Wednesday, October 28, 2015

Up To $87 Billion!

Credit Suisse, the huge Swiss financial institution, has estimated the cost of the Volkswagen diesel debacle may run from a low of $25-billion to a high of $87-billion. Volkswagen disagrees.

Forbes estimates that the market capitalization of Volkswagen Group is $126-billion. I'm no financial genius but if Credit Suisse is anywhere near correct VW is in trouble.

No one, not even VW it seems, knows for sure how this fiasco is going to be resolved. Can VW come up with a software fix? And if so how will the vehicle owners react if it seriously lowers the fuel economy? What if VW has to buy back all those vehicles?

As I said before this may well be catastrophic for the world auto industry. Volkswagen Group is, or was, the world's largest auto manufacturer producing Audi, Bentley, Bugatti, Lamborghini, Porsche, Seat, Skoda and of course Volkswagen.

There were rumors that other manufacturers may have fiddled to get better fuel economy numbers while passing pollution tests but so far only VW is in the cross-hairs.

Do I really believe that VW will fail as a result of all of this? No. I have no idea how they will get out of the mess they created but I think they will. Time will tell.

5 comments:

Michael Coates said...

Just one quick one, Bruce. I don't see it as a "diesel" debacle, it's a "software" debacle. The diesel engine, because of the strict U.S. emissions, happened to be the target of the nefarious software, but that's incidental since the engine could meet emissions, but then used the software to turn off the emissions equipment during normal operations.

Other than that quibble, your usual good commentary on a slippery situation.

Michael Coates

Bruce Hotchkiss said...

I see your point (and I always appreciate your input) but I think in VW's case it is a diesel problem. They didn't cheat with their gas engine cars. The damage they have done to all diesels is much worse than what GM did back in the '80s. In my opinion.

Michael Coates said...

Do we know they didn't cheat on the gas engines? The temptation is the same. Meet emissions during the test cycle, then turn it off to keep consumers happy with better performance and fuel economy the rest of the time. I honestly don't think the damage is to the diesel brand, assuming the rest of the automotive world picks up the challenge. After all, a BMW X5 diesel was part of the West Virginia/ICCT test that uncovered the VW issue and it turned in emissions numbers right on spec. No one else has been implicated in spite of the "rumors" that seem to turn into news on the internet. --Michael

Bruce Hotchkiss said...

True. We know that others have cheated in the past. I don't have a crystal ball but the public may lump all diesels together. That is my fear.

Charlie Peters said...

Bruce, tell us about direct injection, gas & diesel.