- "Dieselgate".
(heavy suspenseful music) The very mention sends
shivers down the spines of car executives across Germany. But we're in America, and we didn't make headlines for cheating US emission standards. So, no need to fear the fall-out from a scandal, right? Not the billions of dollars of fines or the massive recalls or the prison time for
company execs, right? But what if Volkswagen was just the start? (upbeat music) What if, after their cheating
scheme was discovered, other major manufacturers were caught using similar technology? Companies you know and love like Chrysler and Mercedes and oh boy, if you thought they threw the book at Volkswagen with those massive penalties, just wait until you see what happened to those other guys. You will be extremely underwhelmed. Yep, despite the deep crud
VW got themselves into, this wasn't some horror movie where the killer is always on the lookout for the next victim. It turns out none of the companies that did basically the
same stuff as Volkswagen got in all that much trouble. Today on Wheel House, why was Volkswagen's punishment so steep? Was what they did really that bad, or does someone just
hate Jettas that much? - Thank you to Trade Coffee for sponsoring today's video. It doesn't get much better
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the description below. Now let's pour into this episode. (atmospheric music) - "Dieselgate". No, it's not the entrance to Vin Diesel's mansion. Well, it's not just the entrance to Vin Diesel's mansion. It was also a huge scandal. It all started back in
2014 when scientists at the International Council
on Clean Transportation discovered that several
Volkswagen diesel engines performed differently
during emission testing than they did on the road. At the time, VW was really
pushing an alternative to hybrid vehicles that they called "clean diesel technology". "Clean diesel", which
is kind of an oxymoron since diesel fuel inherently burns sootier than regular gasoline. (car engine revving) Diesel engines technically
release less CO2 per mile than gasoline engines, but diesel emits more nitrous oxide and particulate matter, both of which are very bad. Volkswagen claimed to have developed a nitrogen oxide trap that helped their engines
get good gas mileage while meeting ever tightening
emissions standards. International Council of Clean
Transportation scientists, who had been commissioned by the California Air Resources Board, discovered that during road testing, VW's diesel engines exceeded the US nitrogen oxide emission standards by up to 40 times. So much for "clean diesel". The ICCT's initial results were so crazy that the scientists literally thought they had screwed up the testing, but the results held on subsequent tests. So, in May of 2014, the California Air
Resources Board and the EPA opened an investigation into Volkswagen. What the heck was going on? Well, it turns out, the system didn't actually work. What Volkswagen actually did was had the engine programmed to switch into a low emissions mode when it detected an
emissions test situation. When driving normally, the computer switched
back to a separate mode with significantly
different fuel pressure, ignition timing and
exhaust gas recirculation. Volkswagen was slow to
respond to the accusations. Then in December of 2014, the company announced
it had fixed the problem and would be recalling
500,000 affected vehicles. But CARB continued with
additional testing. And in 2015, a German magazine reported that at least 30 people at management levels in Volkswagen had known about the emissions
cheating scheme for years. Finally, after months of VW trying to dodge responsibility, no pun intended, the EPA decided several of
the company's diesel models would not be certified for
American sales in 2016. And that was the straw that finally broke Vin Diesel's gate. Volkswagen admitted to
having knowingly installed a quote "sophisticated software algorithm" that could sense test
scenarios by monitoring speed, engine operation, air pressure, and the position of the steering wheel. Between 2009 and 2015, the software was installed in about 11 million vehicles worldwide split between VW and
two of its subsidiaries, Audi and Porsche. Now, Volkswagen's execs and stockholders were about to pay the price. Volkswagen CEO, Martin Winterkorn, was quickly forced to resign and eventually charged
in the United States with fraud and conspiracy. In April of 2016, the company announced plans to spend $18 billion dollars on repairing the affected cars. Nine months later, Volkswagen pled guilty to criminal charges brought by US Attorney
General Loretta Lynch, and was fined $4.2 billion dollars. To date, Volkswagen has paid around $35 billion dollars total in fines, penalties, financial
statements, and buyback costs. And while it's difficult to calculate the total effect on stock prices, in the scandal's first two months, the company lost 46% of
its shareholder value for about $42.5 billion dollars. Damn. There was also the damage done to dealers. Volkswagen paid its US
dealers $1.2 billion to compensate them for losses. But again, the total impact
can't really be calculated. And then there's the 30,000 jobs that Volkswagen eliminated in the wake of the scandal. There's no reason to think the penalties are over, either. In September of last year, German prosecutors announced charges against eight more employees. Winterkorn's trial hasn't even begun yet. And a couple of months ago, Volkswagen lost a ruling in court that clears the way for them to be sued by the State of Ohio. Volkswagen admitted that they
had been basically treating EPA regulations as a
suggestion to be ignored. Like a sign that says "Employees must wash hands". So it makes sense that the government decided it might be time for a crackdown. The EPA massively expanded
