Economy

How Volkswagen Scandal Could Change Global Auto Industry Forever

A VW plant in Changchun, northeastern China
A VW plant in Changchun, northeastern China
Thomas Fromm

-Analysis-

MUNICH â€" As the Volkswagen scandal continues to unfold, you can either look behind or look ahead. How has this historic German auto giant with 12 brands and 600,000 employees worldwide found itself spiraling downward in a bottomless pit since revelations that it manipulated emission measurements from its diesel models? How was it possible to scam clients and environmental authorities for so long? And how is it possible, now, that VW can do so little to stem the damage from the biggest crisis in its history?

But while the German automaker is still busy tracking down the faulty vehicles, there are some mighty Californian companies ready to pounce. Starting with Apple, which has announced its goal of bringing the first iCar on the market by 2019. The secret project’s code name: Titan. And then there’s Google, the other Silicon Valley powerhouse, which let the prototype of their self-driving car cruise around on the roof of a former Californian mall. This is a car that might be on the roadway in as few as five years from now, combining the most futuristic artificial intelligence technology with the look and feel that one industry expert compared to the classic Fiat 500.

One more glance at the landscape of the West Coast of the United States finds electric car manufacturer Tesla presenting its first SUV model, a cross-country city car with "falcon-wing" doors that seats seven. Tesla founder Elon Musk boasted that "it's like a car from the future."

And so as Tesla, Apple and Google push with all their might on to the global automobile market, the longtime colossus of the German car industry has never looked so old. The coincidence of these events, from California to Wolfsburg, might sound the bell for a whole new era.

Slowly it begins to dawn to the guys in the executive suites of the entire German automobile industry: It’s not only about which VW bosses are being let go, not only about diesel engines and the environment, nor anyone's stock price on any given day; this scandal will bring a fundamental and permanent change to the entire automobile industry.

For the world of traditional car manufacturers, it's about learning to see the whole picture. After these painful recent weeks, some want to make clear they will not go down without a fight.

No more lines

"I consider it inappropriate to distinguish between traditional and modern car companies," BMW Harald Krüger told Suddeutsche Zeitung. "The whole industry has changed: In order to succeed in the future, one has to confront the following challenge: "How do I use the digitizing of the world in the best interests of my clients, and of my company?" And: "How can I invest in individual mobility in as sustainable and eco-friendly way as possible?" And this is valid for everyone, from Silicon Valley in the U.S. to Bavaria in Germany."

The Volkswagen factory in Wolfsburg, Germany â€" Photo: Chris Verwymeren

Perplexed, an entire worldwide industry is watching Wolfsburg. The more information concerning VW’s emissions manipulation comes out, the deeper its competitors are forced to look into their own development labs. They fear a wildfire, spreading from Wolfsburg out over the whole country. "It's a daily fight for our clients’ trust," says BMW's Krüger. "It cannot be taken for granted. And it includes the unwavering respect for the rules laid down by the regulatory authorities."

In Germany, one out of seven jobs depend directly or indirectly on the car industry. And if the world buys fewer German cars, this has serious consequences for cities like Wolfsburg (VW), Ingolstadt (Audi) or Dingolfing (BMW). Germany's largest union, IG Metall, warns: Thousands of jobs in the supplier industry are threatened because of the scandal.

For the moment, the only one in real danger is VW itself. The company has put aside 6.5 billion euros to help pay for the scandal's aftermath. But that most likely won’t cover much more than the retooling of the affected vehicles. Some estimate the entire scandal might cost VW up to 50 billion euros over the next couple of years â€" damage to the company's image and consequent sales slump not included.

No, even an auto giant as big as Volkwagen doesn’t have that kind of money.

Analysts are playing through different scenarios. At the end of the day, the holding company that has become this 12-brands-empire through pricey acquisitions over the last years, might as well simply throw some of them back on the market. The truck-division MAN and Scania for instance, the car brands Seat and Skoda, or â€" particularly painful â€" the luxury daughters Audi and Porsche.

VW shares are still worth some 48 billion euros, even after the dramatic crash on the stock market. Just as a point of comparison, however: Would-be auto upstart Apple sits on a fortune of 180 billion euros. If it was interested, it might even buy Volkswagen ...

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Green

In Argentina, A Visit To World's Highest Solar Energy Park

With loans and solar panels from China, the massive solar park has been opened a year and is already powering the surrounding areas. Now the Chinese supplier is pushing for an expansion.

960,000 solar panels have been installed at the Cauchari park

Silvia Naishtat

CAUCHARI — Driving across the border with Chile into the northwest Argentine department of Susques, you may spot what looks like a black mass in the distance. Arriving at a 4,000-meter altitude in the municipality of Cauchari, what comes into view instead is an assembly of 960,000 solar panels. It is the world's highest photovoltaic (PV) park, which is also the second biggest solar energy facility in Latin America, after Mexico's Aguascalientes plant.

Spread over 800 hectares in an arid landscape, the Cauchari park has been operating for a year, and has so far turned sunshine into 315 megawatts of electricity, enough to power the local provincial capital of Jujuy through the national grid.


It has also generated some $50 million for the province, which Governor Gerardo Morales has allocated to building 239 schools.

Abundant sunshine, low temperatures

The physicist Martín Albornoz says Cauchari, which means "link to the sun," is exposed to the best solar radiation anywhere. The area has 260 days of sunshine, with no smog and relatively low temperatures, which helps keep the panels in optimal conditions.

Its construction began with a loan of more than $331 million from China's Eximbank, which allowed the purchase of panels made in Shanghai. They arrived in Buenos Aires in 2,500 containers and were later trucked a considerable distance to the site in Cauchari . This was a titanic project that required 1,200 builders and 10-ton cranes, but will save some 780,000 tons of CO2 emissions a year.

It is now run by 60 technicians. Its panels, with a 25-year guarantee, follow the sun's path and are cleaned twice a year. The plant is expected to have a service life of 40 years. Its choice of location was based on power lines traced in the 1990s to export power to Chile, now fed by the park.

Chinese engineers working in an office at the Cauchari park

Xinhua/ZUMA

Chinese want to expand

The plant belongs to the public-sector firm Jemse (Jujuy Energía y Minería), created in 2011 by the province's then governor Eduardo Fellner. Jemse's president, Felipe Albornoz, says that once Chinese credits are repaid in 20 years, Cauchari will earn the province $600 million.

The Argentine Energy ministry must now decide on the park's proposed expansion. The Chinese would pay in $200 million, which will help install 400,000 additional panels and generate enough power for the entire province of Jujuy.

The park's CEO, Guillermo Hoerth, observes that state policies are key to turning Jujuy into a green province. "We must change the production model. The world is rapidly cutting fossil fuel emissions. This is a great opportunity," Hoerth says.

The province's energy chief, Mario Pizarro, says in turn that Susques and three other provincial districts are already self-sufficient with clean energy, and three other districts would soon follow.

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