The Truth About Cars » Scandal The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Tue, 29 Jul 2014 17:28:43 +0000 en-US hourly 1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » Scandal Cabal Of Chinese Managers Embezzles Billions Fri, 12 Apr 2013 14:23:14 +0000

More than 100 senior managers of China’s FAW have been questioned and some have been detained over and unfolding scandal that involves more than 10 billion yuan ($1.61 billion) in assets that went missing.

According to a report in the South China Morning Post, Communist Party investigators are looking into missing company assets that had been embezzled over an undisclosed period.

Some department of the State-owned, Changchun-based carmaker have seen all of their top directors probed, Global Times reports.

“The staff is really in a panic now,” an FAW senior manager told the paper. “Heaven knows who’s next.”

Zhou Yongjiang, a deputy chief economist at FAW, and other managers have been placed under shuanggui (loosely translated as “double punishment”),  in which party members can be detained and punished both in criminal and party proceedings. Zhou was allegedly involved in irregular real estate deals.

Reports also says that Zhu Yanfeng, a 52-year-old former president of FAW, was under investigation by the Central Commission for Discipline Inspection (CCDI) in connection with the missing assets. Zhu worked at FAW for nearly 25 years prior to his promotion to deputy party secretary of Jilin province.

In 2012, Jing Guosong, vice-president of FAW-Volkswagen, was probed for engaging in unauthorized transactions for personal gain between 2007 and 2010, when the sales of 170 new cars were not registered properly.

The case of FAW’s missing assets emerged in 2011 when the group was audited in preparation for a public listing.

Chinacartimes reports that “the Party has been sending investigators into FAW on a regular basis.”

Owned by China’s central government, FAW is joint venture partner of Toyota and Volkswagen, the world’s largest and third-largest automakers.

The Chinese government is taking an increasingly tough stand against formerly rampant bribery and embezzlement.

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Creators Of Controversial Ford Ad Dismissed Wed, 27 Mar 2013 16:07:53 +0000

Ad Age is reporting that Ford’s advertising agency, JWT, has fired the ad agency staffers behind a pair of offensive ads showing bound and gagged women in the back of a Ford Figo hatchback. Ford is not, however, looking to change advertising companies over the fiasco. The images were created by JWT staffers in India and then uploaded to the ad agency’s website. Such ads are often created without client approval as a way for ad designers to bolster their portfolios and were never intended to become part of Ford’s official campaign to promote the Figo.

With sexual assaults very much in the news in India the ad could not have been released at a worse tim. One of the images show former Italian Prime Minister Silvio Berlusconi, who was center of a storm of controversy regarding his alleged sexual adventures, with several women bound and gagged in the back of the car . A similar image shows reality TV star Paris Hilton with her reality rivals, the Kardashians, in a similar situation.

Although they bear no responsibility for the ads, Ford has added its apologies to those of the ad agency.

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Our Daily Saab: Muller Losing Faith, Antonov Going Down Wed, 30 Nov 2011 19:09:42 +0000

A TTAC tipster sent us a Teknikens Värld  interview with Saab’s long-suffering would-be rescuer, Victor Muller, in which the eternal Saabtimist seems ready to admit defeat. In essence, he admits that GM is unlikely to ever approve a plan involving Chinese firms, that the Chinese firms are throwing “money into a black hole” and that all the previous plans are off the table. Of course, Muller does seem to think that some kind of rescue may yet be possible, but he admits

If I doze off Saab would disappear in an instant

If Muller is losing faith, and doesn’t even have a hairbrained scenario to hype, it seems that the end may well be near. But then, the whole rescue of Saab is beginning to be eclipsed by questions about Muller’s erstwhile partner, Vladimir Antonov, who was recently bailed out of British jail, where he was being held on charges of embezzlement and document forgery. But first, to the Muller interview…

The following is an interview titled “Muller Does Not Believe In Th Chinese”:

Victor Muller doubts that GM will ever accept a Chinese Saab business. According to him, Youngman, Pang Da and Guy Lofalk sabotaged the whole business when they went from the original plan. It says Muller in an exclusive interview with the Teknikens Värld.

On the way home from Britain hits Teknikens Värld Erik Gustafsson, an unusually outspoken Victor Muller. The gate at Heathrow Airport, the plane to Stockholm, he says frank about Saab’s situation.

- This is how it goes when you put his partner in the back, says Muller continues:

- The deal was long time and the arrangement with a Chinese shareholding of 54 per cent was approved. Then began administrator Guy Lofalk run government affairs, to persuade the Chinese to a 100-percent ownership stake and GM slammed on the brakes.

Late yesterday evening, Swedish time, had GM in Detroit, a further meeting on Saab’s future, but Victor Muller strongly doubt one acceptance.

