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On Tuesday, German carmaker Volkswagen acknowledged that 11 million of its diesel engine cars sold worldwide were equipped with software to cheat on emission tests. In a video statement, Martin Winterkorn, chief executive of Volkswagen, said the deception was the result of “the grave efforts of a very few” employees. Repercussions are just beginning: The EPA may impose fines of up to $18 billion, the Justice Department has reportedly opened a criminal probe, the company’s stock price has plummeted and its reputation, at this point, is in something of a free fall. We discuss the emissions testing scandal at Volkswagen and what it means for consumers and the car industry.
“The irregularities that have been found in our Group’s diesel engines go against everything Volkswagen stands for. At present we do not yet have all the answers to all the questions. But we are working hard to find out exactly what happened,” Volkeswagen CEO Martin Winterkorn said in this video statement this week.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. Volkswagen's chief executive vowed that everything will be laid on the table as quickly, thoroughly and transparently as possible. This follows acknowledgement that Volkswagen diesel engine cars included software to cheat on emissions tests. Here to talk about what this means for consumers, Volkswagen and the car industry in general, Drew Kodjak of the Council on Clean Transportation, David Shepardson of The Detroit News.
MS. DIANE REHMJoining us from a studio at KUOW in Seattle, Ryan Calo of the University of Washington and by phone from Seattle, Steve Berman. He's an attorney in private practice specializing in consumer class action. And we'll be taking your calls throughout the hour. I'm sure there are many of you with questions, comments. Call us on 800-433-8850. Send your email to email@example.com. Follow us on Facebook or Twitter. And thank you all for being with us.
MR. DREW KODJAKThanks, Diane.
MR. DAVID SHEPARDSONThank you, Diane.
MR. RYAN CALOThanks very much.
REHMGood to have you all with us. David Shepardson, at first, we thought it was just Volkswagen's U.S. diesel cars. As of yesterday, we learned software was installed on 11 million cars worldwide. So bring us up-to-date.
SHEPARDSONNo, you're right. The scale of this issue is pretty shocking. The company set aside $7.3 billion to address the cost and warned it could go much higher than that as it faces a criminal probe here in the United States, likely criminal probes in Europe along with regulators in Europe, Asia, the United States, to get to the bottom of why they did it, how it will be fixed, how owners will be compensated and how VW will take steps to address all of the excess emissions that these cars emitted over a seven year period.
REHMAnd what makes and models are involved?
SHEPARDSONThese are small cars with 2.0 liter diesel engines, including the Jetta, Passat and the Audi A3 and Beetle. Only the diesel models of those from 2009 through 2015 model year. The EPA has not allowed the 2016 models to go on sale and the 2015 models on dealers rooms are also barred from being sold.
REHMDrew Kodjak, it was your organization that sponsored the test, ironically because you thought you'd be proving the reverse.
KODJAKThat's exactly right. Really, our purpose for the test was to demonstrate that technologies can be put on diesels to be clean not only on the test cycle, but also during normal driving conditions. And what we found was partially the case. One of the three vehicles that we tested, a BMW, actually had very low emissions both on real road driving conditions as well as the test cycle, but that the Volkswagens did not.
KODJAKWe did this study not only with West Virginia University, but also with the help of the California Air Resources Board that gave us -- they use -- well, they actually tested the vehicles in their labs. So we were able to compare laboratory testing with real world driving, that's how we did it.
REHMSo help us understand what it is the software (unintelligible)
KODJAKSure. Yeah, it's called a defeat device, but it's actually not a device. It's just a software code and the software code detects when the vehicle is actually being tested for legal compliance with the standards and when the vehicle is not being tested. And when the vehicle is not being tested, there's a switch. EPA calls it a switch and the vehicle's calibration switches from very low emissions when it's on the test to improved performance and fuel economy during real world normal operations, but then the emissions tend to rise.
KODJAKAnd the real red flag for us when we did the test, was that it wasn't a small amount of increase. It was very large emission increase, between 5 and 30 times what the legal limits were.
KODJAKAnd that was a real red flag for us.
REHMAnd so how easy was this code to add?
