The U.S. Is Wondering Just How Hard It Can Hit Volkswagen

Illustration for article titled The U.S. Is Wondering Just How Hard It Can Hit Volkswagen

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: Whatcha Got?

Volkswagen already agreed to pay a record $16.5 billion fine with U.S. environmental regulators, but it still has to settle its criminal investigation with the Justice Department. Today Bloomberg reports that in contemplating that figure, the U.S. says this: “whatcha got?”

The U.S. Justice Department is assessing how big a criminal fine it can extract from Volkswagen AG over emissions-cheating without putting the German carmaker out of business, according to two people familiar with the negotiations.

The government and Volkswagen are trying to reach a settlement by January, the people said, before a new U.S. administration comes into office and replaces the political appointees who have been overseeing the process.

[...] It’s not clear what penalty range the U.S. is considering in the criminal case against Volkswagen. The company had net liquidity of 28.8 billion euros ($32.4 billion) as of June 30, and Chief Financial Officer Frank Witter said his goal is to keep the target for average net liquidity at 20 billion euros to ensure funding needs and protect the company’s credit rating. The carmaker generates several billions of dollars of cash each quarter and could tap into a credit line or raise capital if necessary to pay its obligations.

Whatever it is, it’s likely going to be big.

2nd Gear: When Audi Gets Hit, Everyone Feels It

Bloomberg also has an interesting story on one of the biggest yet most untold impacts on the Volkswagen Group as a result of this diesel cheating mess: what has happened to Audi. The luxury brand is the VW Group’s biggest profit generator and technology creator.

Development chief Stefan Knirsch left the manufacturer with immediate effect this week after a probe showed he was aware of the manipulation when he took the job less than 10 months ago. A company veteran who started in Audi’s engine design unit in 1990, Knirsch was picked by Audi chief Rupert Stadler to succeed Ulrich Hackenberg, who was pushed out in the first round of management purges after the scandal broke a year ago. Now Stadler himself has come under increased scrutiny as investigators seek to untangle the origins of the scandal.

“We made it clear from the start that we don’t spare big names in the probe and will act if it becomes necessary,” Berthold Huber, deputy chairman of the unit’s supervisory board, said in a statement about Knirsch’s departure. Audi didn’t comment on the reasons for the executive’s abrupt exit.

Audi is a linchpin in the Volkswagen structure. In addition to providing the biggest share of profit, it’s an incubator for technology that filters down to the group’s mass-market brands and a proving ground for executives.

“Audi stabilizes the Volkswagen group with its profits,” said Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Bergisch Gladbach, Germany. “Audi can’t be allowed to wobble.”

3rd Gear: A Broken Nation Looks To Jeep For Healing

As rational-headed Americans pray for the aliens to wipe us out entirely before this horrible election happens as a precautionary measure, Jeep taps singer Yusuf Islam (formerly Cat Stevens) to bring us all together again. Via Advertising Age:

Just about the time Republicans and Democrats will likely be yelling over who won Monday’s presidential debate, Jeep will run an ad that, perhaps impossibly, seeks to unite the country.

The ad, called “Free to Be,” spotlights people with different political persuasions and lifestyles — such as meat-eaters and vegetarians — before ending with the message “what unites us is stronger than what divides us.” The soundtrack is “If You Want to Sing Out, Sing Out,” by the former Cat Stevens, who now goes by the name Yusuf.

The ad — which spotlights the 2017 Jeep Grand Cherokee Summit and Trailhawk models — is by Dentsu-owned McGarryBowen. The agency is a roster shop for Jeep-owner Fiat Chrysler Automobiles, but has mostly worked on the smaller Maserati brand. So the Jeep spot represents a significant new assignment for the agency and is expected to be followed by similarly themed ads. Jeep’s lead agency is DDB, Chicago. The Omnicom shop’s status has not changed, according to a Fiat Chrysler spokeswoman.


Let’s hope it works!

4th Gear: Tesla Settles Falcon Wing Lawsuit

Elon Musk had to learn the hard way that sometimes there’s a reason cool concept car shit doesn’t make it to production. The Falcon Doors on the Tesla Model X are amazing, but they’ve been riddled with quality problems.


As such, Tesla took a U.S. subsidiary of Swiss auto supplier Hoerbiger to court over the issues, and now Reuters reports the case has been settled:

Both parties have until Oct. 13 to file a joint statement as to the status of the settlement, terms of which have not yet been disclosed.

Tesla and Hoerbiger have delayed filing for a dismissal because certain conditions of the settlement will not be fulfilled until Oct. 4, according to an Aug. 18 filing by the companies.

Lawyers for the companies did not immediately return calls seeking comment.

Tesla claimed that a hydraulic system developed by Hoerbiger in 2014-2015 for use in the Model X doors, which open upwards rather than to the side, was riddled with deficiencies, making it an “unworkable engineering solution” that added costs and “more than a year of wasted efforts.” It sued the company in January.


They probably should have just been regular doors.

5th Gear: Autonomous Trucks VS. American Jobs

Long-distance big rigs seem like an almost ideal place to apply self-driving vehicle technology, in some ways even more so than passenger cars. But as this in-depth story from the LA Times explains, that could mean even more decent-paying blue collar jobs get lost to automation:

Robots’ march into vehicles, factories, stores, and offices could also profoundly deepen inequality. Research has shown that artificial intelligence helps erase jobs that require basic skills and creates more roles for highly educated people.

“Automation tends to replace low-wage jobs with high-wage jobs,” said James Bessen, a lecturer at the Boston University School of Law who researches the effect of innovation on labor.

“The people whose skills become obsolete are low-wage workers, and to the extent that it’s difficult for them to acquire new skills, it affects inequality.”

Trucking will likely be the first type of driving to be fully automated – meaning there’s no one at the wheel. One reason is that long-haul big rigs spend most of their time on highways, which are the easiest roads to navigate without human intervention.

But there’s also a sweeter financial incentive for automating trucks. Trucking is a $700-billion industry, in which a third of costs go to compensating drivers.

“If you can get rid of the drivers, those people are out of jobs, but the cost of moving all those goods goes down significantly,” Kaplan said.


Reverse: My Mother, The Car


Neutral: How Hard Should VW Get Hit?

Especially compared to GM and Toyota’s criminal settlements?

Editor-in-Chief @ Jalopnik, 2015-2019.



I had a discussion about this at work recently and I wonder how far unions would go to prevent this. Strong Unions like the Teamsters and UPS have a lot of truck driving employees to protect. Losing these jobs to automation would be pissing a lot of people off.

You could see massive strikes, and work slowdowns that would effect the entire country. I would imagine longshoreman would be involved in this as well and if things aren’t getting moved off the docks, everyone is losing money.