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Volkswagen And China: A Perfect Fit
Submitted by Raul Ilargi Meijer via The Automatic Earth blog,
If Angela Merkel wants to get rid of one of her major headaches, we suggest she should tell Volkswagen to move its operations from Wolfsburg to China. It may seem a strange thing to do at first blush, with 750,000 German jobs on the line, but bear with us here, because this could well be the only way to preserve at least some value for VW’s stock- and bondholders.
And several layers of German government, as well as German pension funds, are major investors. In a company that has now lost 40%, over €32 billion, of its market cap, and, according to an estimate by UBS, faces €35 billion or more in costs over the various emissions scandals. Count your losses, German pensioners! And the way things are going, and the way the scandal is widening, this may still be a conservative number.
Here’s the ‘thing’: after the most recent admissions coming from the carmaker and its affiliates it may well have become impossible for -international- lawmakers and lawyers alike to not go after Volkswagen with all they’ve got. First the EPA found a few days ago that defeat devices were installed in larger diesel engines too, those used in Porsche and Audi cars, instead of just the smaller ones whose testing by the University of West Virginia started this whole Teutonic drama.
Now we find that for VW’s petrol engines, too, various emissions have gone severely underreported. Porsche’s official reaction to the new diesel findings was that the company was ‘surprised’. Maybe that has something to do with the fact that the new Volkswagen CEO, Mueller, ran Porsche before being promoted to his present gig?! ‘Surprised’?
Other than that ‘surprise’ comment, both Audi and Porsche have reportedly flatly denied the very existence of the defeat devices in their products, even as the EPA research looks solid. Perhaps they should have been advised by their vast legal staffs that flat denial at this point in the game is a dangerous move.
VW has had ample time to come clean, with the EPA, with German regulators, as well as with a wide range of other regulators across the globe. But it’s abundantly clear they haven’t come clean. Moreover, thus far they’ve mostly been allowed to do their own in-house testing. And yes, that is as crazy as it sounds.
If and when the company is found to not have spoken the truth and nothing but the truth after the initial EPA findings (which, remember, followed a multi-year period of blatant lies, denial and deceit), replacing a CEO or pointing fingers at employees will no longer suffice. Heads will have to roll, and they will have to roll straight into prison cells.
At the same time, the company will be ordered, by regulators, lawmakers and judges, to pay fines so hefty its very existence will be in danger. VW lost 40% of its market cap and stands to lose 40% more in fines. An attractive investment? Only until the next lie gets exposed, one would presume.
This is no longer about the cost of repairs. And it’s no longer about greater fools still buying VW cars either. You can’t keep on lying to disguise your earlier lies and expect to get away with it just because you’re a large corporation.
That may not seem obvious or intuitive in today’s environment, but because attacks on VW will come from a multitude of sources -a dozen countries and ten dozen lawyers from all over the world-, regulators won’t want to be found going easy on VW as -some of- their peers go for the jugular. At some point, it gets to be about credibility.
Credibility of the EPA, and of all the other regulators. South Korea and Japan sales are plummeting, and India of all places is now getting on the bandwagon. This is not just a Merkel headache, it’ll be a migraine attack soon. Move the whole thing to China, Angela! Cut your losses…
Why China? We first thought of the VW-China connection because of this Jen Sorensen comic, but thought right away that it would be even much more applicable to China than it is (and it very much is, of course) to the US. That is, the idea of a political system with a built-in defeat device. China’s defeat device is its ‘official numbers’. The government says it wants X% growth, and that’s what comes out a year later.
What defeat device? Well, for one thing, Chinese President Xi Jinping looks to be starting a new personality culture in the vein of Mao, and presumably to that end last week introduced a new 5-year plan. But let’s be frank, these are things that don’t fit in a 2015 economy that relies on trade with the entire world.
The 2016-20 plan, which spans all corners of nation-building, represents Xi’s best chance to enact his reforms and establish a legacy before party retirement rules compel him to clear the way for a successor in 2022. “It bears Xi Jinping’s fingerprints, as does everything else in the Chinese government now. He is the top man, not first among equals, just first. One-man rule is back in China,” said Stein Ringen, a professor of sociology and social policy at the University of Oxford. “This is Xi saying, ’I am in charge and I will continue to be in charge.’”
That Xi goes down this path anyway shows us that he still seeks total control in the Mao or Deng Xiao Ping tradition, even though that is not remotely possible in an even half-open economic system. In China’s economy today, GDP growth can neither be planned nor fabricated. But the numbers still can! Which is where the defeat device comes in.
