VW's emission scandal goes beyond corporate lies

Senior Writer
Yahoo Finance
FILE PHOTO: A car with the Volkswagen VW logo badge is seen on display at the North American International Auto Show in Detroit, Michigan, U.S., January 16, 2018. REUTERS/Jonathan Ernst/File Photo
FILE PHOTO: A car with the Volkswagen VW logo badge is seen on display at the North American International Auto Show in Detroit, Michigan, U.S., January 16, 2018. REUTERS/Jonathan Ernst/File Photo

On Thursday, Volkswagen (VOW) CEO Martin Winterkorn and five other Volkswagen executives were indicted in federal court on charges of wire fraud and conspiracy, alleged crimes that stem from the German company’s 2015 diesel emissions scandal.

In 2017, the automaker pleaded guilty to installing devices in cars meant to cheat on emissions tests. The software allowed the car to go into a lower-emissions mode when a test was occurring. The company paid $4.3 billion in penalties.

The main grievances in the 43-page complaint complaint are fraud and deception, which are both the charges and the chief source of pain for American consumers who were tricked into buying cars that they thought were environmentally friendly. (Besides the “clean diesel” marketing, Volkswagen diesel cars captured records for best non-hybrid fuel efficiency, making it an even stronger choice for drivers trying to be green.)

But a larger point of why this is troubling is often lost in the larger discussion of Volkswagen’s (alleged) sins: what diesel can do to a city. Generally, people often only know the stakes after the fact, when they’ve lost the public good of clean air.

The real world effects

In Germany, both home to Volkswagen and Rudolf Diesel, who invented the diesel engine, air quality has gotten so bad that a German court ruled that cities are now allowed to ban some diesel cars. About 70 German cities had NOx (nitrogen oxides) levels that exceeded the limits for the European Union, according to the BBC.

NOx in the air mainly comes from diesel and causes numerous health problems, even in small amounts. One out of three cars in Germany runs on diesel, far more than in the U.S.

After the ruling, Volkswagen said it was “unable to comprehend it.” It’s not hard to see why. The defrauding VW cars, according to the complaint, had been polluting 35 times higher than the allowable NOx limits.

A few weeks ago on a brief trip to Berlin, I was struck by how bad the air quality in an otherwise fantastic European city was, and asked about it. Coal-burning stoves in some of the city’s quarters account for some of the clean air, but fingers pointed to diesel.

One American I spoke with who had moved there nine months prior developed a post-nasal drip that a German doctor instantly recognized as a result of poor air quality, a common occurrence in Berlin. For much of the city, bad air is part of life there, a constant source of health issues, headaches, and complaints.

The European Environment Agency calculated that 12,860 people died prematurely from NOx in Germany’s air. A spokesperson from the agency told Deutsche Welle that every measuring station in Berlin exceeded EU limits in 2015.

Looking beyond the letter of the crimes

Much of the bad behavior in the business and financial worlds is abstract. Wells Fargo’s infamous fake account scandal in which the company allowed millions of fake accounts to be made in customers’ names did not necessarily cause major damage beyond dinging some credit scores.

Every so often, the reverberations of a seemingly minor or victimless crime — lying on an emissions test or having bad standards for mortgage lending — can have significant consequences. They can precipitate a global financial crisis, or cause premature deaths and diminish the quality of life for millions.

Ethan Wolff-Mann is a writer at Yahoo Finance. Follow him on Twitter @ewolffmann. Confidential tip line: FinanceTips[at]oath[.com].

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