KODJAKSo software codes, I mean, vehicles have millions of lines of codes. How difficult or not it is put that code in there really isn't my area of expertise, but I'll tell you this, that it must be fairly difficult to do the fix because California worked with Volkswagen to do a voluntary recall really at the end of last year and the beginning of this year. And it was only because California didn't trust the company when the company came back and said, we've fixed everything.
KODJAKCalifornia said, well, that's very nice, but we want to verify not only on the test procedures, but also in real world driving that the fix has worked and then they found out that it had now. Now, why Volkswagen didn't fix those vehicles when they had the opportunity is one of the biggest questions that I still have in this case.
SHEPARDSONAnd we don't know whether a software fix alone is going to address this issue or will VW have to do a more expensive mechanical fix to take additional steps to remove those emissions.
REHMNow, to you, Ryan Calo, Volkswagen announced that this fix was there, but if they haven't actually acknowledged it, how easy would it have been to discover?
CALODiane, I think it would've been very difficult to discover. I mean, first of all, as your other guest has already eluded to, there are millions of lines of code. The code is proprietary. It's not as though anybody can easily inspect it. And then, you have to know what you're looking for and that combination of things means that unless something extraordinary, like has happened here, bubbles up, you wouldn't realize that a company is avoiding the law with code.
REHMAnd is that because the EPA has neither the funding nor the technology to be able to discover that kind of fault, Steve? Sorry. I meant, Ryan. Go ahead.
CALOOh, sure. Of course, Diane. Well, let me just take you back a few years to the sudden acceleration scandal. If you recall, there was this concern that Toyota was suddenly accelerating and some thought it might be software issue, others didn't. The government was not really in a position to determine one way or the other, even though Congress had asked them to, whether it was a software problem.
CALOAnd so the Department of Transportation wound up having to ask NASA. They basically went to NASA and said, you have expertise, you know. Can you take a break from putting robots on Mars and take at this Toyota for us? Right. And that was just -- that was looking for a particular error. And so it's that hard. And, you know, honestly, the government is not in a position, it doesn't generally have the expertise in order to discover or often in order to really understand, even if it has been brought to its attention, and that's a problem that goes well beyond VW.
SHEPARDSONI was just going to say, but the EPA is essentially trying to build a better mousetrap because, remember, the auto companies are told, these are how we test these vehicles. These are the specifications and so, in a sense, the auto companies -- or VW had a bit of a leg up. It could, you know, design the algorithms to pass the test and then turn them off, based on the position of the steering wheel and other indicators to show whether the car was in real world use.
SHEPARDSONSo I don't think it's fair to say that EPA didn't have the technical expertise, but I do think, and the agency acknowledged yesterday, that it's going to have to take steps, you know, to do new testing, to perhaps not tell the auto companies all of the ways they're going to test these vehicles to insure that in the future that companies can't game the system. 'Cause remember, this has gone on for 40 years. I mean, back to the '70s, companies have found ways to cheat the system, notably in the late '90s when the seven largest heavy-duty truck manufacturers paid $1 billion fine and all admitted cheating.
SHEPARDSONSo this has gone on awhile, I mean, 'cause there are lots of profit-minded reasons to try to game the system.
REHMSo Steve Berman, we've heard lots about the penalties the EPA may impose on Volkswagen and about possible investigations by the Department of Justice, but where does this leave consumers?
MR. STEVE BERMANWell, the consumers' remedies in these kinds of situations, if you look at Toyota or GM, both of which I'm involved in, really boil down to a class action lawsuit in which we will seek damages and/or penalties to make those consumers whole.
REHMI mean, how whole?
BERMANWell, that's an interesting question. I think there are two things I am thinking about right now. One is people paid a premium for these cars and they were willing to do so 'cause they thought they were clean and environmentally responsible and the premium ranged from $1,000 to $7,000. That's easy to calculate and easy to get back to consumers 'cause we know who they are.
BERMANThe more intriguing question is, it's my understanding that the reason they were cheating was when they were properly regulating the emissions, the car's performance was not as powerful as the consumer might like it. So now, if they have to run the emissions tests or the emission system properly full time, the question is, is performance going to be affected in a material way and if the answer to that is yes, then I think consumers are going to want all of their money back.