- I understand GM fully, it is clear that they do not want to jeopardize its market in China. But right now I understand the other side is not why the Chinese continue to pump money into the company. As the situation is, it just means to put money into a black hole, without getting anything back. The relationship with GM is so damaged that they (Youngman and Pang Da) can not even go back to the original plan.

While he acknowledges that the situation is tough, he means that there is a solution. He can not tell you how it looks, but he promises to fight till the end.

- If I doze off Saab would disappear in an instant

Muller may still be fighting for Saab’s future, but as prosecutors unwind the Vladimir Antonov situation, Muller could soon be forced out of the process. After all, Muller is said to have a personal debt to Antonov of upwards of €100m, and it seems highly likely that Antonov was using Muller to launder funds embezzled from his Baltic banks. Antonov ‘s sports business has been placed into bankruptcy, and he has stepped down as Chairman of the British soccer team Portsmouth, reports ESPN. And Latvian officials seem to be clear on the Saab connection as well, as the Moscow Times reports

Latvian officials on Wednesday said about 100 million lats ($200 million) was stripped out of Latvyas Kraybank to fund Antonov’s investment projects, including the ill-fated Saab bid.

And the investigation is ongoing, as BBC reports that

[Lithuanian prosecutors] said they were investigating everything that might have links to criminal offences.

They added they would be taking “all the necessary steps” to freeze assets belonging to Mr Antonov and Mr Baranauskas.

It seems inevitable that this investigation will eventually catch up to Muller, at which point he’ll have to plead ignorance of Antonov’s alleged crimes. And even if Muller does escape prosecution, his ability to organize a deal to save Saab will be fundamentally compromised by his association with Antonov. And as Muller himself says,

If I doze off Saab would disappear in an instant

The countdown continues…

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Mercedes USA Boss Fired For “Serious And Repeated” Financial Violations Wed, 19 Oct 2011 16:15:40 +0000

The German business paper Handelsblatt reports that Mercedes-Benz USA CEO Ernst Lieb, a 36-year Daimler veteran, has been fired for “serious and repeated” violations of the company’s internal finance compliance rules. Per the Dow Jones [via FoxBusiness] translation,

Lieb is said to have remodeled his house in New York at the expense of Daimler and settled personal golf club contributions through the company, the executive is reported as saying.

Lieb has also been accused of providing favors at the company’s expense, such as renting cars in exchange for flight upgrades

In the words of one “longtime Daimler executive,”

Ernst was warned, but he has done it again

According to Handelsblatt, internal whistleblowers are likely responsible for Lieb’s firing, as Daimler’s new “zero tolerance” policy on such misconduct outweighed the loyalty felt for such a long-standing executive. But there will be consequences from Lieb’s firing, as the paper notes that Lieb had done much to repair shattered relations with Mercedes’ US dealers (sure enough, a planned dealer meeting has been canceled). But Daimler had to stand firm: six years ago, a similar issue arose when a German sales manager was found to have used company funds to renovate his house in Majorca. Now, at least, there’s no question as to where Daimler stands on the conduct of even its top executives.

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Washington: Traffic Camera Company Runs Press Relations for Lynnwood Sat, 10 Sep 2011 14:07:41 +0000

The distinction between employees for a private photo enforcement firm and taxpayer-funded public servants blurred in the city of Lynnwood, Washington. Emails between city officials and American Traffic Solutions (ATS) suggest a cozy relationship developed where both sides were willing to perform the duties of the other in terms of marketing and public relations.

Lynnwood Police Sergeant Wayne “Kawika” Davis, for example, used official government resources and time to come up with a marketing plan to sell for the privately held firm at a conference held at the Tulalip Resort Casino in June.

“Ray, I really believe this is a great venue for ATS exposure,” Davis wrote in a May 19 email to ATS project manager Ray Pedrosa. “I have some ideas that really could market ATS in WA, ID, OR and Canada. I know you are already in some of these areas; however, there is a lot more business to be had. Is there someone in marketing that you might
turn me on to?”

ATS was equally generous in inviting municipal employees from across the country to attend a complimentary seminar in Arizona discussing “tips and tricks for speaking with the media” regarding red light cameras and “when to panic, when to relax” regarding efforts in the state legislature to restrict automated ticketing. Airfare, lodging and wages during such events is considered official business and paid by taxpayers. ATS picked up the rest of the tab, for which municipal employees expressed gratitude.

“I had another wonderful time in AZ,” Sergeant Davis wrote in a May 9 email to ATS spokesman Kate Coulson. “ATS is the greatest host, and put on a great conference. I really get irritated at the media, and I find it hard to keep my mouth shut, so I don’t.”

