Volkswagen

Volkswagen Scandal explained

It has been recognized by the Environmental Protection Agency (EPA) findings that many VW cars being sold in America had a "defeat device"- in diesel engines able to detect when they were being tested and thus accordingly changes the the performance to improve test results.

 VW has had a major push to sell diesel cars in the US, backed by a huge marketing campaign proclaiming its cars' low emissions. The attention should be drawn up over the EPA's findings that highlighted 482,000 affected cars. However, apart, from EPA's findings, it has been admitted by VW that about 11 million cars worldwide, including 8 million in Europe, are fitted with so-called "defeat device".

Defeat device a sophisticated piece of kit

The details of how it worked are still unclear, the EPA, however, has said that the engine had computer software that could sense test scenarios by monitoring speed, engine operation, air pressure and even the position of the steering wheel. According to the EPA's findings and statements it seems that the software has been deliberately designed to deceive the authorities and thus accordingly becoming successful in carbon emission tests.

When the cars were operating under certain conditions that sounds like the test conditions, the software detects and appears to have put the vehicle into a sort of safey mode in which the engine ran below normal power and performance. Conversely, once the engine switched out of the test mode, the results are worse. The engine, accordingly, emitted nitrogen oxide pollutants up to 40 times what is allowed in the US.

VW's response to that findings

The direct implication the incident had over the company is the recent resignation of the Chief Executive of the VW's Group Mr. Martin Winterkorn. He was being replaced by Mr Matthias Mueller, the former boss of Porsche.

With VW recalling millions of cars worldwide from early next year as an attempt to rekindle the interests of the consumers and the public, it has set aside €6.7 billion to cover costs. That resulted in the company posting its first quarterly loss for 15 years of €2.5 billion in late October.

But that's unlikely to be the end of the financial impact. The EPA has the power to fine a company up to $37,500 for each vehicle that breaches standards - a maximum fine of about $18 billion.

Therefore, the possible implications of the legal action can't be estimated by the shareholders at the current time.

Will more heads roll?

It's still unclear who knew what and when, although VW must have had a chain of management command that approved fitting cheating devices to its engines, so further departures are likely.

Christian Klingler, a management board member and head of sales and marketing is leaving the company, although VW said this was part of long-term planned structural changes and was not related to recent events.

In 2014, in the US, regulators raised concerns about VW emissions levels, but these were dismissed by the company as "technical issues" and "unexpected" real-world conditions. If executives and managers wilfully misled officials (or their own VW superiors) it's difficult to see them surviving.

Are others car makers implicated?

That's for the various regulatory and government inquiries to determine. California's Air Resources Board is now looking into other manufacturers' testing results. Ford, BMW and Renault-Nissan have said they did not use "defeat devices", while other firms have either not commented or simply stated that they comply with the law.

The UK trade body for the car industry, the SMMT, said: "The EU operates a fundamentally different system to the US - with all European tests performed in strict conditions as required by EU law and witnessed by a government-appointed independent approval agency."

But it added: "The industry acknowledges that the current test method is outdated and is seeking agreement from the European Commission for a new emissions test that embraces new testing technologies and is more representative of on-road conditions."

Implications over the sales of diesel cars

Certainly is. Over the past decade and more, carmakers have poured a fortune into the production of diesel vehicles - with the support of many governments - believing that they are better for the environment. Latest scientific evidence suggests that's not the case, and there are even moves to limit diesel cars in some cities.

Diesel sales were already slowing, so the VW scandal came at a bad time. "The revelations are likely to lead to a sharp fall in demand for diesel engine cars," said Richard Gane, automotive expert at consultants Vendigital.

"In the US, the diesel car market currently represents around 1% of all new car sales and this is unlikely to increase in the short to medium term.

"However, in Europe the impact could be much more significant, leading to a large tranche of the market switching to petrol engine cars virtually overnight."

Remember:

The matter presented above has been partially referred from BBC News.