Xi Jinping cannot resist the temptations of a personality culture and at the same time demands a minimum 6.5% GDP growth over the next five years. A volatile combination. Question then is: what happens if and when growth is much lower than that? Who is Xi going to blame? And who are the Chinese people going to blame? What are the odds that a sub-6.5% growth rate will lead to mayhem?
But that’s just one side of the tale. There are many western observers, quite a few of them quite knowledgeable, who put Chinese GDP growth already at much less than 6.5 %. Lombard Street, Chris Balding, the Li Keqiang Index, Capital Economics, Danny Gabay, you just Google them, there are far too many critical views to ignore. And they on average put REAL China GDP growth at less than half XI’s 6.5% number.
And so again: what will happen when Mao-wannabe Xi can no longer fudge the numbers enough to make his 1.3 billion people believe? What will happen when the PBoC cannot buy sufficient assets with sufficient printed mullah to keep markets appear steady that haven’t been steady in ages?
The 5-year plan calls for GDP to double from 2010-2010, and for per capita income to do the same. Imagine if the US or EU set such goals. There’s no prediction, whether from the OECD or IMF or one of various central banks that comes even close to being correct after just one year, let alone five.
Xi Jinping’s 5-year plan should be read in the same way that one reads Alice in Wonderland. It is wishful thinking devoid of any sense of reality, and it’s only the inbuilt ‘official number’ defeat device that can provide it with an air of importance.
Apparently, China’s emissions numbers follow the same path, and the link to Volkswagen is again awfully easy to make in that respect too:
China has been consuming as much as 17% more coal each year than reported, according to the new government figures. By some initial estimates, that could translate to almost a billion more tons of carbon dioxide released into the atmosphere annually in recent years, more than all of Germany emits from fossil fuels.
The adjusted data, which appeared recently in an energy statistics yearbook published without fanfare by China’s statistical agency, show that coal consumption has been underestimated since 2000, and particularly in recent years. The revisions were based on a census of the economy in 2013 that exposed gaps in data collection, especially from small companies and factories.
Illustrating the scale of the revision, the new figures add about 600 million tons to China’s coal consumption in 2012 — an amount equivalent to more than 70% of the total coal used annually by the United States.
In other words, the deceit is built-in, it’s a feature not a flaw. That goes for both China’s and Volkswagen’s emissions models, and it goes for Xi Jinping’s 5-year plan. One common element seems to be desperation, the knowledge that certain aspired conditions cannot be met, and the subsequent decision to then fudge and cheat. That decision is made necessary by one thing only: incompetence.
We don’t want to harp this horse to death, the overall idea should be clear by now. But while writing, we do get new ideas popping up. Like those 750,000 Germans who depend on Volkswagen, directly or indirectly, for their jobs, can all move to China, and settle in some of the abundant ghost cities.
Their homes in Wolfsburg et al can then be made available to the 1 million or so refugees that Germany expects to settle in this year. Win win win, everybody happy.
But we remain anxious about what will happen if and when it becomes clear that the Chinese doubling of GDP and incomes is just a weird fantasy of a man who feels omnipotent enough to think he can control global financial markets. China has malinvested to such an extent that major busts are inevitable.
The British steel industry knows exactly what we mean. And predictions are that a year from now, all US aluminum smelters will be closed. China exports deflation. And that is being felt in its domestic economy too. So it looks like either Xi will need to crack down on his people, or they will crack down on him. Neither is an enticing prospect.
But he can’t tell the truth either, because it’s too far removed from the fairy tales he’s been telling. Just like Volkswagen.
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The things are freakin defective, why would still want to increase the shareholder returns? Just admit it and BTFD already you morons.
The more I hear about these defeat devices the more I want a Volkswagon...
My god do they move the soccer team too? that would make Bundesliga very complicated
the kind of things corporate claimed, did, and will do...
exactly !
Yuan do lai bing fa mi li ka? Mei bi yuan tai ni ka fo ge tsu wa ku? Wi se ling yu bo lu ku su wa gon!
Chinkswagen?
Ilargi is pissed at Volkswagen so he thinks that of all the far more corrupt entities, like his beloved Zio-marxist party, that a successful company in a highly competative industry producing goods valued by consumers the world over and employing hundreds of thousands of skilled middle class employees, and whose health is the at the foundation of the retirements of millions, is the most importand target to make an example of. Check. And all because of "global Zio-warming".
