The scandal swirling around Germany's largest listed company had its beginnings in an attempt to crack the U.S. market, the missing link in VW's global footprint. But, as Handelsblatt details, what began as expansion ended in deception (piecing together the events that led up to the scandal, based on the facts as they are currently known).
Volkswagen, the world’s largest automaker, has been brought to its knees by the emissions cheating scandal. The company’s share price has been virtually halved, its reputation is in tatters, customers are furious and employees are distraught.
Handelsblatt pieces together the events that led up to the scandal, based on the facts as they are currently known.
The following chronology is based on the work of six reporters and correspondents, who analyzed corporate documents and spoke to many of the people involved.
Chapter 1: The Big Plan is Hatched in Wolfsburg
Wolfgang Bernhard becomes head of the group’s core VW brand and, with the help of CEO Bernd Pischetsrieder, begins developing a new engine that will work with “common rail injection.” The new engine is to be used above all in the United States, where VW wants to start growing again. The group hopes that diesel engines, which are more economical and accelerate quickly, will help it gain ground against U.S. and Japanese rivals. There is one problem, however: The U.S. authorities have the strictest environmental standards.
Mr. Bernhard entrusts the new project to Rudolf Krebs, a developer at VW’s Audi brand. It quickly becomes apparent that it will be impossible to comply with U.S. emissions standards using current technology. Their solution is “adblue,” a technology used by German carmaker Daimler. Developers at VW and Audi are strongly opposed to the use of “adblue” in the planned engine, which later will come to be known as the EA 189, the engine containing the emissions cheating device. Mr. Bernhard is undeterred and presses on with plans for the new engine to incorporate “adblue” and common rail injection.
The first prototype is tested in South Africa. Martin Winterkorn, the head of Audi, and Ferdinand Piëch, the chairman of the VW group’s supervisory board and a major shareholder, are reported to have been present, but are not said to have been impressed.
November 11, 2006
It emerges that Daimler and the VW group will offer diesel cars in the United States under the joint label “Bluetec.”
Chapter 2: The Plan Takes Shape in Wolfsburg
January 7, 2007
VW subsidiary Audi launches its diesel offensive in the United States at the Detroit Motor Show. It is the first German manufacturer to do so. Wolfgang Bernhard does not attend the show, which surprises journalists. It soon emerges that he is to leave the company at the end of January, after less than two years in his post.
Martin Winterkorn is appointed as chief executive of the VW group. From his first day in office, he is aware that the group’s U.S. business is floundering. He knows that only diesel engines will enable VW to gain significant market share in the United States and to fend off Japanese rival Toyota and its hybrid drive.
Mr. Winterkorn restructures VW’s development activities, dispatching engines chief Rudolf Krebs to the group’s Salzgitter plant and replacing him with Wolfgang Hatz, while putting Ulrich Hackenberg in charge of development. Both Mr. Hatz and Mr. Hackenberg were close confidants of Mr. Winterkorn at Audi.
July 20, 2007
The new Euro 5 and 6 emissions standards come into force in the European Union. Diesel engines in particular are to become cleaner. Manufacturers must ensure that vehicles do not exceed limits in “all operating conditions.” National authorities are called upon to check manufacturers’ specifications. The need to check whether manufacturers are using defeat devices is explicitly mentioned in regulation No. 715/2007.
The diesel engine EA 189 is used for the first time in the new Tiguan model. It contains the software that will later be used to cheat in emissions tests, although it is not yet being used. The sporty off-road vehicle can comply with emissions standards in Europe, but not the stricter limits that apply in the United States.
The diesel engine EA 189 is used for the first time in August 2007 in the new VW Tiguan. It contains the software that will later be used to cheat in emissions tests, although it is not yet being used.
August 6, 2007
Volkswagen ends its Bluetec cooperation with Daimler. It now plans to market its diesel engines under the TDI brand.
Volkswagen uses software in its EA 189 engine that allows vehicles to be switched into test mode. This is intended to make work easier for technicians, who will not have to perform the same routines on each car. The software was developed by automotive supplier Bosch, which warns VW against using it in series models.
September 11, 2007
At the International Motor Show in Frankfurt, German environmental organization DUH claims that actual emissions values are up to 45 percent higher than those stated by manufacturers and calls for measurements to be repeated. The German authorities do not respond.