REHMSteve Berman, he's an attorney in private practice specializing in car consumer class actions. We'll take a short break here. When we come back, we'll talk further, take your calls, your email. I look forward to speaking with you.
REHMWe've got so many tweets, so many questions, so many emails, but one thing a lot of people want to know, how can the software know when the car is being tested? Can you answer that, Drew Kodjak?
KODJAKI can try. One of the explanations that's very interesting is that there's a lot of very well-established procedures that take place when the federal government or the California government is testing a vehicle. And one of the indicators is that when you're -- when the -- when you put the vehicle on a roller, and the vehicle then goes through highway driving and city driving and stopping and transitions, and the steering column doesn't move.
KODJAKAnd so one of the codes in the software was just to say basically, look, if you're driving and accelerating, and there is no movement in the turning of the wheel, you know you're on a test procedure so now switch from, you know, high emissions to low emissions.
REHMSo then the code switches, right.
KODJAKThe code switches, right.
REHMAnd that's how it's tested?
KODJAKAnd that is -- yeah, so there's many ways that you can design the software because everyone knows exactly what the federal test procedure is. So there's many ways that it can trigger this switching of the codes.
CALOInteresting, the EPA does do some real-world testing, but one important reminder is diesel cars only account for less than one percent of the U.S. market. So most of their focus has been on the heavy-duty diesel vehicles, you know, the big trucks you see on the road. Whereas diesels are 50 percent of the cars in Europe, they're a very small percentage here, so they haven't gotten perhaps as much scrutiny from regulators as some other vehicles.
REHMWell, but what about Europe's testing? What kind of testing have they done on this issue?
KODJAKWell, so that's an excellent question and really one of the main reasons why we did the testing in California on these three vehicles is to highlight to Europe, A, that the technology is available so diesels can operate cleanly, that's A, and we did that, find that. But the second point was that when you have a robust compliance and enforcement program like we have here in the United States, we expect vehicles to be clean in normal operating conditions.
KODJAKWe did not find that with the two Volkswagens, but this whole case, the way it's developed, proves that you've got a very strong enforcement mechanisms and authorities here in the U.S. You don't have that in Europe. There is no European-wide authority that can do recalls, that can do penalties. It's all relegated to the member state.
REHMNow Ryan, it behooves me to ask, if Volkswagen has done this and now has gotten caught, what about other automobile manufacturers both here and abroad? Could they, might they, are they doing the same thing?
CALOWell, that's a great question. You know, I think that deterrence is generally a function of how likely are you to get caught and what is the penalty if you do get caught, and I think that what we're seeing here is a lot of nervous regulators and others throwing the book at Volkswagen because they're concerned about the detection, right. So in other words, we're ratcheting up the penalties. We're going to practically ruin this company for a time because we're so upset about what they're doing, but I think that's also a function of the fact that it's hard to find this stuff out.
CALOAnd I would be surprised if a lot more illegality were not hiding in code, whether that's of automobiles or slot machines or speeding cameras.
REHMSo one of our tweets says, how come you cannot release, force the auto companies to release their code as open source? Then anyone interested could look at it. David.
SHEPARDSONI think there's two issues there. One, the proprietary nature. The auto industry is one of the most competitive industries in the world. They, you know, GM doesn't want Ford to be able to see its code and take advantage of coding. But secondly, I think the other big issue would be hacking concerns. We've already seen a couple months ago Wired demonstrated that they were able to take control of a Jeep SUV on the road. The government's very concerned about hacking. So that would be my initial concern, if you open it up to everybody, could it make it easier for hacking?
REHMAnd Steven Berman, here's a question for you from Jeffrey in Germantown, Maryland. Do you believe that VW could be held liable for sales losses that dealerships and their sales staff, their sales staff, will suffer as a result of the fraud?
BERMANThat's an interesting question. I know in Toyota, after the unintended acceleration situation came up, Toyota took care of the dealers by giving them special rebates on new cars, and they paid for the -- reimbursed the dealers for the service, for the fix and things like that. So theoretically the dealers could possibly sue, but usually that's worked out between the dealer and the manufacturer.
REHMWhat do you think, David?
