The world’s second largest car company has long bragged about its superiority in providing “clean diesel” vehicles to the U.S. But now Volkswagen executives have admitted that those vehicles have a “defeat device” that hides the cars’ actual level of pollutants … but only during emissions testing. This blatant violation of ethics and public trust has damaged the Volkswagen brand, perhaps permanently.
Owning a Volkswagen was at one time a rite of passage that many young Americans strove for. Some of us can remember the Volkswagen fad that took the country by storm from late 1959 till the mid 1960’s of cramming as many people as possible into a VW Beetle. The record was 18 with all windows and doors closed – in order to comply with the “official” rules.
The Beetle, also known as the “Bug,” was a symbol of freedom and quality. No questions asked. It was an icon. And for many of us, it was our first car. And the Beetle never really lost its popularity. Newer “Bugs” came along not too long ago, with a flower holder in its dashboard. The car, especially loved by students, activists, the environmentally conscious, flower children, now grown up and somewhat gray, remained especially beloved.
But the sweetheart of cars now suffers a tattered reputation after the VW Company’s admission that it had deliberately rigged emissions tests. This is especially shattering as VW has long prided itself on its stellar reputation for technological prowess and a singular focus on environmental sustainability.
German prosecutors are probing former VW CEO Martin Winterkorn who resigned after he admitted the company rigged pollution tests on millions of diesel vehicles in the VW family. The Beetle, Jetta, Golf, Passat, and Audi A3’s have lost most of their value, and their owners are stuck as the company figures out what to do.
And while the company has apologized, it has not yet explained how the cheating was allowed to happen on such a widespread scale. The emission scandal affects nearly 500,000 in the U.S. alone and millions more around the world. Volkswagen has set aside $7.3 billion to cover vehicle recalls, and other costs, but that figure may be nowhere near enough. The company is facing dozens of class action lawsuits representing people claiming their cars have lost their value due to its emission testing scandal. By the time the dust clears it’s going to be a very costly lie.
It takes years and years for a company to build its brand. The building of trust in a brand takes a very long time to develop. VW’s brand is dramatically compromised. What is critical is that they tell the public what actually happened, who was involved and that they assure their public this will never be allowed to happen again. To date, this disclosure has not really happened. Big questions loom, including: How will the company even get the cars in question to comply with the law? How will it compensate its customers?
[tweetthis]It takes years for a company to build trust in its brand. ~ @RichardMBowen #volkswagen #ethics [/tweetthis]
Until the company has figured out how to fix its bogus emissions controls, there’s not much that can be done about dirty diesel. Owners are stuck with cute cars that emit unhealthy pollutants, especially embarrassing because the VW buyer profile says these same people are those especially conscious of the environment! Their cars have little-to-no resale value left! These cars may have been pumping out nitrogen oxides at 40 times the permitted levels!
Volkswagen was the champion of sustainability. The company is saying that anyone who was involved in the fraud will face “full consequences” and it is diligently working with prosecutors to get to the truth. Employees themselves could in fact be prosecuted for fraud and if convicted face fines and potential jail sentences of up to 10 years in prison. If prosecutors can prove that VW employees installed the software for these emissions for the financial benefit of the company, or that there was collusion with more than three people working together on the scam, they could prosecute under even harsher terms.
So how did this happen? This was America’s sweetheart! How could we forget the 2012 Darth Vader Passat commercial? We grew up with this car and this company – a symbol of quality, a brand we could trust.
Just this week on NPR reporters interviewed Germans in the town VW originally hailed from – where most still rely on VW production. The woman interviewed, laughed. She said, ”with so many other evil things happening in the world; there are so many bigger scandals and corruption going on. This is so little. Life will go on, we’ll forget.”
That’s sad. We can’t forget.
Lying, cheating and stealing robs everyone, eventually. It’s going to cost VW owners and the company billions. It’s robbed the people who own these cars, some of them young college students who bought their dream car. Maybe their first car. And it will cost the taxpayer.
Federal regulators are now launching even more aggressive testing of diesel-engine cars sold in the U.S. The Environmental Protection Agency has sent letters to automakers of its expanded efforts to uncover defeat devices and any other mechanisms that can thwart air pollution laws. Janet McCabe, acting administrator for the office of Air and Radiation, stated that the additional monitoring is meant to ensure that “the industry is competing on a level playing field and that consumers are getting what they paid for.” According to the Washington Post, regulators are going to be hyper-vigilant as a result.
This is no little thing that we can turn the other way on. If we laugh, if we say “no big deal, life goes on,” then ethical violations, lying, cheating and stealing gets even bigger and more prevalent. We’re all robbed.
[tweetthis]We’ve lost an icon. That’s not something to laugh at! ~ @RichardMBowen #volkswagen #ethicalleadership[/tweetthis]
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Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.
I’m so glad you wrote about this, Richard. This story disturbs me greatly and illustrates the big issue: ethical leadership has left the building in many major organizations.
While there clearly are VW employees that have done some very bad things, let’s not forget that there are thousands of honest employees in approximately 150 countries who are feeling betrayed by their company and who are likely to suffer great financial loss because of this scandal.
And, how about the thousands of VW dealers, suppliers, and investors? Just think of the potential financial devastation of all of these people and their families. The ripple effect on the global economy could be massive. This is no small matter.
These unethical – and often illegal – practices can, and should, be avoided. It all starts at the top with strong, principled, ethical leadership.
Will Volkswagen disappear from our world much the way Arthur Andersen and Lehman Brothers did? Sadly, in those cases, thousands of lives were ruined due to the actions of a few bad apples.
And, General Motors’ executives lapses in judgement about disclosing problems – lapses that resulted in over 150 deaths – are merely resulting in a financial slap on the wrist – a slap that hurts the investors. The wrong doers appear to be getting a free pass on it all.