Asymmetry of information, corporate governance and stakeholder theory

Renault SA will announce a technical plan to reduce diesel emissions of its vehicles in the
coming weeks after a special environmental commission found that some of the French auto
maker's cars exceeded emissions limits. Thierry Koskas, the company's sales chief, said
Monday that Renault will unveil a plan that will explain how the auto maker intends to lower the
emissions of carbon dioxide and nitrous oxide from its diesel cars that are currently under
production and on the road. Renault is seeking to win back consumer and investor trust after the
government named the company among auto makers that sold cars in France in violation of
pollution standards. News of the emissions breach, as well as revelations that the French
government launched an antifraud investigation into the company's emissions claims, sent the
stock tumbling last week, wiping out billions in shareholder value. The stock fell 1.3% to 74.17
($80.97) in Paris on Monday . On Monday afternoon, Renault executives appeared before a
closed-door French government commission to explain why some of the company's cars have
exceeded emissions limits, according to a Renault representative and a commission member.
France's environment and transport minister, Sgolne Royal, set up the emissions panel last
October, in the wake of the Volkswagen AG emissions scandal, to test 100 cars under real
driving conditions. The tests are still under way, but Ms. Royal said last week that Renault and
several foreign car brands were among those that had been found with excessively high exhaust
emissions. The commission isn't expected to comment on the hearings until all of the auto
makers have met with the panel. Mr. Koskas said Monday that Renault hasn't been found to
have cheated on emissions tests. All of its models have been approved by the appropriate
regulators to be produced in Europe, he said. About 63% of Renault cars sold in Europe use
diesel for fuel, he said.
With some of Renault's diesel emissions exceeding allowable limits, the government is
scrutinizing the situation. Immediately, Renault announced a plan to reduce diesel emissions on
its vehicles. There is no evidence that Renault attempted to manipulate emissions tests similar
to the Volkswagen scandal. In addition, there are no expected recalls and Renault is committing
to correct any emissions violations that exist.
The French government is investigating certain models from Ford, Mercedes-Benz, and Renault
because they allegedly produce more nitrogen oxide than the country's pollution rules allow,
according to Automotive News, citing a French newspaper.
After VW's emissions scandal, French regulators began checking more vehicles for evidence of
defeat devices and excessive real-world pollution. According to Automotive News, the Mercedes
S350 allegedly showed inconsistent results across these tests, and a Ford C-Max had NOx
levels five times over the limit. The Renault Captur crossover, Espace, and an unnamed utility
vehicle also had results that were too high.

The French testing for this investigation includes an on-road emissions check that's not part of
the EU's normal evaluations, which some automakers claim is unfair. "Unofficial on-road testing
has varying conditions and can produce significantly different results," a Ford of Europe
spokesman told Automotive News.
Renault representatives met with French officials on January 18 to explain the situation. The
company later submitted a plan to recall 15,800 examples of the diesel Captur, and said it would
offer a voluntary software upgrade for about 700,000 other vehicles, according to Automotive
News. Representatives from Ford and Mercedes will meet with the government soon, too.
Renault has recalled more than 15,000 diesel cars after an admission that its emissions filtering
system does not work in all temperatures.
The French carmaker denied any wrongdoing and said there was no defeat device of the kind
Volkswagen used to cheat emissions tests, but acknowledged there was a difference between
its test results and actual pollution.
According to the French environment minister, Sgolne Royal, who established Frances
commission to investigate vehicle emissions, the problem would require Renault to correct the
filtration system on Renault Captur cars produced between July and September 2015, so that it
continued to work in hot or cold weather.

French government reassures Renault investors there is 'no emissions fraud'

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Emissions tests for vehicle certification in Europe are conducted at an ambient temperature of
between 20c and 30C (68F-86F).
Renault confirmed the recall, saying it involved a small proportion of Capturs produced before
September 2015, when it identified and fixed the problem.
The carmakers director of engineering, Gaspar Gascon Abellan, told reporters that Renault had
discovered a calibration error in the emissions-cutting system of its diesel engines, which
meant nitrogen oxides and sulphur were not being properly eliminated.
The manufacturer has come under scrutiny since the revelation last week that anti-fraud
investigators had raided its premises across France as inquiries continue into the actual
emissions produced by its cars, which have been found to be substantially above test levels.
The French government, which owns almost 20% of the company, moved to reassure investors

after Renault shares fell sharply on fears that it would be drawn into the scandal engulfing VW,
although the carmakers value remains 10% lower than when news broke.
Renault announced it was also planning a software upgrade to cut nitrogen oxides pollution from
its diesel engines, in a move that could potentially affect up to 700,000 vehicles on the road. The
voluntary upgrade would apply to owners of cars using the most modern Euro 6-compliant
engines.

Renault promises plan to bring down emissions from diesel vehicles

Campaigners have pointed to Renault as one of the major culprits in discrepancies between
vehicle test results and real-world NOx emissions, as awareness has grown of the true level of
pollution emitted by diesel cars. A German environmental group that tested Renaults Espace in
late 2015 said it released NOx emissions, which are linked to a host of public health problems
from respiratory illnesses to heart disease, that were between 13 and 25 times the EU limit.
Renaults chief competitive officer, Thierry Bollor, said that while he disputed some of the
reported measurements, he acknowledged that our position is not satisfactory and there was
room for improvement. Bollor insisted that Renault was meeting the norms rather than
cheating tests or consumers.
The commission established by Royal has so far identified several manufacturers whose realworld emissions exceed the tests, but no evidence of defeat devices in vehicles beyond those
used by VW.
French ministers have said that no defeat device or fraudulent software in Renault engines has
been found, after the carmakers share price plunged on Thursday following reports that police
had raided its premises.
Shares in Renault tumbled more than 20% on Thursday morning as investors feared that the
French manufacturer could be drawn into the VW diesel emissions scandal, after unions
revealed that fraud investigators had searched three sites the previous week. Shares rallied to
leave Renault down around 10% by the end of the day.
Renault confirmed the raids had taken place but denied that any evidence of defeat devices had
been discovered, before Frances ecology and energy minister, Sgolne Royal, moved to calm
speculation.
Royal said that the French independent technical commission set up in the wake of the VW
scandal, which presented its results to the minister in a meeting on Thursday, had found nothing

wrong in Renaults cars. She told journalists: There is no fraud at Renault. Shareholders and
employees should be reassured.
However, Royal confirmed that Renault cars did emit carbon dioxide (CO2) and nitrogen oxide
(NOx) emissions above accepted limits in their tests. Renault pledged in late 2015 that it would
invest 50m (38m) to bring its cars real-world emissions into line with those recorded under
official test conditions.
As news of last weeks police raid emerged, Renaults shares fell sharply, wiping 5bn (3.7bn)
off the companys market value and depressing European markets. Already down around 2% on
the back of lower oil prices, the French stock market, CAC, and its German counterpart, the
DAX, extended their losses to more than 3% after the Renault reports.
Renault's stock price plunged last week after investors heard that French regulators searched
three of the automaker's sites as part of the emissions investigation. The stockholders feared an
environmental scandal like the one currently embroiling Volkswagen. There's one major
difference as of now, there's no evidence Renault equipped any of the polluting models with
defeat devices.

QUESTIONS:
1. Should Renault have known that some of its diesel models were in breach of pollution
standards?
2. What does it say about the ethical culture of Renault in that it is being proactive and working
with the French government to eliminate vehicles that exceed emissions limits?
3. Is it possible that in the manufacture of diesel automobiles it could be technically difficult to
standardize emissions output over hundreds of thousands of vehicles?
4. Connect the dots between CG, asymmetry of information, fraud and stakeholder theory.