Martin Winterkorn, the perfectionist, autocratic CEO of Volkswagen, resigned on September 23. Here, Mr. Winterkorn expects the model of a competitor at a 2008 auto show. Source: DPA
October 5, 2007
Stefan Jacoby takes over as head of VW’s U.S. business and announces the biggest restructuring in the group’s history. The U.S. subsidiary is reporting a loss of several hundred million dollars each year.
Chapter 3: The moment of deception
January 12, 2008
At the Detroit Motor Show, Matthias Wissmann, president of German automotive industry association VDA, says 2008 will be the year in which “clean diesel” achieves a breakthrough in the U.S. market. He predicts diesel cars will increase their market share from 3 to 15 percent by 2015, thanks to rising oil prices and stricter emissions standards.
Volkswagen announces the launch of the VW Jetta 2.0 TDI in the United States, based on the EA 189. The company highlights the car’s low fuel consumption and low emissions, which have been made possible thanks to the cheat software.
November 20, 2008
The VW Jetta TDI wins an award for “Green Car of the Year” at the Los Angeles Auto Show. It is the first time that a diesel vehicle has won this award.
Chapter 4: The manipulation spreads
VW fits the EA 189 diesel engine in the sixth generation of its mass-market Golf model.
May 8, 2009
VW presents its new 1.6 TDI engine, based on the EA 189, at the 30th Vienna Motor Symposium and says it will form the basis for all four-cylinder diesel engines at VW in future. The Audi A3 wins “Green Car of the Year” in the United States. It also has an EA 189 engine.
VW installs the EA 189 in its Polo and Passat models, while Audi uses it for its A1, A3, A4 and A6 models, the TT sports car and the Q3 and Q5 all-terrain vehicles. The engine is also used in cars produced by the group’s Spanish subsidiary Seat and its Czech subsidiary Skoda.
Chapter 5: A technician blows the whistle
A VW technician discovers the deception and informs Heinz-Jakob Neusser, head of engine development at the VW brand. Mr. Neusser notes the information but does not take it seriously, and nothing is made public. Mr. Neusser’s silence pays off, and from 2013 onwards he is in charge of development at the group.
The EA 189 engine proves popular with customers as it is economical, robust and durable, and is praised in particular by taxi drivers and traveling sales reps.
VW presents its new 1.6 TDI engine, based on the EA 189, in May 2009 at the 30th Vienna Motor Symposium and says it will form the basis for all four-cylinder diesel engines at VW in future.
Chapter 6: The Major U.S. Offensive
May 24, 2011
VW finally opens its own car factory in the United States. The group’s plant in Chattanooga, Tennessee, employs over 2,000 staff and will eventually have the capacity to produce up to 230,000 vehicles per year. The ultimate goal is to make cars produced in the United States up to 20 percent more environmentally friendly than VW models made to date in Canada and Europe.
December 31, 2011
Volkswagen has sold 69,730 diesel vehicles in the United States this year, almost 18,000 more than in 2010. Other manufacturers such as General Motors, Daimler and BMW have sold only 2,000 to 3,000 diesel cars there. However, the diesel market is still only small in the United States, where a total of 12.8 million new cars were sold in 2011.
Chapter 7: More warnings
2012 to 2013
Environmental associations complain repeatedly that diesel cars are much dirtier than claimed, but the automotive industry does not respond and tries to play down the issue.
April 26, 2013
Martin Winterkorn says at the Vienna Motor Symposium that VW has cut the fuel consumption of its TDI and TSI engines by more than 30 percent since 2000. He is confident that it will be able to increase efficiency by a further 15 percent by 2020, making diesel at least as clean as hybrid engines from rival Japanese manufacturers.
May 13, 2013
The environmental organization DUH presents audit reports showing considerable discrepancies between test results and the figures obtained during actual use in Germany. It criticizes the “close links between members of the government and the automotive industry.” While the European Commission is discussing stricter limits, these are rejected by the government in Berlin, to avoid causing problems for German carmakers.
Two days after the scandal breaks, Michael Horn, the head of VW’s U.S. business, attempts to pass off the emissions investigation with a joke during a presentation of VW’s new diesel Passat in New York. A week later, VW consolidates its operative management in the United States, Canada and Mexico, says it is retaining Mr. Horn in his current position. Source: DPA
Chapter 8: The revelation
The environmental organization ICCT tests actual emissions figures for diesel cars and finds that the two Volkswagen models are well above the limits, exceeding the guidelines 35-fold in extreme cases.
Two U.S. authorities are informed of this, the Environmental Protection Agency and the California Air Resources Board, a state agency. They commence official investigations into Volkswagen. VW indicates that it is willing to discuss the matter, conducts its own investigations and repeatedly compares the results on both sides.
