Do the Volkswagen diesel exhaust investigations in the US affect SinterCast?

Shareholder, name withheld

The Environmental Protection Agency (EPA) in the US filed a “Notice of Violation” against Volkswagen on 18 September.  The notice claims that Volkswagen installed software that changed the engine exhaust management system when emissions tests were being conducted. Specifically, it is claimed that the software detected when the emissions testing equipment was connected to the vehicle and operated the emissions control system at full mode to ensure clean emissions results.  However, when the vehicle was running on the road, the software reduced the emissions treatment causing the vehicle to emit more NOx emissions.  It seems that this was done in order to improve fuel economy and to reduce the urea consumption used in the SCR exhaust treatment. 

Volkswagen issued a press release response earlier today, 22 September.  The response states that the software only affects the 2.0 litre diesel engine and does not affect any other Volkswagen engines or vehicles.  The 2.0 litre engine is not a SinterCast engine.  The SinterCast 3.0 litre V6 diesel engine manufactured by Audi and used in Audi, Porsche and Volkswagen vehicles is not implicated in the EPA Notice of Violation. 

It is clear that diesel engines can meet the current US emissions legislation (which are more stringent for NOx than the current European emissions legislation).  It is also clear that this exposure will result in a loss of trust for Volkswagen and will draw negative publicity to diesel engines in the US.  However, there will also be many strong voices in the US that remind consumers that this is an issue of management decisions rather than an issue of the cleanliness of diesel engines.  The likely outcome will be a fine against Volkswagen (VW has set aside a provision of EUR 6.5 billion).  At this stage it is not possible to predict how it will affect Volkswagen sales. 

The Audi 3.0 litre V6 sales in the US account for approximately 1% of SinterCast’s current production, so any impact on Volkswagen group sales in the US will be insignificant for SinterCast.  We remain confident in the benefit of diesel engines in US pick-up trucks and SUVs and we regard this market as a continuing growth opportunity for SinterCast.