Comment: Have the wheels come off the Volkswagen?

Volkswagen says 11 million vehicles worldwide are involved in a scandal surrounding emissions. Picture: PA
Volkswagen says 11 million vehicles worldwide are involved in a scandal surrounding emissions. Picture: PA
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AS WITH all major scandals, the one involving Volkswagen will have both financial and public relations dimensions. When the American authorities – and, who knows, possibly other nations’ authorities as well – eventually hand down fines on the cheating by the German car giant regarding dirty air emissions, they will be in the billions of euros.

The PR damage will be drawn out as no doubt the external and internal investigations at Volkswagen are inevitably prolonged affairs (remember Libor in the banking industry, it was hardly a case of quick hit, line drawn under, let’s move on).

And the mud will stick for quite some time after the cars have been recalled in following the rigging of US emissions tests.

Lasting damage has been done to the almost totemic place VW held at the heart of German industry. There is almost a futuristic Blade Runner aspect to the deception.

America’s Environmental Protection Agency said that hundreds of thousands of diesel cars produced by VW had been fitted with software that turned emission controls on only during their official tests.

It is a type of software known as a “defeat device”. Once on the road, however, the affected VW and Audi cars produce 10 to 40 times the legal limit of harmful nitrogen emissions.

It is difficult to conceive how this elaborate, deceitful and widespread perversion of software to get round the pollution laws of the land, and thereby risk poisoning the public, could have been achieved without knowledge of the practice going quite some way towards the senior echelons of the company.

Clearly, it could not have been the work of half a dozen rogue software and automotive scientists in the bowels of VW.

The car giant’s shares on the Frankfurt stock market have lost about 30 per cent since the story came out two days ago.

Troubling, but that is not the half of it for the spectre of damaged goods that now hangs over a former German icon.

Manufacturing treads water in third quarter

thE army of pundits that constantly warns Britain’s economic recovery is built on the flaky foundation of consumer debt, and without the ballast of strong exports and a more balanced economy than one too dependent on the services sector, will feel vindicated.

The latest CBI industrial trends survey shows that manufacturing output marked time in the three months to September after export orders slumped in the quarter to their weakest level for six months. It is the first time manufacturing output has stalled in two years. Exports have obviously been hit by the strength of sterling and increased international uncertainty. Small and medium-sized businesses have been the worst impacted, with their export orders at their lowest level since October 2009.

One ray of light for the manufacturers is lower commodity prices, but in the wider shape of things it is a relatively minor consolation.

As the CBI says, manufacturers will be looking warily at China’s slowdown and its domino effect on emerging markets in the region.

In a further worrying straw in the wind, firms expect average prices to edge south in the next quarter. The latest survey is not disastrous.

Manufacturing’s progress throughout 2015 has been pedestrian rather than stellar. But the latest data is still a chill breeze.