SHEPARDSONI think the amount of costs that VW could face are pretty staggering. As Steve pointed out, number one, they could arguably be required to buy back the cars. Secondly, when the new software or fix is added, there's a very good chance it will either have poorer low-end torque performance or poorer miles per gallon. They could be required to offer rebate checks for miles per gallon lost, as it did Hyundai and Kia in a separate emissions, you know, scandal. And then there's just the general issue of how will VW recover or make up all the additional emissions.
SHEPARDSONIn the case of other auto companies, they've been required to buy dirty school buses and take other efforts to reduce emissions, or VW in theory could be required to make their next general of vehicles even cleaner than the requirements to reduce their footprint.
REHMDrew Kodjak, help as an uninitiated person understand the value of diesel over ordinary gasoline. Why do people want to buy diesel-fueled cars?
KODJAKI think a couple reasons. The first is that the diesel engine inherently is more efficient than the gasoline engine, somewhere about, let's say, 10 to 20 percent more efficient. And so that's good.
REHMSo does that mean you get more mileage?
KODJAKYou get more miles for the gallon, you do.
KODJAKThe second is that they tend to be a little more durable than a gasoline engine. That's why you see a lot of them on very, very heavy trucks. So there are certain benefits that accrue from using diesels, and then as David mentioned, there's a lot of low-end torque that you get for diesels, which is very fun to drive, particularly if they're turbo-charged.
REHMWhat does that mean? Explain that to me? You guys, come on, I mean, you're talking about this low-end torque. I don't get it.
CALOIt just means that there's a lot of pep when you step on the petal.
BERMANPerformance, you know, quick acceleration.
REHMQuick acceleration, okay, and what about the fuel itself, any cheaper?
CALONo, typically in the U.S. it's been slighter higher, although it's gone up and down. Remember in Europe, the reason there's 50 percent diesels is because the governments tax regular gasoline much higher than diesel fuel to, you know, prod consumers to use more diesel vehicles.
REHMHelp -- also help me to understand, Ryan Calo, are the legal emissions level the same for gas and diesel cars?
CALOYou know, I'm so sorry I can't -- I can't speak to that. Maybe some of the other guests might know.
KODJAKYes, they are, not in Europe, but they are in the United States.
REHMSo when you've got EPA looking at a regular gas-fueled car, and you've got them looking at a diesel-fueled car, does the EPA have different equipment by which to measure emissions on each of those differently fueled cars?
KODJAKNo, the emissions equipment, the dynamometer that they're putting the vehicles on, is identical for a gasoline vehicle. So they're tested on the same equipment, and in fact one of the principles of environmental regulation is you don't want to try to choose which technology is better than the other, right. A good regulation would set performance standard, you have to meet a certain level for air pollution, and if your technology meets it, terrific, and if it doesn't, that's too bad.
SHEPARDSONRight, that's why the government wants to encourage hybrids, electric vehicles, you know, sort of a wide-range of fuel-celled vehicles, a wide range of options because the government is interested in reducing the overall emissions from vehicles but leaves it up to the auto companies to determine the best -- the best solution.
REHMSo Steve, what's going to be the next step for those people here in the U.S. who own VWs?
BERMANWell, the next step is they're going to get a recall notice, and they have to bring their car in. In terms of the litigation, the next step will be there's a number of suits that have been filed all over the country, and what will happen is there's a special court that deals with situations where there's multiple suits all over the country. That court will decide to consolidate the cases in one place and send it to one jurisdiction for the case to get started.
REHMI see, but I gather just to be clear, there are no safety issues here. Isn't that correct, David?
SHEPARDSONThat's right. This is strictly an issue of additional emissions, but for an individual driving the car, there's no safety concern about the car.
REHMAnd Steve Berman, how is this class action suit, or how might it compare to the one against Toyota?
BERMANWell, in the Toyota case, as one of your speakers mentioned, Toyota was vigorously contesting whether there was a software defect, and so much of the case was a battle between experts on that. In this case, Volkswagen has admitted that they rigged the test. So it's much easier, I think, for us to prove our case, and the case should go faster.