Davis and other Lynnwood officials were concerned as the Everett Daily Herald newspaper widened its investigation into the operations of the automated ticketing program. ATS offered to write responses for the city.

“Our public relations department has great information on the safety aspects of the cameras and they are available to you to create an opinion editorial so the Herald can cover the safety message in next month’s article,” Claudia Garibay with ATS wrote in an April 26 email. “Would you like for the public relations manager Kate Coulson to get in touch with you and discuss ideas and information to provide the Herald?”

Coulson ensured whenever Davis conducted interviews with reporters that he used ATS-approved talking points and materials. It did not help, as Davis did not think the Herald’s May 2 online article was fair. Reporter Scott North had described city officials as “a bit prickly” when responding to questions about the photo enforcement program that had generated $4.7 million in less than a year and a half, which did not sit well with Davis.

“I will need to wait some time before I call Scott North about this,” Sergeant Davis wrote in an email after reading the article. “Because if I call him now, it won’t go well!”

A set of ATS emails is provided in a 1.6mb PDF file at the source link below. Pictured: ATS entertainment as provided after conference in photo taken by Davis.

Source: PDF File ATS emails (City of Lynnwood, Washington, 9/9/2011)


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Ask The Best And Brightest: Which Automaker May Be Fudging Their EPA Numbers? Fri, 02 Sep 2011 17:12:34 +0000

The Environmental Protection Agency’s fuel economy testing system is notoriously weak, relying on self-reporting for the vast majority of vehicles, and exhibiting vulnerabilities to “gaming.” But rather than attacking each others’ EPA numbers, automakers seem to have agreed that it’s best if everyone does their best to juice their own numbers and allows the imperfect system to limp on. But over at Automotive News [sub], we’re hearing what could be the first shots fired in a new war over EPA ratings, as Product Editor Rick Kranz reveals that an OEM is starting to complain about another OEM’s fuel economy ratings. He writes:

An executive of one U.S. automaker suggests there might be some sleight of hand going on and that the EPA is not catching the offenders.

The issue: There’s a noticeable difference between the mpg number posted on some cars’ window sticker and an analysis of the data submitted by automakers to the EPA.


Kranz continues:

The executive raised a red flag earlier this year. He told me his company was unable to replicate the city, highway and overall fuel economy numbers achieved by some automakers for their 2011 car models.

He didn’t name the automakers or the car models in question. Neither would he give the percentage differences between the mpg numbers posted on new-car window stickers and an analysis of the data taken from dynamometer readings his company purchased for certain competing models.

But he said consumers are being misled. The mpg numbers on some window stickers or in advertising are being misrepresented, he said.

Here’s the thing: if an executive is complaining about another OEM gaming the EPA test or somehow fudging its results, this executive must be extremely angry or frustrated. After all, a weak EPA testing regime benefits all automakers at the expense of customers. And if someone is willing to blow down the EPA’s house of cards, there’s no knowing where the fallout could end. There are basically three possibilities:
1) The accusing executive has the wrong end of the stick, and is just lashing out without cause.
2) The accusing executive is on to something and an automaker is fudging its EPA numbers.
3) The accusing executive is on to something, and he’s just scratching the surface of a problem infecting a large part of the industry.
As fuel economy becomes a bigger factor in car-buying decisions, the EPA needs to recognize that there is more riding on its weak, “faith-based” fuel economy testing regime than ever. It should not only investigate this allegation, but it should perform supplemental targeted verification tests on vehicles with “suspiciously high” fuel economy ratings. Consumers need to trust their window stickers, and if there are rumors of gamesmanship around the production of those numbers, competitive pressure will spread deceptive practices around the industry. This needs to be nipped on the bud.
So, in hopes of helping the EPA get a handle on this situation, I ask the B&B to share their thoughts about what automakers might be fudging their numbers. What vehicles would you spot-test to see if they can achieve their window sticker numbers?
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“Volt Scam” Debate Misses The Point Wed, 01 Jun 2011 15:38:00 +0000

Mark Modica, a former Saturn dealer GM bondholder, has leveraged his financial loss at the hands of the government bailout into a blogging position at the National Legal and Policy Center, a conservative nonprofit that “promotes ethics in public life through research, investigation, education and legal action.” At the NLPC, Modica focuses on what he believes to be corruption surrounding the auto bailout, and has written a series of anti-GM posts that make TTAC look like a Detroit hometown newspaper (TTAC “bias police,” take note). Most recently, Modica has caught the attention of the auto media, including Automobile Magazine and Jalopnik, with a series of posts accusing Chevy dealers of “scamming” taxpayers by claiming the Volt’s $7,500 tax credit and then selling Volts as used cars. TTAC welcomes anyone seeking to cast more light on the bailout, but unfortunately, Modica’s attacks are too focused on making GM look bad and not focused enough on providing relevant information to the American people. Let’s take a look and see why…

In the piece that set off the current flap, Modica wrote

I recently set out to determine how honest General Motors is being when it claims that demand for the Chevy Volt is exceeding supply. It was not hard to discover that this is not the case as retail sales remain dismal. A web search on vehicle locator sites such as Autotrader and exhibit sufficient supply of the Volt, one dealership within 70 miles of my location had six new Volts available for sale.

