There is a new scandal to hit the corporate world and it involves the German car manufacturer Volkswagen. Volkswagen’s emissions cheating scandal came to view recently and it involves the VW, Audi and Skoda cars around the world. So what is it all about?

The Volkswagen emissions cheating scandal

The company has in recent years been installing software in their cars enabling them to cheat emissions tests which allows them to seem clean when in actual fact they aren’t as clean as they claim to be. The software is a defeat devices type of software which allows it to beat the testing apparatus and systems in the lab. When on the road however, the emissions controls are turned off and the nitrogen oxide emitted is up to four times greater than the legal limit.

So how was this possible? How did the software work? Well, the software was enabled with an algorithm that enabled to detect when it was being tested. The software would use the information about the engine use, steering patterns and even atmospheric pressure to ‘know’ when it was being scrutinized. When it was being tested the software would switch the emissions control on and off.

Volkswagen did indeed admit there are vehicles with the cheating software totaling up to eleven million vehicles including the A3 Audi, the Golf, the VW Jetta, and the Passat and The Beetle models. There are also some Skoda cars believed to be affected about 1.2 million of them. The full list of the affected cars has been released and the sale of vehicles mentioned in the list has been halted. Majority of the vehicles are being driven by British motorists and a small minority is in the US. The British motorists are in the millions while their US counterparts barely reach the half a million mark with the number being a mere 482,000 people.

Where was management during all this?

Management at VW failed the consumers. It is noted that as a result of the software update, the drivers will incur a much higher fuel cost. That is not the only bad news. In the event of a recall and the car is not updated, your insurance could be invalidated and the resale value of your car could take a big hit. Accountability for the loss of value in your vehicle is yet to be determined. This is in light of the fact that it is yet to be established how deep the cover up ran. Questions that are exposing management failure include:

1. Up to what level of management was aware of the cover up?

2. If top-level management were unaware, what were the reasons for their subordinates covering up?

3. What company practices could have compelled employees to seek alternate solutions to such levels of deceit?

4. If both management and subordinates were aware, what is the type of ethos cultivated within a company that does not promote internal accountability?

5. Is VW management unable to come up with strategies that can compete in the vehicle manufacturing sector that they result in subterfuge?

As a result of this new discovery, the company is looking at penalties running into billions. An estimated eighteen billion dollars or twelve billion pounds under the Clean Air Act by the US which fines over thirty-seven thousand dollars per car. This is independent of the charges it could be facing from the EU and the numerous civil groups which also may file lawsuits as they have already threatened. The US Department of Justice and FBI could bring criminal charges.

The defeat device software was manufactured in Germany however the source is not yet confirmed as some sources claim it could be the big auto industry supplier Continental while others say it could be the engineering firm Bosch. A continental spokesman has denied the claim and said they know nothing about the contaminated software and are not in a position to measure emissions. The company Bosch said that they did warn VW that the use of the software would manipulate road tests and is in fact illegal and this was eight years ago.

The question now is who installed the software throughout the 2009 to 2015 models? This question is currently being looked into by the Jones Day US law firm which was hired by the company to conduct an independent external investigation. The investigation could be extensive given that the software was found in the Audi and Skoda cars as well. The pool of people is wider than it appears. The people who gave the go ahead in the use of this software and the people installing it acted criminally and would have to take personal responsibility.

The CEO?

Mr. Winterkorn who resigned when this scandal came to light was the CEO of the company up until that point. He had worked his way up through various engineering roles before taking up the job as CEO. When asked about the cheating software Mr. Winterkorn said he was shocked and was in fact resigning in the interest of the company although on his part he not aware of any wrong doing. Investigators who had earlier claimed that he was under investigation have taken a very unusual step to say he is not under investigation but they are still undecided on whether to launch an inquiry against the employees responsible at VW.

Was Mr. Winterkorn, who was famed for his hands on approach, really unaware of what was going on? Or is it that the company Volkswagen, which has over 600,000 employees, too big for one person to manage and that’s how this gross over site on the part of the management occurred? Or is it a cover up on the part of the management. Mr. Winterkorn continued to say that the company must continue the process of transparency and clarification. These questions remain unanswered but investigation should soon reveal the truth behind this new revelation.

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