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Is General Motors About to Have Its Own Dieselgate Scandal?

By John Rosevear - May 19, 2016 at 4:20PM

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German government officials have demanded details about GM's emissions-control software in Europe. Is GM about to land in the same hot water that has burned rival Volkswagen, or is this just a political tit-for-tat?

The CEO of GM's German subsidiary Opel, Karl-Thomas Neumann, strenuously denied that GM cheated on emissions tests. A German government panel had summoned Neumann to explain irregularities that showed up in tests of diesel-powered Opels. Image source: General Motors

The German government on Wednesday gave General Motors' (GM -3.40%) Opel subsidiary two weeks to explain "irregularities" in some of its diesel-powered vehicles.

Is GM about to land in the same diesel-emissions hot water that burned rival Volkswagen (VWAGY 0.12%)?

GM's situation isn't like VW's... yet

While certain commentators have equated the two, GM's situation isn't anything like Volkswagen's, at least not now.

Here's the background. In the wake of VW's admission that it had rigged millions of diesel-powered vehicles with software that detected (and cheated on) emissions tests, the German government set out to test diesel-powered cars from other automakers to see if anyone else was cheating.

After exhaustively testing a total of 53 different diesel-powered car models, government officials concluded that VW was the only automaker to use software that detected emissions testing. In other words, its tests showed that VW was the only automaker that was overtly cheating on pollution testing.

But, it also noted that nearly all of the manufacturers used temperature controls to turn off the engines' emissions controls at lower temperatures. That's not exactly illegal under European environmental regulations, but it is a gray area.

Meanwhile, a German environmental activist group, Deutsche Umwelthilife (DUH), claimed that it had discovered a particular Opel model dialed down its emissions controls under other circumstances. That led the German government to summon Opel CEO Karl-Thomas Neumann to a hearing at which he was given 14 days to explain exactly what's going on with the company's diesel engines.

In other words, as of right now, there's no formal government allegation that GM deliberately cheated on emissions tests, in Germany or anywhere else. That's very different from the situation that VW faces.

Opel's chief vigorously denies any wrongdoing

Officials at Opel have strenuously denied that there's any cheating going on in their engines. "We at Opel do not have any illegal software," Neumann said in a statement earlier this week.

"Our engines are in line with the legal requirements. We anticipate the authorities to share this point of view. We have always cooperated transparently with the authorities in Germany and Europe and we will continue to do so. Opel already provided [German government officials] in October 2015 with the details regarding the company's engine software, engine calibration and engine emissions strategy. We will provide the public with more information after we have talked to the authorities."

He was similarly blunt when addressing the DUH allegations:

"The recent accusations based on findings of [DUH's] hacker Mr. Felix Domke are misleading oversimplifications and misinterpretations of the complicated interrelationships of a modern emissions control system of a diesel engine. Emissions control devices are highly sophisticated integrated systems, which cannot be broken down into isolated parameters.

"As methods and protocols of the activities by DUH, Monitor & Spiegel were still not shared with Opel, the company is not in the position to evaluate this part of the allegations. Based on our own and independent measurements and on the experience with experiments published by DUH before, we have to repeat that we do not believe that these results are objective or scientifically founded."

What does this mean for GM?

Right now, not much. But that could change.

Some people in Germany have suggested that U.S. officials' zealous efforts against VW were motivated by a patriotic desire to knock GM's global rival down a peg or two. (Those people clearly haven't met any California air-quality regulators, but I digress.) Given that sentiment, it's possible that the German actions against Opel have at least a little bit of tit-for-tat behind them.

But I think GM's current leadership knows better than to issue such emphatic denials if they have reason to believe that they're actually guilty of something. CEO Mary Barra's actions around the ignition-switch scandal in 2014 strongly suggest that she knows full well that the best way to manage a corporate crisis is to come clean as soon as possible.

Long story short: I will be very surprised (and as a GM shareholder, very disappointed) if there's any evidence that shows GM was cheating on emissions tests. Given GM's recent history and its behavior so far, I don't think there's much to worry about. But I'll be watching carefully.

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