its vehicle testing. And, as I so expertly foreshadowed, it turned out Volkswagen
wasn't the only cheaters. (upbeat music) In January of 2017, the FEDs issued a notice of violation against Fiat Chrysler, alleging that over a hundred thousand of their diesel SUVs and trucks were also using software to exceed nitrogen oxide limits. Similar cases were found in diesel cars made by Nissan and Opel. And Daimler admitted just last year that some Mercedes diesel vehicles also had been programmed to cheat emissions tests. Volkswagen even bumbled their way into another scandal when it was revealed
that they had colluded with Mercedes and BMW to limit diesel emissions
treatment technology. In simple terms, the
three German companies agreed to use technology that met the minimum legal
environmental standards, but it was not as good
as it could have been. Probably to save money. Hyundai and Kia were fined for overstating the gas mileage on 1.2 million vehicles. Ford is currently facing a $1.2 billion dollar lawsuit for lying about the fuel economy of the Ranger and the F-150. Yep, the auto industry is just like the Chris
Evans - Scarlett Johansson cinematic classic, "The Perfect Score", in which they steal the SATs. Pretty much everyone is
cheating on their tests. But remember the 35 billy
that it cost Volkswagen? Fiat Chrysler's scandal cost it a comparably small $800 million dollars in fines and recalls. And meanwhile, Daimler
paid around $2.2 billion for their emissions cheating scandal. And they didn't have
to pay anything at all in the collusion case because they were the ones that ratted out BMW and Volkswagen, and it was barely a blip in the news. So, why did Volkswagen
take such a huge punishment while the auto world's
many other uber polluters got off fairly scot-free? Fair or unfair, there are actually a bunch of reasons. First and most important was the scale of Volkswagen's shenanigans. In 2013, VW-owned brands sold over a hundred thousand
diesel cars and SUVs in the US, more than 75%
of the diesel market. So they face stiffer penalties based on the sheer number of offending vehicles on the road. That number also made their
recall cost a lot more and increased their
liability and lawsuits. Volkswagen was also pretty darn flagrant in breaking the rules. Other companys' cars
didn't run as differently during testing as Volkswagens did. So, the penalties they
faced weren't as bad. Meanwhile, Volkswagen was explicit in their attempts to
evade emission standards, and they did it by about 4,000%. It's like the difference in punishment between a guy who steals the Mona Lisa and a guy who steals a
poster of the Mona Lisa. Politics also played
a role here. Surprise. Volkswagen's scandal happened primarily during the more environmentally
focused Obama government, while subsequent scandals happened mostly during the Trump administration when the EPA made a sharp pivot to business friendly and
climate skeptical positions. The Trump administration
was, unsurprisingly, less inclined to punish corporations. A final big difference,
Volkswagen was first. "Dieselgate" was a
headline-grabbing scandal. "Fiat Chrysler gate" isn't even a word. It makes sense that the authorities would use Volkswagen to set an example, especially when it's
the American government going after a foreign company. I can already hear some of you guys in the comments being like "Oh, so what? Who cares about any of this?
This is my 402nd day of asking for up to speed on the unicycle." But this stuff has real
world consequences. Nitrogen oxide has been linked to asthma, bronchitis, emphysema, and heart disease. A study published in 2015 estimated the excess pollution caused by Volkswagen's phony
"Clean Diesel" vehicles would cause 59 premature deaths. Another study calculated the cost at 45,000 disability life years, which is a measure of
years lost due to illness, disability, or early death. But here's the thing. There's no easy solution to any of this. Volkswagen's shenanigans were discovered, 400,000 cars were forced off the road. That's good. But about three quarters of those cars are still
sitting in parking lots around the US waiting to be disposed of. That's not exactly an
environmentally friendly alternative. Luckily though, the future of green cars looks pretty bright. Thanks to new, tighter
EU emissions regulations, even VW themselves announced that they'll no longer sell gas vehicles in Europe by 2035, with phase-outs in America
and China to follow. I think a scandal like this will be less likely in the future as more automakers
switch to electric power. We all know that electric cars are zippier than most gas cars anyway. - [Driver] Ready? - [Cameraman] Yep. - [Driver] Oh! (beep) (beep) (beep) (men laughing) - [Driver] Holy (beep) - [Announcer] Ladies and gentlemen, (audience applause)
James Pumphrey. - Today, we honor a lost innovation. Let us remember its legacy.
(atmospheric music) Let us remember its rising light. Though no longer with us due to safety regulations, their up-and-down
contributions will live on in our hearts forever. Here with a special performance
from Epidemic Sound, please welcome Nolan Jason. (audience applause)
(piano music) Show your respect for pop-up headlights by going to "donutmedia.com". It's got a beautiful airbrush design, and honestly, it's hard to put a price on such a legacy, but if I were to guess, I'd say they're available for $29.98, which is, in fact, way less than $30. So, go pay your respects
at "donutmedia.com". Bless up and down. - Thank you very much
for watching Wheel House. Hit that subscribe button if you're not already subscribed. We've got a lot of new merch on our store right now
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