BERMANThe one thing that hasn't been mentioned yet, Diane, is the reason that people bought these cars. I mean, Volkswagen heavily advertised and promoted this idea of clean diesel, and from what I'm hearing from the consumers, we've had over 3,000 people call us, they all bought into that concept, and I have to admit somewhat embarrassingly that I bought three of these cars for my kids because I thought it was a good thing to do, clean diesel, good mileage, you know, that kind of thing.
REHMSo you're going to be part of your own lawsuit?
BERMANYes, I am.
REHMYeah, I understand that totally. So David, looking at the auto industry as a whole, how many manufacturers have diesel engine cars? How many could be pulled into this whole question of cheating?
SHEPARDSONSo all the major companies sell diesel car worldwide, certainly in Europe and other markets. In the U.S., it's still primarily limited to heavy-duty vehicles, although General Motors sells a diesel Cruze, is coming out with a diesel Colorado, a smaller truck. And all the German companies here, they dominate. I mean, they -- you know, BMW, Mercedes-Benz and VW and its Audi brand, you know, sell the vast majority of diesel cars and SUVs to Americans. So -- but it's still a very small percentage, and in fact, you know, at the same time that these vehicles are being sold, the U.S. taxpayers gave credits totaling more than $50 million. So we're talking about roughly $1,500 per vehicle because they got higher MPG and reduced fuel use and emissions in theory. So, you know, that's another place that VW may have to recoup costs, as well as the lost value of these cars because if Steve tried to sell any of these three cars right now, their resale value would be much lower than it was a week ago.
REHMAnd you're listening to the Diane Rehm Show. Drew, what about BMW? What about some of the other car manufacturers who do produce diesel-fueled cars in this country?
KODJAKRight. So we -- in the one vehicle that we tested, so we can't extrapolate very much from one test, but the one vehicle that we did test and on real-world driving conditions, which is one of the big gaps between what the federal regulators do and we do...
REHMSo the wheel is turning.
KODJAKThere's a -- you're actually driving.
KODJAKWe outfit the car with the trunk full of equipment. We drive it just as you would drive your own vehicle.
KODJAKThat BMW did very well in normal operating conditions. So that demonstrates, A, that the technology is available, and manufacturers can do it, and they can sell the cars to consumers. So that's good news. The big question is how are the rest of the manufacturers complying or not, and we don't know that answer yet.
REHMSo how much more -- how many more models are you going to be testing?
KODJAKWell, so we're a small NGO. This type of testing costs a fair amount of money. The testing that we did was about $100,000 to test three vehicles. West Virginia helped us out, West Virginia University, and that doesn't include the in-kind contribution that California gave to do testing in their lab. That's above and beyond this $100,000 figure. It's a fair amount of money for a small NGO.
KODJAKWe do do some testing. We have done a variety of testing in Europe. Certainly given this case and the importance that it's demonstrating, we would hope to do more testing not only in the United States but also in Europe, also in China, also in India. Interestingly, the largest markets for diesels outside of Europe is India and Korea, and so it really makes sense to test some of these diesels in Europe and other markets, as well.
REHMAnd what's the EPA going to do in the meantime, David?
SHEPARDSONSo the EPA said Friday they are going to do tests and look at other diesel vehicles to make sure that VW's competitors are not doing this. And they're also going to, you know, ensure that VW's larger, 3.0-liter diesel engines used in the Porsche Cayenne and some of the Audi vehicles, are also complying. So -- but this is a problem around the world that regulators are trying to grapple with, from Korea to India.
SHEPARDSONI think it's important to note, looking at all these other auto cases, that the U.S. government by far has been the most aggressive regulator in bringing criminal cases, enforcement actions against the auto companies because remember in Germany, you know, the auto industry accounts for about one in seven jobs. I mean, the auto industry is very powerful in a lot -- in many countries, and again, if you compare the role of U.S. regulators, be it Toyota or General Motors or VW, you know, you can certainly argue whether they've been tough enough, but there's no argument that the U.S. has been the toughest with companies, you know, over the last 10 years.
REHMIs there any question as to whether VW can survive?
