By Ryan Beene, Crain News Service
GENEVA (March 10, 2016) — Auto makers from Detroit to Tokyo are paying a price for Volkswagen A.G.'s emissions cheating scandal as environmental regulators intensify their efforts to root out violations.
Regulators are taking an extra-long look at new-vehicle emissions before giving their stamp of approval, a trend that could delay vehicle launches.
So far, only Volkswagen has been formally accused of deliberately manipulating emissions to fool lab tests. But top executives from more than half a dozen auto makers say the scandal eroded the auto industry's credibility in the eyes of European and U.S. environmental regulators.
“After the loss of the credibility between the industry altogether and the regulator, we see situations where the normal certification process which normally took four weeks all of the sudden takes three months, and you have to delay your launch for two months,” Daimler AG CEO Dieter Zetsche told reporters last week at the auto show in Geneva. “And I don't think it's a Mercedes experience; I think it's a more general experience.”
The new environment is an aftershock of VW's admission last fall that it rigged some 11 million diesel-powered vehicles worldwide with software designed to mask oxides of nitrogen emission levels in lab tests. Regulators in the U.S. and Europe swiftly responded with a compliance crackdown, including beefed-up testing regimes, more audits and, auto executives say, a generally tougher stance with auto makers seeking emissions approvals for new models.
“Whenever you get breaches consistently, you end up getting overreactions,” Sergio Marchionne, CEO of Fiat Chrysler Automobiles (FCA), said. “I'm not talking these overreactions are not justified ... but I think that we're all in for an adjustment process.”
Days after announcing VW's emissions violations in September, the EPA began testing to search for defeat devices used by other auto makers. Extra testing began on all diesel-powered vehicles on the market.
The EPA has applied the same additional tests to new vehicles — including gasoline models — seeking certification that their emissions levels comply with U.S. clean-air laws.
The EPA has not said how many vehicles it has subjected to the additional testing, but the extra work being crammed into its busy labs in Ann Arbor, Mich., is slowing the EPA's approval process by at least several weeks.
At least one launch already has been affected. BMW delayed production of its X5 diesel until January of this year, about a month later than planned, because of the additional EPA tests.
More vehicles could be delayed. The EPA said it has made the tests a standard part of its emissions-certification process for new vehicles — gasoline and diesel alike.
“Testing vehicles in new and unpredictable ways is the new normal,” an EPA spokesman told Automotive News. “We may keep vehicles longer.”
Hachigo: Delays not costly yet
Honda Motor Co. CEO Takahiro Hachigo said the EPA's approval processes are now taking about a month longer than normal but the delays have not yet led to higher development costs. Executives from Ford and Nissan also say emissions certifications are taking weeks longer.
Trevor Mann, Nissan Motor Co.'s chief performance officer, said the auto maker now is adding weeks to its prelaunch process to account for the longer EPA approval times.
“They're certainly being more interrogative in terms of going through, in the wake of what happened, to make sure things are right,” Mr. Mann said.
At Fiat Chrysler, teams are combing through vehicle software code and code from suppliers to avoid an “inadvertent noncompliance situation,” Mr. Marchionne said last week. No “deviations” have been found so far, he said, but the audit has taken an “inordinate amount of time” from FCA staff to ensure compliance.
A new distrust of auto makers underlies the regulatory changes.
“The biggest problem on the worldwide level is that we, the carmakers, lost part of the trust and credibility with some regulators who just said, “If [VW] did it, everybody is doing that, so potentially we should be more severe,'” said Didier Leroy, executive vice president of Toyota Motor Corp.
Like the EPA, European authorities have launched fresh compliance testing, resulting in a “potpourri” of European countries, each doing its own testing, Ford of Europe President Jim Farley said.
“All of them are out there testing them in their own way, and they're finding all kinds of weird stuff, and we're all going and explaining our results,” Mr. Farley said.
Mr. Marchionne said European Union regulations set broader emissions targets than the “highly prescriptive” rules set by the EPA.
“That has led to a variety of possible interpretations of what the targets really meant,” he said. “That needs to be tightened up.”
Real-world vs. lab
Renault-Nissan CEO Carlos Ghosn said the industry's current “emissions problem” results from the difference between real-world emission levels and results produced in standard test cycles.
He also called for clearer rules from European authorities.
“Anybody can test a car and find that, by the way, under other conditions, your emissions are way different from the one that you are announcing,” Mr. Ghosn said at a press conference last week. “Tell us what we need to do in order to establish the trust between the public and carmaker.”
Reporters Dave Guilford and David Undercoffler contributed to this report, which appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.