Ilargi is as delusional as Barak chosenite-gonad-licker Obama.
What nonsense! Why does this clown post on ZH on a regular base?
VW has a strong presence in China. But there's a problem. See, the millions of Taxi Drivers in China used to drive the VW Diesel. They loved it. They still do. But the Chinese government has forced all the taxi drivers to switch to the Chinese owned/operated BYD car. The taxi drivers hate this car, but they are forced to drive it.
So, moving VW operations to China is a great idea, but this will need to be done in a way to make the Oligarchs who are certainly now billionaires, at BYD happy. So, I think giving China a large equity stake in VW will be part of the deal....and oh, by the way, China doesn't want or need the 750,000 Germans. Probably 10,000 of them at first to get things rolling, another 10,000 Chinese expats living in Germany who can provide translation services....and boom, you've got a new Chinese VW.
Quite honestly, VW group (VW, Audi, Porsche) + BMW + Mercedes should collectively pull out of the US market and let all these greedy lawyers drive some fucking Hyundai, Kia and Toyotas.
There are no good cars anymore, car technology peaked in Germany( for the most part) in the very early sixties, and it's been all downhill ever since then.
I've driven Hondas, GM, Lexus, Jeep, and a few others. My favorite cars so far were my 1977 International Scout (still running in someone else's hands), and my 1969 Mercedes 280SL 4 speed manual. The latter was a dream to drive. Wish I had the money to get it going again.
I'm almost finished with a complete restoration of 1961 190d Mercedes with a 1966 automatic tranny, won't have to nothin except drive it and change the fluids for the next 50 years, now that's a dream.
I can't speak to the '61 diesel, but I had an '82 240D that had nothing but problems. I finally gave up on it after the engine fan decided to break and pierce the radiator. But I'm guessing they were built better in the '60's (ironically).
Soon as we went off the gold std it must have pissed off some german(s) and the cheapining began, i've come acrossed it left and right. Got the best of both now.
Could be. I drove the 280SL almost daily for 15 years and it was well used when I bought it, though it looked almost new. It needed expensive maintenance now and then, but it was still cheaper than a car payment for anything comparable in the era, and I enjoyed the shit out of it.
Just don't let your employees unionize the cake shall fill thy mouth... On a credibility building path again, then the calls for more government, nicely done..
I notice no thoughts on this..
"China has been consuming as much as 17% more coal each year than reported, according to the new government figures"
Antarctic ice growth got ya down again...
It's hard to even know where to begin on this. I was responding to a car post. And by the way, I paid $6K for my Scout II in 2006, and $18K for the 280SL, in 2002. I mentioned I don't have enough money to get the 280SL running again, though it is still taking up space in my garage because I (and mostly my wife) refuse to part with it. And I have no union policy one way or the other on my small business. So your point is what?
My point simply your a liar, I have been here a long time and your position then was you like big gov. but would not let employees unionize as you were the one with skin in the game. Remember... We were actually discussing unions and their influence on big gov. which you liked but would not allow your employees to do the same.. We all thought you were a women in LV, now your a guy??
very well said, we are suppose to believe EPA that corrupt agency
They are a big headache to keep on the road excluding the device, but if that's what you want, the less power to ya.
Interestingly, VW figured out how to maximize horsepower and fuel economy with their engines -- a true breakthrough. If you believe as many here do that emissions are irrelevant, you definitely want one of these vehicles. The problem is that many consumers who purchased the vehicles thought they were helping the environment and bought them for that reason. If you believe in free markets and having corporate and/or personal responsibility for selling what you claim you are selling, VW should be subject to lawsuits for fraud.
They were hot heads which required a std tranny and manule labor to keep them actively running, they never lasted the test of time and the dealers were just as crooked when obtaining parts.
I own a 2012 Passat tdi. I get 38-41 in the city and 48-52 on the highway. I can drive from Detroit to Tallahassee on 1 18 gallon tank. I won't be giving this up or let them make any "updates" to it either. Great car, very smooth and quieter than any ford gas engine.
Anyone who buys a diesel to "help the environment" is a brainless moron to begin with.
How about rolling back this exorbitant extortion instead? Throw some execs in jail if need be.
Fraud should cause some to go to jail. But I don't agree with the proposition that it is extortion to hold a company responsible for fraud and divest it of profits derived from fraud.