SHEPARDSONI don't think there -- I don't think there's any question that they will survive. This is currently the world's largest auto company. The first six months of the years, they've got 600,000 employees, you know, I think close -- over 100 auto plants, 10 million cars a year. And I think when you're in the middle of this crisis, if it was GM last year or Toyota a couple years ago or Ford, you know, in 2000, when people think oh, they're never going to survive this, but the other day the lawyers reach a deal, they pay a massive fine and settlements to the consumers, and they walk away.
SHEPARDSONBut that's -- it would be hard to imagine they wouldn't survive this.
REHMDavid Shepardson, he is Washington bureau chief for The Detroit News. Short break here. We're going to open the phones when we come back. One question up here from The Guardian, would VW have gotten away with its alleged cheating in the UK? We'll answer that one when we come back. Stay with us.
REHMAnd just before the break, we got a question from an individual with The Guardian newspaper. Would VW have gotten away with its alleged cheating in the UK? What do you think, Drew?
KODJAKRight. So, that's a great question. And my suspicion, very strongly, is that Volkswagen certainly would have gotten away with this type of cheating in the UK.
KODJAKBecause in order to catch this type of cheating, you have to do testing in the real world. And most government agencies never do that. And that's the real flaw in the current system.
REHMOkay. Here's a question from Tony in Dayton, Ohio. What about compensation for ordinary citizens who've had to breathe that wonderful diesel particulate? David.
SHEPARDSONYou know, one of the things the EPA has mentioned, and certainly also in the Clean Power Plant Rules is that air pollution and smog are a significant public health threat and they, you know, 200,000 Americans a year die of air pollution related illnesses. You know, asthma, especially in southern California with smog as a key factor in asthma and other, you know, air pollution related conditions. This is a big issue, and certainly, there is a public health risk all over the world to these dramatically higher emissions.
REHMSo, Steve Berman, will that be part of the class action suit?
BERMANNo, Diane, it won't. I mean, the class action suit's really, right now, seeking recovery for car owners. In terms of pollution and the increased pollution, it would be very difficult for any person to say, you know, I have suffered an injury as a result of increased emissions from a Volkswagen car.
BERMANYou have to trace your injury, and it would be very hard to do that.
REHMHere's a question from Charles in Houston. If the problem is in the software, isn't the fix as simple as bringing the cars to the dealers and having them upload a new version of the software? Drew.
KODJAKSo, great question. And one would think that's exactly all that was necessary. The reason why we're suspicious that it will take more than that is because VW would probably have done that already when it was doing a voluntary recall with California earlier this year. And the fact that they decided not to do a simple software fix suggests that there's likely to have other requirements for hardware fixes, et cetera, that are more challenging.
REHMAll right, let's go to Johnny in Texas City, Texas. You're on the air. Hey Johnny, are you there? Gone. Let's go to Todd in Cincinnati, Ohio. Hi there.
TODDHello. Thanks for taking my call.
TODDMy question is, is there any way to quantify how much more pollution has been released into the atmosphere, just like in the United States, for example, due to their cheating. And is there any way to give an example or a comparison to like, in real terms, how much we're really talking about.
SHEPARDSONWe don't have a precise figure yet, because we don't know how many miles these 42,000 vehicles traveled. There have been some estimates by I think the British newspaper, The Guardian, suggest it could be, you know, a million tons of nox, (sp?) which was, I guess, equivalent to much of the emissions of all the United Kingdom. But I have not seen any good scientific estimates.
REHMAll right, and let's go to Larry in Trevor City, Michigan. You're on the air.
LARRYHi, good morning and thank you for taking my call.
LARRYSo, I have a question. Why didn't EPA and CARB find this problem on their own? It's my recollection that the manufacturers are required in their submissions for certification to include all the inputs to their control system software. And if they did, that would have included the steering wheel input, which should have been a red flag. I'm curious, did they include it? If so, why didn't EPA and CARB find it?
KODJAKSo, excellent question, Larry. Thanks for the question. They did not include information about all the software code that would lead to defeating and evading the emission tests. That is one of the charges against the company, frankly. The reason why California and EPA were unlikely to have found this is because as a general rule, when they do testing, they test the vehicles on the test procedures, and at that time, the code would tell the vehicles to go into low emission mode.
KODJAKWhat happened here was that there was real world testing that uncovered this massive discrepancy. My sense is that, you know, in the future, we'll have a lot more testing on the real world.