Even Ebay lists vehicles, many had no bids and one listing in Texas hadn’t even met reserve with only one day of bidding time remaining. But I discovered something far more disturbing during my search. Many Volts with practically no miles on them are being sold as “used” vehicles, enabling the dealerships to benefit from the $7,500 credit supplied by the American taxpayers on each car. The process of titling the Volts technically makes the dealerships the first owners of the vehicles, which gives them the ability to claim the subsidies.  The cars are then offered to retail customers as “used” vehicles.

The practice of dealerships purchasing from one another is not uncommon. “Dealer trades” are done all the time in the industry. What is very unusual is for the receiving dealership to be able to maximize profits at the expense of taxpayers by claiming tax credits of $7,500. It is also very rare for dealerships to part with any model that has higher demand than supply, as GM claims is the case with the Volt. In addition to qualifying dealerships for a $7,500 tax subsidy, the titling process also allows GM to record Volt sales even if the cars are sitting on dealership lots.

Modica’s attack is hamstrung from the start because his goal is to demonstrate that supply of the Volt exceeds demand. The simple truth is that the government’s tax credit, in combination with strong early-adopter demand and low production volumes, basically guarantees that Volt demand will outstrip demand in the short term. If Modica wants to prove that the market won’t support the Volt’s high price and complexity, he’s going to have to wait until production ramps up and the early adopters have satiated their “gotta have it” instincts.

Because he doesn’t appear to have the patience to watch the Volt fail on its own terms (which, it must be added, is not a foregone conclusion, depending on how GM handles production), Modica has to look twice as hard for potentially damning evidence. Since the availability of used Volts alone doesn’t say much about the supply-demand balance, Modica manufactures another “scandal”: that Chevy dealers are taking the $7,500 tax credit that the government intends for consumers, and then selling Volts as used cars with no tax credit.

This “scandal” quickly falls apart under the weight of its over-ambitious pretensions: after all, if demand for Volts is as weak as Modica wants to believe, surely absorbing the tax credit at the dealer level is a recipe for Volts languishing on dealer lots. Since Modica offers no evidence for high dealer inventory, his major thrust (proving that demand for the Volt is weak) falls apart. Furthermore, without a single case of a dealership claiming the tax credit and then selling a Volt to a customer under the pretense that it still qualifies for the tax credit, his research ends up well short of proving a “scandal.” As a result, Modica is left having to argue against dealers taking the credit on principle.

And here’s the tragedy: Modica is so focused on landing a political-economic “scandal,” he ignores the legitimate criticisms of both GM’s Volt-dealer policies and the government’s tax credit. Had he been less interested in the political side of things, Modica would have noted that GM’s hands-off approach to Volt dealers has led to dealers gouging early adopters. Sure, that storyline would have proven that short-term demand for the Volt was strong, but then Modica could have pointed to the contrasting situation at Nissan, where Leaf sales are pre-arranged online, cutting dealer markups out of the loop. This strategy also keeps Nissan dealers from taking the tax credit (at least in theory), and will prevent any “gouging fatigue” that could hurt Volt demand down the road.

From the other side of this issue, if Modica had been more interested in the politics of plug-in tax credits, he would have realized that manufacturing a poorly-proven “scam” was wholly unnecessary. As TTAC reported back in February, taxpayers have already lost some $7m worth of plug-in tax credits to fraud. In short, the Treasury Inspector General for Tax Administration has already proven that $33m of tax credits were claimed erroneously by everyone from prisoners to IRS employees ($7m of which is unrecoverable), offering Modica a well-documented scandal that has been undercovered in the mainstream media.

When industry and politics collide, the public deserves strong, independent information gathering and analysis to protect against inevitable abuses. But those who wish to take up that mantle have a responsibility to own up to their motivations: are they looking for legitimate issues regardless of their political or economic consequences, or do they set out with predetermined conclusions and gather up just enough information to support them? Unfortunately, Modica’s history and recent work seem to place him in the former category. Exploring the interaction between the US Government and the auto industry that it now interacts with more than ever, requires the ability to spot scandals without having to manufacture them. And the more you cover the inevitably tortured relationship between private business and public government, the more you realize that there are very few big scandals anyway… after all, free markets and fair governments almost always die the death of a thousand cuts rather than being taken down by a cartoonish scandal.

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