MODERN cars are packed with safety features designed to withstand horrifying pile-ups. The emissions-cheating scandal at Volkswagen (VW) will show whether carmakers are similarly resilient. VW’s finances and reputation will certainly suffer after its attempts to fool American regulators about the levels of nitrogen oxides (NOx) emitted by its diesel cars. But the effects will also be felt by an industry that was already facing huge costs to keep up with ever-tougher rules on emissions and fuel efficiency, while suffering from chronic overcapacity and poor returns.
The extent of VW’s cheating is becoming clearer, as is the mounting bill for the damage. On top of the costs of fixing the 11m cars affected, for which the firm has set aside €6.5 billion ($7.3 billion), VW may be fined billions of dollars in America and suffer a grave blow to its business there. Lawyers are preparing class-action suits. Some executives may face prosecution. That adds up to a daunting in-tray for the new boss, Matthias Müller, who has replaced Martin Winterkorn.
However, the scandal will also mean big repair bills for VW’s rivals. One ramification is that...Continue reading