REHMAnd do you want to comment, Steve Berman?
BERMANNo, I think he covered it.
REHMAll right. Ryan Calo.
CALOWell, I think it's important to remember that there's a difference between detecting an anomaly in real world situations and figuring out that it was because of deliberate coding on the part of the engineers. Right? And so, that's what the big challenge is here, right? If the EPA had not, and California had not put extraordinary pressure on VW, they probably wouldn't have admitted that they did this on purpose. And there would be relatively little way to determine one way or the other, right?
CALOAnd that, I think that's important. And I think that the earlier tweet about making things open source, about protecting people who reverse engineer code in order to see how it works against abusive copyright authority, you know, those are really important. Because that's the only way we'll get at what the code is trying to do.
KODJAKNo, I think, you know, he raises a good point, and I think it also goes back to the idea that our computers, certainly in our cars and in our lives, are going to have more and more control over decisions. I mean, when your car now, the algorithms determine if you're wearing or you're not wearing a seatbelt. It might not deploy your airbag if you're not wearing a seatbelt. So, our cars, you know, are loaded with up to a hundred million lines of code. And, you know, we don't know, we buy a new car, all the decisions our car is going to make for us.
REHMAnd here's a tweet. David, you said earlier that VW will survive, but the -- David goes on to say, but GM went bankrupt, in part, to shield itself from the ignition switch liability. Will VW do the same?
SHEPARDSONWell, I don't think that. There's no evidence that GM's bankruptcy in 2009 was caused by the ignition switch problem. GM's problem was it didn't borrow enough money and time and got caught flat footed by the financial crisis and ran out of money. And ultimately got a 50 billion dollar government bailout. So, you know, it was not the ignition switch problem, which was discovered much later, and certainly GM was able to use its bankruptcy shield to avoid liability for these pre-bankruptcy crashes.
SHEPARDSONBut I don't think it's fair to say that GM's bankruptcy was caused by that. So, you know, certainly VW is going to face a lot of legal costs, to be sure.
CALOYeah, I mean, I can't speak to whether this will ultimately bankrupt the company or not. I can say that it's a good thing that, and they're going to experience pain in a very public way, because it will cause other manufacturers, not just of cars, but of the internet of things, of everything else, to think twice before trying to sneak in some kind of evasive procedure into their code. And I think that if you have a low detection probability, you know, situation, that you need to have a high penalty. So, I don't know if they should or will be bankrupted by this, but they should be publicly hurt.
REHMAll right. And to Patrick in Lagrangeville, New York. You're on the air.
PATRICKHello. Yes. I'm just wondering why Volkswagen is being held so hard to task here when GM, as far as I'm concerned, just skated away with this, a mere 900 million dollar fine. When people obviously died from their, you know, fault. They were going on over 10 years, so they knew well about. And people were prosecuted and, you know, in the court of law because of their failures. And it wasn't until years later they were exonerated because of GM's things.
PATRICKAnd nobody's going to jail. And just as a side note, you know, somebody in the peanut butter industry was just sentenced to 28 years in jail for, I don't know, a dozen people dying or something from salmonella with a cover up. And I just feel that Volkswagen is being held way too hard to task. You know, it's been way so much more coverage of this than either one of those situations.
SHEPARDSONWell, so, you know, the caller's right, GM only paid a 900 million dollar fine. It's gonna, for the defect linked to 124 deaths. 275 injuries. It's also paying, you know, over 1.2 billion dollars in compensation, in lawsuits/an independent compensation fund. But I do think one reason the VW issue has touched a nerve in some ways more than GM, even though there are no deaths directly involved in VW, is the result of the intent issue. Here, it appears, and the company's admitted that the company intentionally used the software to evade emissions standards.
SHEPARDSONAt GM, there's evidence that individual employees, you know, knew about problems. They didn't share it (unintelligible) and, you know, some lawyers and mid-level executives were aware of parts of the problem, but there's never been evidence that there was a company-wide conspiracy to intentionally have a safety defect that killed, you know, a very large number of people. So, I think it all goes back to intent. And since VW has admitted it, impacts all these vehicles worldwide, is one of the reasons it's getting more attention.
