A week is a long time in the motor business.
I sat down today to write something of a Frankfurt IAA overview; a sofa-eye view of the trends, winners, losers and the why-botherers. Post-NOxgate however, there’s only one story and one loser. Or perhaps there’s several…
Just seven days ago it was all looking quite jolly for the German auto industry at their home show. New car announcements rubbed shoulders with credibly exciting concepts while the World’s press gathered to listen to the accumulated wisdom of the likes of Zetsche, Winterkorn and Müller; although BMW CEO, Harald Krueger’s collapse prior to his scheduled press conference sounded a decidedly minor note amidst all the chest thumping. Perhaps he was suffering from exhaustion, although it’s equally possible he’d just seen what Mercedes-Benz and Porsche were offering as concepts.
Before news of VW’s emissions cheating broke of course, the over-riding theme of Frankfurt was the belated reaction amidst the big-hitting German marques to the threat posed, not only from Tesla, but Apple, who have only this week promised to begin ‘shipping’ Apple branded cars by 2019. Say what you like about the Californian tech giant, but this announcement will have several car executives – already reeling from the wave of effluent heading their way – reaching for the Rescue Remedy. Overall however, the word last week from IAA was the Teutonic big three were ready to get on the good foot again – infinite loops notwithstanding.
Post NOx-gate however, we’re through the looking glass into a landscape that appears to be deteriorating daily. Winterkorn quite naturally is toast, the very idea that he didn’t know about duplicity on this scale being risible and even were it to be true, merely reduces his culpability to that of base ineptitude. And if the suggestion that uncle Ferdi had a hand in all this is tempting, the fact he stands to lose at least as much if things go badly – as they now seem likely to do – makes it less than credible. In fact, as investigations proliferate, it seems probable he’ll be fortunate to escape merely with a few €bn wiped off his retirement portfolio, as VW is forced to payout left, right and centre. The ‘I wasn’t there when the excrement started spraying’ defence won’t really cut it if things get messy.
But this is bigger than VW’s growing crisis – and this is a huge crisis for the World’s number two car maker, on the back of an already torrid year. Its reputation has been built upon solid conservative values – upon a veneer of material quality and dependable, state of the art German engineering prowess.
Even if VWs have proven no more dependable than their main rivals, the perception has until now at least been largely unshakable amidst the buying public. VW’s ambitions in the United States are almost certain to be set back a good decade in the wake of this scandal. Should things escalate back here in Europe, VW’s hard-won reputation could well be in tatters, and before anyone starts waving their schadenfraude about, the repercussions for the German economy – (read Eurozone) – and wider motor industry should this come to pass could be equally dire.
Worse still is the fact this whole emissions business has been well known for decades. European Union bureaucrats, Post-Kyoto and under massive lobbying pressure from the motor industry backed diesel in the mistaken belief that getting CO2 down quickly was more important than protecting air quality. If, as is likely, it is found that right across the mainstream motor industry, manufacturers have been fiddling their emissions as regulations tightened, the fines liable to be levied are likely to be vast.
It now seems even more certain the days of the high-performance diesel are fast becoming numbered as the truth about the deadly nature of Nitrogen Oxide particulates becomes widespread public knowledge. The cost of altering course away from diesel could potentially sink several already poorly performing manufacturers, to say nothing of the costs to drivers who bought diesel in the mistaken belief they were buying a cleaner car.
In an interesting twist, PSA announced this week they are scaling down development of their promising hybrid air technology, claiming that without government backing it was uneconomical to pursue further. PSA’s Maxime Picat hinted that governments in backing plug-in hybrids were forcing manufacturers into narrow developmental pathways – a little disingenuous given PSA’s significant investment and likely historical endorsement of diesel. In a post NOx-gate landscape however, its almost impossible not to be cynical of any auto manufacturer’s motives. Certainly, the timing of this announcement begs closer scrutiny.
Another aspect of this unfolding story is the position of the automotive press amidst all this. Oh sure, from time to time we’ve had the odd opinion piece but who amongst our motoring journalists questioned the scientific orthodoxy when the push to diesel was pressed home in Brussels? Where have they been while it’s been screamingly obvious that all manufacturers were lying about their fuel consumption figures for years? When it’s become blindingly apparent that diesel, far from being environmental salvation was in fact a huge and noxious problem government is only belatedly admitting they’ve rushed and blundered into. (Which sounds familiar doesn’t it?) Where were they? On corporate junkets, hooning about in fast cars and generally playing the PR game as though their livelihoods depended upon it. Which they probably did – and do even more so now. It also raises uncomfortable questions relating to an earlier VW scandal involving the use of prostitutes in the ‘entertainment‘ of, well who exactly?
Bernstein Research’s Max Warburton – (yes him again…) – suggested to the Guardian yesterday that NOxgate is equivalent to the Lance Armstrong doping revelations and certainly there are similarities. Both were broken by US federal investigations, and should this one go the distance, could have a similar seismic effect upon the European (and especially German) motor industry as Tex’s fiery descent did for the sport of cycling.
Another possible outcome is this. With VW/Audi and who knows who else implicated in what could end being a fraud as big as anything the bankers could have dreamed up, the credibility of big auto is about to take a very hard knock. Which plays right into the hands of Tesla, Google and Apple who as gamechangers can now plausibly lay claim to the high ground – loftily above all this grubby carbon-based shenanigans.
Yes, a week can be a long time in the auto industry – long enough to go from good foot to back foot. This is the only story in town – and what a story it’s turning out to be. Perhaps I’ll write that Frankfurt review tomorrow, but frankly, who on earth would be interested now?