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The Criminal Charges Against Volkswagen's Former CEO Over Diesel Cheating Are Largely Symbolic

Illustration for article titled The Criminal Charges Against Volkswagens Former CEO Over Diesel Cheating Are Largely Symbolic
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Good morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know.


1st Gear: Disgraced Former VW CEO Probably Not Going To Prison Or Even Trial

If you had visions of Seal Team Six swooping into Wolfsburg underneath radar cover by helicopter in the middle of the night, breaching the door of a mansion, putting a black bag over the head of now-indicted former Volkswagen CEO Martin Winterkorn and absconding with him back to America before the German Air Force has a chance to scramble its jets, I have two things to say: one, that you must be really pissed about your VW diesel recall because that is an oddly specific and vengeful fantasy, and two, that is probably not happening.


Winterkorn was charged with conspiracy and wire fraud in a federal indictment unsealed in Detroit yesterday relating to VW’s now infamous diesel cheating scandal. While eight others have been indicted and two German engineers were sent to prison, Winterkorn is by far the most high-profile person charged criminally in the affair.

But unlike his engineers, it’s very unlikely Winterkorn will face trial in the U.S. Via Automotive News:

The U.S. indictment of Winterkorn is likely to be largely symbolic. He is unlikely to face trial in the U.S. because Germany doesn’t extradite its citizens to countries outside the European Union so Winterkorn won’t be arrested unless he leaves the country. A source close to Winterkorn told Reuters on Friday that Winterkorn is in Germany, and will remain there.


Remind me to tell my insurance company that all those speeding tickets were “largely symbolic.”

More from that story:

The indictment describes a July 27, 2015, meeting at which VW employees presented PowerPoint slides to Winterkorn and “other senior VW management at an in-person meeting at VW’s headquarters in Wolfsburg.” The meeting provided a “clear picture” of how the company was deceiving U.S. regulators about software used to rig emissions tests of Volkswagen diesel vehicles, it said.

The indictment also alleges that VW employees recommended the company seek to get approval for 2016 diesel models from U.S. regulators without revealing the existence of the cheating software. Winterkorn agreed to the plan, the indictment said.

The indictment also states that Winterkorn was informed of the emissions cheating by a memo sent in May 2014. Winterkorn has said he did not learn of the cheating until late August 2015.

VW had initially suggested that only lower-level executives knew of the diesel emissions cheating.


Of course he knew! They always do!

2nd Gear: I Thought He Liked Boring?

After much criticism following a bizarre Q1 earnings call this week in which he called analysts’ questions “boring” and turned to YouTubers for them instead, Tesla CEO Elon Musk defended his actions on Twitter, the go-to place for attempting to explain yourself after you did something weird and/or egregious.


Via Bloomberg:

Tesla shares had their biggest drop in more than a month on Thursday after the earnings call, during which the CEO rejected analysts’ questions following another quarter in which the company burned more than $1 billion in cash and pushed back production of its Model Y crossover. Musk said the questions “are so dry,” and turned instead to one from a channel on the YouTube video-streaming service.

“The ‘dry’ questions were not asked by investors, but rather by two sell-side analysts who were trying to justify their Tesla short thesis,” Musk said Friday on Twitter. “They are actually on the *opposite* side of investors. HyperChange represented actual investors, so I switched to them.”

The analysts, Toni Sacconaghi of Sanford C. Bernstein & Co. and Joe Spak of RBC Capital Markets, rate shares of the electric-car maker the equivalent of hold. Musk cut off Sacconaghi for what the CEO called “boring, bonehead” questions, while Spak was the target of the “dry” comment.


Sorry the business isn’t just rocket ships and hanging out with movie stars, Elon!

3rd Gear: And It Cost Him

The Wall Street investors are not to be trifled with! Ducking their questions and trying to act “cool” was seen as “not cool” by the people putting Tesla under more financial scrutiny than ever. Via Reuters:

Tesla Inc investors gave a rare rebuke to iconoclastic Chief Executive Elon Musk on Wednesday after he cut off analysts asking about profit potential, sending shares down 5 percent despite promises that production of the troubled Model 3 electric car was on track.

[...] Tesla stock was little changed after the earnings announcement but fell during a conference call, when Musk began cutting analysts’ questions short, costing Tesla over $2 billion in market capitalization.


Don’t you hate when that happens to you?

4th Gear: Meanwhile At BMW

The Japanese automakers aren’t the only ones feeling the effects of unfavorable exchange rates. Via Reuters:

BMW AG posted a 3 percent drop in first-quarter operating profit as unfavorable exchange rate effects weighed on revenues and earnings, even as the automaker posted higher margins and sales volume at its cars business.

Group earnings before interest and taxes (EBIT) fell to 2.73 billion euros ($3.27 billion) from 2.82 billion euros in the year-earlier period.

Revenues fell 5.1 percent to 22.7 billion euros in the quarter, held back by currency effects, BMW said. Excluding those effects, revenues would have been 0.7 percent lower.


Luckily the M5 Competition Package should help make up the difference.

5th Gear: Idled During The Bankruptcy, Orion Now Builds The Future Of GM

The Detroit News has a briefing on what’s going on at General Motors’ Orion Township plant in metro Detroit, which was idled during the bankruptcy a decade ago and now builds the electric (and soon autonomous) Chevrolet Bolt. It’s also one of the only American car plants left that builds small cars.


The story’s complete with some shade on the newer startups, one in particular:

The Detroit automaker is among those leading the charge into driverless, emission-free transportation, promising to build the industry’s first production-ready, dedicated autonomous vehicle next year. And GM has placed its all-electric and autonomous vehicles in the hands of American auto workers at Orion Assembly plant, a low-cost production center for GM’s smallest cars.

[...] Efficiency will be important while GM waits to see where demand for EVs in the U.S. goes, Dziczek said, but it’s not something GM or its legacy automotive competitors are unaccustomed to.

That puts GM and its Detroit rivals arguably in better positions than Silicon Valley challenger Tesla Inc. CEO Elon Musk has been trying to navigate his way out of “production hell” while GM and other legacy automakers make incremental progress toward what some industry analysts call Auto 2.0.

Traditional automakers “can actually deliver the goods,” [Center for Automotive Research analyst Kristin] Dziczek said. “They back up their claims that they have the ability to do it.”


Building cars is hard, I’m told.

Reverse: Pink Cadillac


Neutral: Did VW Get Punished Adequately?

The company seems on the right track these days. Its crossovers are leading a bit of a sales comeback in the U.S. and it’s making penance by investing heavily in EVs—not to mention the hefty fines it had to pay. But is it enough, and should more execs go to jail?

Editor-in-Chief at Jalopnik. 2002 Toyota 4Runner.

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One would think that rules could be put in place. To do business in the country and falsifying something that is required to put product on roadways would force extradition or ban of all product from that company for X number of years.

I think it is dumb that the engineers get prison time while the Exec who set goals/timelines/expectations and allowed the cheat device to continue gets nothing. He is paid to hold the liability, and he gets nothing other than symbolic while those paid less with less liability (unless they are professional engineers, at least in the US) get prison time.