We do not have to worry about ousted Volkswagen CEO Winterkorn. His termination pay is reportedly topping $30 million. We have to worry though about the affected 500,000 Volkswagen owners.
Yesterday the Volkswagen board has accepted the resignation of CEO Winterkorn, who takes the responsibility for the EPA Diesel scandal. He says that he had no knowledge of the emission manipulations.
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We don't have to worry about 68-year-old Martin Winterkorn. After leading Volkswagen successfully for 8 years, he will likely part with a hefty termination payment. Bloomberg reports that Winterkorn is eligible for about $32 million, when his contract is ended prematurely. This sum could be even higher. It all depends how the VW board will classify Winterkorn's exit.
So no worries about Winterkorn, but what happens to the 500,000 Volkswagen owners in the United States that drive a car that pollutes the environment at levels way beyond the EPA set limits?
The options to fix the cars are all disadvantageous for the owners. The cheap fix for Volkswagen would be to update the engine software and make the car run in the EPA test mode all the time. This will mean a hit on engine performance and fuel consumption as Wired points out.
The other option is very expensive and faces technical issues. Volkswagen would need to enhance the cars with the Urea (AdBlue) technology. This requires space for the tank and the cost according to Wired would range from $5,000 to $8,000 for each car. Some cars will not even be worth that much money anymore.
The Urea technology takes out 70 to 90% of the NOx emissions. The system is very common in larger Diesel cars including those from Volkswagen.
To maintain the performance and the value of an affected Clean Diesel Volkswagen the Urea solution is the only way to go. It would cost though Volkswagen $2.5 billion to fix all cars, given the resolve the technical issues of adding a Urea system.
This recall will also be likely mandatory for car owners as their cars pollute the environment and are a public safety hazard.
Volkswagen has to get really creative here in finding solutions for the 500,000 affected customers. There could incentive trade-in offers for those cars that cannot be fixed. Other option would be to accompany the software fix with a payment to compensate for the lost value of the car.
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The Volkswagen Diesel scandal is going to have a huge impact on the small Diesel cars. Diesel engine will only be offered again in larger cars and SUVs. If the German government will find any irregularities in the German Volkswagen Diesel cars in the tests they announced, this will happen very, very quickly.