Chapter 9: Tussling with U.S. Regulators
The management of Volkswagen invites journalists to “Valhalla,” a high-security wing at its head office in Wolfsburg, where Mr. Winterkorn and chief financial officer Hans Dieter Pötsch spend around two hours justifying their actions. They promise that the group’s U.S. business is a top priority and present VW’s new models for the coming years. All are SUVs, most of which will have a diesel drive.
In April, supervisory board chairman Piëch announces in an interview he is distancing himself from Mr. Winterkorn, leading to an open power struggle between the former allies.
December 2, 2014
VW recalls 500,000 cars in the United States due to technical problems. Sales of diesel vehicles in the United States decline for the first time in years. VW has sold 80,441 diesel cars in 2014, compared with a record 93,338 in the previous year.
December 8, 2014
Despite the sluggishness of the Russian and Brazilian markets, VW, Audi, Seat and Skoda are set to have sold more than 10 million cars by the end of the year, a record.
Chapter 10: The Crisis Escalates
Supervisory board chairman Mr. Piëch announces in an interview he is distancing himself from Mr. Winterkorn, leading to an open power struggle between the former allies. Mr. Winterkorn ultimately comes out on top following a crisis meeting of the supervisory board, and Mr. Piëch resigns from the board but remains a major shareholder. Mr. Piëch gives no reason for his open attack on Mr. Winterkorn, and it is unclear whether he was already aware of the problems looming at Volkswagen.
U.S. environmental authorities threaten to stop approving Volkswagen’s diesel vehicles from 2016 unless it complies with emissions limits. VW engineers are unable to explain the massive difference between measurements obtained in tests and those recorded on the road. Finally, the group admits to rigging emission figures with the aid of software.
Chapter 11: The Scandal Erupts
September 18, 2015
Cynthia Giles, head of the U.S. EPA, tells the world press that VW has deceived its customers and the U.S. government. The scandal goes public. VW is humiliated but initially says nothing. The results of the emissions tests hit the German press, with the news that VW could face a maximum penalty in the United States of $18 billion causing surprise.
September 20, 2015
Volkswagen comments publicly on the accusations for the first time. A statement from Mr. Winterkorn says he deeply regrets having lost the trust of customers and the public and that the group is collaborating with the authorities to clarify the issue quickly and transparently.
September 21, 2015
All hell breaks loose on the stock markets, with Volkswagen shares sliding 20 percent, wiping several billion euros off the group’s market capitalization. Mr. Winterkorn continues to declare publicly that he is the right person to investigate the issue.
September 23, 2015
The pressure becomes too great and Mr. Winterkorn asks the supervisory board to terminate his contract. He says he is doing this in the best interests of the company, although he is not aware of any misconduct. Volkswagen files charges against persons unknown at Braunschweig public prosecutors.
September 28, 2015
Matthias Müller, the head of Porsche and Volkswagen’s new CEO, invites 1,200 managers to a conference at 6 p.m., announcing that a project team has drawn up a large-scale action plan over the weekend.
October 1, 2015
The public prosecutor in Braunschweig reverses itself and says it is not conducting formal investigation proceedings against Mr. Winterkorn and that there is merely only an initial suspicion. The prosecutor does not give a reason for the reversal and apologizes for the “false impression.”
Chapter 12: The Clean-Up Begins
VW has started the biggest recall program in its history, affecting 5.5 million vehicles in Germany alone. It estimates the cost at €300 for each affected vehicle, but the recall could prove much more expensive, depending on the technical solution required. The real risks, however, arise from legal action against the company. Volkswagen faces fines for its deception, which are likely to be particularly high in the United States. Customers and investors are also suing the company, claiming that they were informed too late of what was happening. As the lawsuits are only just beginning, the financial damage to the group cannot yet be estimated. Experts anticipate that it will run into tens of billions of euros.
Epilogue — so far
While rival automotive groups Toyota and General Motors have had to launch similar large-scale recalls of defective vehicles in recent years, Volkswagen differs from these cases in that it acted criminally with intent, which is likely to aggravate the situation. The group’s new management will now have to deal with a scandal that goes well beyond VW.
The entire German automotive industry, the driving force behind the nation’s economy, is being damaged, with suspicion being cast on diesel cars from other manufacturers as well. Every second car in Europe runs on diesel fuel. The coming months will show how well VW is able to cope with — or even survive — the crisis.