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Sunday, October 11, 2015

The Bankruptcy of Volkswagen



It must have been fifty years ago when I watched a black and white television advert that started with the camera focused on a one storey, snow covered building. The announcer asked, "Ever wonder how the man who plows the snow gets to work?" The sound of a Volkswagen Beetle starting its engine was followed by the doors of the garage opening and a VW Beetle drove on out, taking our hero to work to clear the paths for the world to get to our own work.

Simple! Direct! Effective! This is the type of image building that brought us to revere VW.

There are many experts weighing in with their opinions on the effects of excess emissions, and corporate fraud. I am not one of those, I am simply Joe Public, but I too have my opinions and my questions.

Volkswagen has been an iconic brand that earned the world's respect by producing one of the simplest of cars, The Beetle, dubbed The People's Car. It was one of the most reliable cars known to man, and so we bought it. I owned a VW Scirrocco, one of the sweetest cars I have had the pleasure to own in my lifetime. VW cars were always known for German engineering, and that occupied an exalted position in world opinion.

It seems that the VW Board required a diesel engine that would perform well and give extraordinary mileage and meet strict emission standards, but VW engineers apparently were not able to achieve that, so they developed a Defeat Device to make monitoring authorities think their cars were on target.

What worries me is that if VW engineers were not able to develop such capabilities, why would we think that any other engineers suceeded where they failed? Are there also other brands out there that have nothing to do with VW that are cheating?

VW has a choice: fix the problem in full at its own cost, or close up shop permanently. VW is a company that is "too big, and too beloved to simply go out of business permanently." However, it is facing overwhelming costs in terms of worldwide fines and fixes. Added to that are the lawyers who are busy with their class law suits and we can see that VW are facing unknown liabilities in connection with this problem.

As was the case with GM in the U.S., VW will have to bite the bullet to protect itself and declare Chapter 11, (Bankruptcy) to limit the exposure, and it must do so soon.

The effect of VW's actions on owners is that when the recall begins you will have to take your car to authorised dealers and repair shops, get the fix and then drive away in a car that will not perform as well and will drink more fuel. That was not what you bought but that is what you will be left with.

In the fullness of time this scandal will be forgotten, just as the GM affair has settled down. Other than the damage done to the environment owing to your car emitting 40 times more CO2 than was allowed, this was not a safety on the road issue. If it were not for the fact that all affected cars will have to be certified that they have been rectified, a lot of people would not bother with the recall.

We need not panic when it is announced that VW has filed for bankrupty. The old VW will be dead, but Long live VW.

Copyright (c) 2015  Eugene Carmichael