Legal Liability

Bosch CEO: Call it VW-Gate, Not Dieselgate

winterkorn denner dpa picture alliance
Former VW CEO Martin Winterkorn, left, and Bosch CEO Volkmar Denner, at the Frankfurt Auto Show on September 17. Mr. Winterkorn resigned less than a week later.
  • Why it matters

    Why it matters

    Bosch is being sued in the United States for making some of the emissions control technology that VW used to falsify emissions test. The German parts supplier has denied culpability in the scandal.

  • Facts

    Facts

    • Bosch supplied the emissions-control software and hardware for VW’s diesel engines at the center of U.S. probes into emissions rigging.
    • Class-action lawsuits in the United States allege Bosch conspired with VW to avoid complying with strict U.S. standards on nitrogen-oxide output.
    • Bosch has denied culpability in the scandal, saying its technology is neutral and was not designed to help automakers illegally evade pollution laws.
  • Audio

    Audio

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Volkmar Denner, the chief executive of German auto parts maker Bosch, stressed sustainable mobility, autonomous vehicles and networked “smart” homes this week at the International Consumer Electronics Show in Las Vegas.

But there was no ducking the subject Mr. Denner most wanted to avoid: Dieselgate and Bosch’s alleged role in Volkswagen’s emissions-rigging scandal.

The world’s leading diesel-technology developer supplied software and hardware for VW’s diesel engines at the center of U.S. probes into the carmaker’s manipulation of emissions control systems. Whether or not Bosch was aware of it, VW used the technology Bosch supplied to avoid compliance with strict U.S. standards on nitrogen-oxide output.

Asked about Dieselgate, Mr. Denner was openly annoyed.

“You speak of ‘Dieselgate’ – but that is total insanity,” he said. “If laws have been broken there must be sanctions, but that has nothing to do with the entire technology.”

So it isn’t a Dieselgate scandal, but rather purely a VW scandal?

“Naturally!” said Mr. Denner, who for the first time openly sought to distance Bosch from VW, one of its main customers.

“You speak of ‘Dieselgate’ – but that is total insanity. If laws have been broken there must be sanctions, but that has nothing to do with the entire technology.”

Volkmar Denner, Bosch CEO

In its first public statement on the topic – issued shortly after U.S. environmental regulators last September accused VW of installing software in nearly half-a-million diesel cars to cheat emissions testing – Bosch said it was “fundamentally the responsibility of each automaker” to calibrate and integrate the components it supplies to their specifications.

In other words: Bosch supplied the software, but Volkswagen is responsible for how it was used.

Until now, Mr. Denner has done little to counter the unfavorable views of diesel technology unleashed by the VW scandal.

But he has every reason to do so, considering Bosch has billions of euros tied to diesel – even though the privately held auto parts supplier does not divulge exactly much it makes from its diesel technologies.

Bosch does disclose the results of its “mobility solutions” division, however. The largest unit of the Bosch group posted earnings of €2.64 billion, or $2.84 billion, in 2014 on €33.3 billion in revenue, accounting for 68 percent of total Bosch revenue. The Stuttgart-based company will release its 2015 financial results at the end of January.

 

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In Las Vegas, Mr. Denner hoped to steer the conversation over diesel in a new direction. By using Bosch technology, he says diesel can be a clean engine – fulfilling the “clean diesel” marketing hype European carmakers have long deployed in pursuit of U.S. market share.

Despite the VW scandal, Bosch believes diesel remains the best platform for combustion engines, yielding the lowest emissions.

“What annoys me massively,” Mr. Denner said, is that “journalists, specifically in Germany, do not differentiate between the misdeeds of individuals and the technology.” He criticized news coverage of the VW scandal as irresponsible for threatening sector jobs and communities reliant on them.

It isn’t surprising the issue touches such a sensitive chord for Mr. Denner.

In addition to the negative public relations fallout of being so closely associated VW’s deceptions, Bosch is facing legal action.

In the United States, where the Justice Department on Monday filed a civil lawsuit against VW, several class-action lawsuits also have been slapped on Bosch. They accuse the supplier of being part of a conspiracy, although the details of the allegations are not yet known.