The dollar amount I heard was like $40+ billion which seems like it's more of a favor for VW's competitors (i.e., political) than punishment.
I'm all for a cap on 100% divestment of fraudulent profits, with people going to jail. The current system is financial fines over and above profit (punitive damages), which only fucks employees and stockholders, and no one goes to jail. Punitive damages are supposed to be a disincentive to engage in bad conduct, but I think criminal penalties would be far more effective.
Xi is probably kicking himself in the ass for not implementing the American education system in China so that no citizen would be capable of doing the math...
Germany is plagued right now. What/Who flagged or whistle blew on the emission issue
Merkel and others in the German govt pushing open borders and helping these invaders need to be Mussolinied.
Obola and his gang did that shake down of Toyota/Lexus, BNP, BP (for Stuxnet-false flag) and many many others.
"Volkswagen and China: a perfect fit". Could have been before the 2 million refugees appeared. Now its 'Volkswagen and Syria: a perfect fit'.
Traditional German cooking with pork will be banned as well due to Islamic law.
Same with many of the other European countries.
Best way for the globalist to destroy nationalism is to flood it with another culture. Working as planned.
In 5 years, no one will remember this incident. If VWs burst into flames when detecting muslim music, this would be a much more interesting story.
Fuck Germany.
I drove past a school bus today and could see smoke it was spitting out an entire block away. Then I saw a tractor trailer spewing more smoke than the school bus. Later I stopped behind a VW TDI at a traffic light. When the TDI pulled away there was no visible smoke coming from its tailpipe. Fuck the EPA and its clean air racket.
Citation: "...followed a multi-year period of blatant lies, denial and deceit..."
I'm still a little bit surprised: As I remember all this fake-testing, indoor-testing etc... was official well known and accepted as result of intense lobby-work in Brussels: Not just VW but the whole car maker branch in Europe - especially those producing potent cars for higher speeds on German freeways.
How many print articels and television documentaries addressed this issue over the years, how many times environmentalists get worked up about this issue - not particulary about VW but against the branch as a whole and even more the corrupt work methods in Brussels - the capital of lobbyists approving those practices: Brussels -- untouchable for voters because of non-existing democracy.
Even the "test-modus"-software was an open secret - it took a long time that the EPA put on guard. Existing television documentaries mentioned it - and we got used to this as an another absurd chapter of European lobby-politics.
Somehow it's a boomerang: The contradiction between enviromental requirements claimed especially in Germany - and at the same time the tolerated bypassing and softening of new requirement-regulations by lobby-work in Brussels. Thats politics. It's unpossible to understand the attitude of VW without this European lobby-chapter in the backround.
Beside of this without justifying anything: Personally I got the impression that modern VW-cars are not the issue (type of cars) which we suffer most in our daily traffic routine...one or two Chinese coal-fired power plants probably blow up more carbone and nitrogen oxids in the air as the whole Volkswagen-fleet together. But also that is politics ;-)
Cheat...lose $100 billion.....go to jail if you're an auto company
If you're a major financial corporation you get trillions and no jail time
And if you are a multi-trillion a year armed racket like the federal government you cover every dollar of every promise made to the worst fuckup employee, the moreso if they have advanced the cause(Lois Lerner, SEC porn afficianados, et al)
Two points: 1) CO2 (Carbon and Oxygen for christ's sake) is the most important molecule for ongoing plant/insect/animal/human life, so if all the defeat additions do is mask that then bring it on. We are starved of CO2. 2) Given that VW isn't the only car manufacturer using these techniques, this looks like a targeted take down of VW and if so who is behind it? Who stands to benefit? Which big banks would be in the firing line?
Um let's see.
France might have broken ranks in the Empire of Chaos, but got forced, somehow, to break the Mistral contract to punish Russia ... didn't work because Russia didn't really need the Mistrals and they got sold to Egypt (just had its tourist industry wrecked by association with the crashed - to punish Russia - airliner).
Russia to host the World Cup, so the FIFA 'scandal' is drummed up.
Germany was softening on Syria and Russia so, lo and behold, VW is attacked.
I could go on with many other examples, but does anyone else see a pattern here?
S'funny how Wall Str crimes are never prosecuted, nor war crimes which, in addition to killing millions, cause WAY more pollution/environmental damage than VWs ever could ... ever seen a B-52 take off, or an Abrams tank spewing smoke?
