manufacturers, Mercedes and Daimler announced a recall of over three million cars over concerns of emission standards. They asked owners to upgrade a software already present in the cars.

Analysis

James Liang was the first person to be prosecuted over the scandal. It has been reported that he was a key member in designing the cars to flout the existing rules. There are charges against seven others as well. Other nations have also begun their own independent investigations.

VW has already admitted that it is guilty as charged. It has vowed to spend $25 billion in addressing the problems as laid out by the US. Lang’s legal team sought for a more lenient term for him in return for cooperation with the prosecutors. They had asked for a $20,000 fine and three years of jail time.

However, the 63-year-old has been sentenced to 40 months and has been ordered to pay a penalty of $200,000. US District Court Judge Sean Cox said, “This is a very serious and troubling crime against our economic system.” Liam is still an employee for VW but is no longer an engineer. He can appeal the verdict.

The VW scandal has also implicated other carmakers. A study found out that a number of cars driving on UK roads found to exceed legal European emission pollutants by more than 10 times.

Assessment

Our assessment is that this could be the first of other indictments for those working at Volkswagen. Other countries might also pursue their independent investigations. Liang’s sentence will point to an equally tough fate for Volkswagen executive, Oliver Schmidt.