REHMYou know, what's fascinating to me is that the head of VW said that this was done by a very, very few people. How do we know that? And how do we know how widespread that thinking might have been within the company to make sure that got covered up? David.
SHEPARDSONWe don't know any of those answers. We don't know if the highest level executives knew. We don't know if a supplier made the decisions, or if engineers were tasked with, you will meet these emission standards. We don't know if the bosses up the level of command knew.
REHMAnd Steve Berman, is that gonna make a difference in terms of how you go forward with the class action suit?
BERMANSure. I mean, we're going to be taking discovery to find out, you know, at what level of management knew about this. I don't accept the notion that it was a small group of people. That's what General Motors said when ignition switch situation first happened, and I disagree with Dave. Because last week, General Motors entered into a plea agreement in which it admitted, at a company level, not just individuals, that it was covering up the defect intentionally from at least 2012 to 2014.
BERMANI think we may find that here in the Volkswagen situation. And if we do, it may entitle the consumers to punitive damages.
REHMTo what kinds of damages?
BERMANWell, they're enhanced damages. If we can show that senior management willfully was involved in this, then under certain state statutes, you can get three times your actual damages.
REHMThat's very interesting. And you're listening to The Diane Rehm Show. Steve Berman, how long do you think this case is going to go on? It could go on for decades, maybe?
BERMANNo, if I look at the Toyota case, that unintended acceleration case that Dave mentioned, that went three years before we got compensation back to the consumers. This case is, as far as I can tell right now, a much simpler case. We're not trying to prove that there's a defect in the software, which was a very complex task. VW's admitted it, so I would hope that we can get this done in two to three years.
REHMAll right, let's go to Ann Arbor, Michigan. Joe, you're on the air.
JOEHi. Good morning.
JOEMany states don't require ongoing emissions testing to get a new license, so what would be done to solve the problem of drivers not getting a fix, especially if the fix is going to hurt the performance of their car?
SHEPARDSONThat's a good question. In fact, about half of the states do not have any emission testing. California has talked about, you know, taking steps to ensure that drivers do get the fix when it's done, but you're right. I mean, there's not going to be a big incentive for the individual if they lose miles per gallon or their performance, unless these civil suits, or VW offer some compensation to drivers for what's clearly going to be a fix that might hurt performance.
REHMYou know, Ryan Calo, we've heard a lot in the last few months about self-driving cars. To what extent does this whole question of code concern you as far as self-driving cars are concerned?
CALOWell, it concerns me a lot. So, if the Department of Transportation had to ask NASA about sudden acceleration, imagine the complexity of regulating a driverless car and ensuring that it's safe enough. And ensuring that it makes decisions that society is prepared to accept as reasonable. For example, if a driverless car were to confront a situation where either it had to kill a pedestrian or it had to kill the driver. That is to say the passenger, I suppose.
CALOHow will that decision be made? How will it be encoded into the technology? This is something that lawyers and ethicists have begun to examine. And these are issues of immense complexity. And one last thing I'd say is that this is not the last time we're going to hear about a scandal involving code that's breaking the laws of our nation. You know, this is something where more and more things are smarter, more and more complex code. There will be more opportunities for this.
REHMBut you said earlier, David, that because the auto industry is so incredibly competitive, that manufacturers have a right to have their code as proprietary. But are we reaching a point where proprietary code is no longer in the best interest of the public?
SHEPARDSONWell, I think there's going to be a push from Congress and potentially regulators to say hey, maybe the government needs to have access to the code under some sort of confidentiality agreement. But no, you know, you're right, I mean, there are increasing opportunities for companies to take advantage of the fact that these cars are very complex and moral dilemmas to address. So, no, I agree. There's going to be a lot of pressure, especially with, as the Thomas vehicles continue to move forward. And the industry grapples with the fact that hacking is a big concern.
REHMDavid Shepardson of The Detroit News. Drew Kodjak of the International Council on Clean Transportation. Ryan Calo, he's Assistant Professor of Law at the University of Washington. And Steve Berman, he's an attorney in private practice, specializing in car consumer class actions, which we are very much likely to see in the near future. Thank you all so much. And thanks for listening. I'm Diane Rehm.
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