Mr. Denner declined to comment on the legal proceedings in America, consistent with his silence over German federal prosecutors’ ongoing investigation, which is also exploring Bosch’s role in the debacle.

While the combustion engine continues to dominate Bosch’s business today, this could change in the future – if its presence at CES in Las Vegas is any indication.

“What annoys me massively (is that) journalists, specifically in Germany, do not differentiate between the misdeeds of individuals and the technology. ”

Volkmar Denner, Bosch CEO

According to Mr. Denner, Bosch already has a much different roster of customers than five or even 10 years ago. In addition to auto makers, the company also counts fleet operators and cities among its clients. Bosch also supplies drive systems for electric bicycles and scooters.

“This proves there are powerful new business opportunities,” he said.

Bosch also sells systems for automated driving, with revenues already reaching €1 billion a year. But the Bosch boss cautioned against exaggerated optimism over fully autonomous vehicles.

“There was a lot of hype in the past year,” said Mr. Denner, who prefers to focus on what is “realistically achievable.”

The auto parts maker plans to deliver a technology that can drive autonomously from highway on-ramp to highway off-ramp by 2020.

“We can already drive fully autonomously today when the area is very well known and driving speeds are restricted,” Mr. Denner added. In cities, however, the technology is not yet ready.

Mr. Denner’s position on self-driving vehicles contrasts sharply with the more optimistic views of competitors such as Tesla and Faraday Future.

“Some newcomers think it can happen faster,” he said.

Tesla, for instance, in October already released autopilot software for its Model S as part of a plan to incrementally introduce autonomous-driving features.

 

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But Mr. Denner remains skeptical of going too fast.

“One must properly validate the functions. By now, a majority of the sector also sees it that way,” he said.

The fallout from the scandal continues to weigh on VW.

Sales of VW-brand cars plunged 18.8 percent in Japan during 2015 to 54,766, the Japan Automobile Importers Association reported on Friday.

VW’s luxury brand Audi also saw sales drop in Japan, selling 29,414 cars last year, 6.4 percent fewer than in 2014.

Earlier this week, figures revealed a nearly 5 percent decline in VW’s U.S. unit sales to 349,440. In Germany, however, VW-brand vehicle sales rose 4.4 percent to 685,669 last year, rising despite the diesel scandal.

But the damage so far has been limited to Volkswagen.

Mercedes-Benz, the luxury brand of Daimler, closed out another record sales year, boosting sales 13.4 percent to 1.87 million cars in 2015. It was the fifth year Mercedes sales reached an all-time high, the automaker said Friday.

Mercedes also beat Audi to become the world’s second-largest maker of luxury cars after BMW. Some of Audi’s diesel models also contain manipulated engines, but the carmaker nevertheless sold 1.8 million cars worldwide last year, 3.6 percent more than in 2014, Audi said Friday. BMW will announce its 2015 car sales figures on Monday.

VW rival Opel, a unit of General Motors, sold 3.3 percent more cars last year compared to 2014, delivering 1.1 million cars to customers in Europe, Opel said Friday.

For VW, which has not yet releashed annual sales figures, an important step to rebuild its image in the United States will be the meeting of VW Chief Executive Matthias Müller with the head of the U.S. Environmental Protection Agency, Gina McCarthy.

The two are to meet on January 13, a day before a deadline expires for VW to submit plans how to fix 480,000 2-liter-engine cars in the United States.

According to a German newspaper, VW’s Porsche unit has presented a plan to the U.S. authorities to refit 13,000 Cayenne SUVs by fixing manipulated diesel engines.

 

Martin-Werner Buchenau reports from Stuttgart as Handelsblatt’s Baden-Württemberg correspondent. Christof Kerkmann is an editor at Handelsblatt who covers the German auto industry and parts maker Bosch. To contact the authors: buchenau@handelsblatt.com and kerkmann@handelsblatt.com. Gilbert Kreijger, an editor at Handelsblatt Global Edition, contributed to this article: kreijger@handelsblatt.com

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