aNewDomain — Building trust for a brand can take years, but that trust is so fragile. Volkswagen has relied on the German good name for quality of engineering and is one of the major producers of automobiles in the world. The public trust was destroyed last week when an underfunded NGO proved that software in VW diesel cars were using a “defeat device” to cheat emissions tests in the US.
On Friday, Porsche chief Matthias Mueller is expected to take over the CEO role at VW, which has been vacated by former CEO Martin Winterkorn.
Wintercorn denies knowledge of the scandal, but Volkswagen finally admitted that EPA defeating software does exist in some 11 million vehicles globally and in 482,000 VWs in the US. The firm has reserved about 6.5 billion euros ($7.2 billion US) to pay this scandal’s costs.
It might even need more: VW potentially faces criminal investigations and some $18 billion in US fines, analysts say. Some 27 US-based lawsuits reportedly loom, too.
At least in the US, there are approximately 500,000 TDI-branded cars on the roads that routinely spew up to 40 times the legal amount of nitrogen oxide, which leads to increased air pollution.
For the tech minded, see below for the structure of the VW emission system. The software comprises about 20,000 lines of code for the whole car.
For an in-depth analysis of how it’s rigged, see this Reuters article.
CEO Steps Down
German citizens and the world over are shocked by this criminal behavior. But it all raises an interesting notion — that the environment is a major factor in world perception. Andrew Winston in Harvard Business Review says:
In a strange way, VW’s chicanery only reinforces how important it is for products today to be environmentally safe. This wasn’t a test of how well their cars handle, how fast they go from zero to 60, or how well they protect you in a crash. No, VW was risking its reputation to make everyone believe the cars were cleaner.”
VW has publicly admitted to the fraud, and the CEO Martin Winterkorn resigned yesterday. Winterkorn issued a statement on Sunday saying that the company will fully cooperate with government investigations and has ordered an internal probe. Winterkorn stated, “I personally am deeply sorry that we have broken the trust of our customers and the public.”
Forbes listed Winterkorn as No. 58 in a list of influential leaders of industry in 2014. This is the age of transparency, and as secrets float to the surface corporate cheaters will continue to fall.
Spiral of American Ideologies
In the US, Porsche’s Mueller faces a White House that’s keen to address deception and illegal activity. Earlier this month Attorney General Sally Yates stated at the New York University Law School:
Effective immediately, we have revised our policy guidance to require that if a company wants any credit for cooperation, any credit at all, it must identify all individuals involved in the wrongdoing, regardless of their position, status or seniority in the company, and provide all relevant facts about their misconduct.”
Fraud and CEO criminal behavior will no longer be dealt with in closed door proceedings. The criminals will hopefully get their day in court, which echoes the public desire for accountability and transparency.