The Trouble with Volkswagen

We have been hearing a lot about Volkswagen of late, mainly from the company itself . Most of the puffery surrounds its attempt to dress itself up as the new squeaky clean friend of the environment, but is that view sustainable?

A quick look at its history is in order here. The birth of company dates from the 1930's and Hitlers desire to provide the German people with a cheap car. However, in his usual way of doing things he insisted on an unrealistic target price which the motor manufacturers of the time considered unfeasible.

To counter such negativity from those who actually knew about these things Hitler pressed ahead and established the Volkswagenwerks in 1938 to produce the first model, a car that later famously became known at the Beetle. During the war the newly built factory, and the equally new town of Wolfsburg, concentrated on the supply of military vehicles with help from inmates of the nearby concentration camp, who of course, had little choice in the matter and were not paid for their input.

In 1945 the factory ended up in the British occupation zone. An army major took it upon himself to restart manufacture of staff cars amongst the ruins, and so was born the modern Volkswagen. The company then grew to become a symbol of German reconstruction. It was far bigger than just a car company, it gave the defeated and war weary population hope and a sense of pride once more. Thus it was that Volkswagen became so ingrained within the country's collective psyche.

At first Volkswagen was a trust wholly owned by the German government, and even today the state of Lower Saxony retains 12% of the shares and 20% of the voting rights. With the various other acquisitions and mergers including Audi, SEAT and Skoda, the company has become a huge conglomerate and a powerful force within Germany. Indeed, the car industry as a whole is said to wield huge influence within the country and its leaders have been regularly photographed with Merkel. Germany itself is generally held to be the most influential member of the EU.

All went swimmingly for VW until the Americans noticed that VW engineers had created a cheat device in the software of turbo diesels which enabled them to pass the required emission tests in the lab. Much has been written about the event, except perhaps, for one consequence which has attracted little attention in Europe. As part of the settlement with the American authorities the company agreed to spend $2bn on promoting electric vehicles over the following ten years. $2bn is a lot of money and no doubt the company will want to recoup that cost. One way to do so is to promote battery powered cars globally, so spreading the expense of development and marketing of those it was obliged to build for the US market.

Thus we now find ourselves in the position of VW needing to sell battery powered cars, not because it believes in them, it has already shown its contempt for environmental concerns, but because of a hurried settlement in America. Could this be why we are suffering a major PR offensive from the company pushing electric vehicles? What makes it worse is that the company also pulls strings in the German government and, by extension, the EU as a whole. Therefore, any pro EV legislation in Europe needs to be seen in that light.

Environmentalists might rub their hands in glee, but they overlook the fact that EV's will produce a whole new set of environmental problems, not least of which is cobalt supply, much of which mined by child labour in The Congo. Labour, BTW, which is often described as modern day slavery. It's funny how things go round in circles.