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Faster, Higher, Farther
The Volkswagen Scandal
Jack Ewing
read on January 21, 2018

The Volkswagen Scandal can be broadly broken into four parts, each worse than the last:

  1. The manufacture of diesel engines that did not meet EPA standards according to US law (these engines emitted up to 35x the legal limit of highly toxic nitrous oxide gas).
  2. The intentional design and implementation of a "defeat device" that would temporarily lower engine performance (and resulting emission levels) when it was detected that the car was being tested for emissions. This device allowed the diesel cars in 1) to pass inspection and be sold in the USA. The sole purpose and intention of the device was to evade US law.
  3. The  egregious marketing of these cars as "clean diesel", and as environmentally responsible.
  4. Upon discovery of the deception, the systemic denial, obstruction, and attempted cover-up of VW management.

The book digs into the details of what happened, but all of it was pretty cleanly summarized in the Statement of Facts that VW eventually had to cop to. It really was a disgusting corruption, and I'm convinced from reading it that I'll never buy a VW/subsidiary car. Some of the more interesting discussion in the book was theorizing what led to such corruption... what led so many people to act so terribly? In most cases you can pretty easily trace a straight line from an outcome like this back to a system of incentives that caused it (e.g., stock bonues, sales targets, etc). That's partially the case here - but there was nothing particularly unique about VW in this respect as from other car companies. Everyone has stock bonuses and sales targets - everyone would love to lie and juice results and get away with it. But VW somehow had/has a really poison corporate culture that doesn't respect the law, or didn't fear being caught. I wish the book had focused a bit more on that, and sought to understand better the first-principals that led to the eventual result. How did the culture get so tolerant of that? How can those lessons be applied broadly to other orgs? Ewing gives some brief thoughts here, with comments around the concentrated control of VW by very few family shareholders, and no diversity on their board at all. A great jumping-off point for a discussion that never fully developed.

Other items:

  • Quite surprised the emissions standards in the EU were looser than the US. While VW was definitely against the spirit of the law in the EU, they never explicitly broke the letter. In the EU, car manufacturer's are allowed to over-emit pollutants when they determine, in their sole opinion, that they're doing so to "protect the engine".
  • Big surprise: no one has gone to jail, all the executives got giant bonuses, the stock has totally recovered (and then some). I.e., nothing at all has changed.

Author Bio:

Jack Ewing has covered business and economics from Frankfurt for The New York Times since 2010. He has worked as a journalist in Germany since 1994, including over a decade as a BusinessWeek correspondent.