I bought a 1986 300SD so I have something to tool around in post EMP. Surprise! great milage (39 mpg on first tank) and since it is +25 years old it gets a classic license and cheap insurance in NV. For $2k I'm pleased. I think cars are over all much better in the past 15 years. My Hyundais seem like they will never die. I too don't have a problem with emmissions as the planet will need all the CO2 it can get going into the next solar minimum. Maybe VW is just doing their part. If Trump gets elected I think it will just be algore whinning about greenhouse gasses.
The great irony would be it the greenies get their climate deniers laws passed , for it to be turned on those who lie about climate data that shows warming where there has been none.
It’s cheating on Nitrides of Oxide. Who gives a sh*t? Our leaders are insane for allowing Volkswagen to be vampired in this way. This sucking on Volkswagen’s lifeblood only punishes future pensioners and today’s stockholders.
Punish managment crooks, but don’t punish the innocent. Don’t reward the ambulance chasers either.
https://en.wikipedia.org/wiki/Volkswagen_emissions_scandal
Oxides of nitride really only matter in those cities that naturally have smog; generally they have the smog due to being in a bowl like depression, which traps emissions. These geological features are a small percentage of Earth’s “Road surface.”
Possible “nitric acid” like rain from NOX is claimed as an issue, but that is mostly nonsense … and also:
The solution to pollution is dilution!
Just give everybody who has NoX Volkswage currently residing in a smog city, a new updated Volkswagen. Then on-sell old car into areas where there is PLENTY OF DILUTION. Many open areas of the world can easily absorb NoX emissions of old Volkswagen, until car dies of old age. Volkswagen absorbs cost between new car and old one. Old car (nox car) is registered so owner cannot travel back to former smog prone city, like Mexico City or Los Angeles. Most rational people don’t want to go to those areas anyway, so if they already have a NoX car, then they can sign a waiver, saying they won't drive car there.
This would be a simple fix to Volkswagen problem, so it does not target the innocent workers and stock holders. But, it seems our political leaders are incapable of rational thought or behavior, or even coming up with simple solutions to problems.
Agree but this about Germony thinking business independence to east
and about pollute???
well, all know wars clean environments...
hey Durden
dont forget that China can and probably will fuck the west 3 times over, so you can keep the wishfull thinking
http://www.jsmineset.com/2015/11/04/china-could-reprice-gold-to-100000-p...
That article is a bunch of BS. There isn't a hope in hell that China could "reprice" gold. It's just your wet dream.
Let me run a couple simple numbers for you, since you are incapable of actual thought. There's 2,400 tonnes of NEW gold mined every year. That alone is 77 million oz a year, or, at $10,000/oz, or $770 billion. PLUS another 10,000 to 40,000 tonnes in sales from various people, institutions etc, around the world, "cashing in". And that's just the first year. For the sake of argument, say $10 trillion the first year.
Every year after that, the production of new gold would skyrocket. And within a couple years, production would be on 4 or 5 times, say 10,000 tonnes a year. That would mean another $4 trillion a year in perpetuity, just for mined gold. And that doesn't even include ongoing sales from people selling their gold. You know there's on the order of 165,000 tonnes of gold that's been mined.
Since gold returns ZERO on investment, what' China going to do with all that gold? Look at it? They can never sell it, becasue then the price will drop to peanuts. If they stop buying up every oz that's mined, the price will also drop to peanuts.
You are so naive, Why don't you read up on Nelson Bunker Hunt and what he and his brother tried to do with silver in the late 70's and 1980
Breaking news, I just tried to order an Audi A3 TDI 1.6 EU6 norm car in Europe and they say that isn't possible. Which means even EU6 norm cars have defects. You can bet something will be announced in a few days.
Talking your book in another spin on China' imminent collapse and it must be through a crash. If you suck their however defective numbers and plans and exercise your conclusions through shorts in deformed markets, you going to have your ar**s hand back to you. They too know how to play deformed markets. True, they are on the brink of implosion in their real economy that matter most and not their secondaryfinancial economy. Reforms towards a Long Landing (Japan style) is equally possible. Effects of these fiscal reforms sparking volatilies in their financial economies are expected. Watch the dog not its tail (financial economy) over here.
Europe is dying anyway. Millions of middle eastern invaders are over-running Europe.
German cooking with pork will be forbidden by Islamic law.
The globalist have destroyed Europe on purpose, so there is no longer a sense of nationalism.
Much easier to make a one-world government.
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