There, But for the Grace of God. . .

"The Volkswagen Group is fully functional in every respect, even during these eventful days. How, and when we meet the current challenges is primarily – although not solely – up to us. In order to pass this test, we must make an enormous, common effort – and we are all ready to do so."-- Chairman of the Supervisory Board of Volkswagen AG, Hans Dieter Pötsch, December 10, 2015

The Volkswagen diesel scandal continues on apace.  It has been with us for so long now—the whole issue of diesel engines having “defeat devices,” actually software that modified performance such that it was advantageous for emissions testing and only emissions testing because when the vehicles equipped with the engines were on the road, they were putting out as much as 40 times the NOx that they were supposed to, which certainly isn’t a good thing—that it seems almost like a matter of course.

Volkswagen has rearranged the chairs in its board room such that there are new people in place addressing the matter, which will end up costing the company billions of euros and which has done serious damage to the VW brand. 

As for that last point, a recent Gallup survey found that 41% of Americans are “less likely” to buy a Volkswagen now, while only 29% said the news has “no impact” on their purchasing decision.  However, 28% said they would have never considered buying a Volkswagen in the first place, so the scandal doesn’t have any effect on them.

It is worth knowing that through August of this year—prior to a hint of anything untoward—Volkswagen Group, which includes Audi, Bentley and Lamborghini, had just 3.2% of the U.S. market, according to Autodata.

The Group sold a total 370,547 vehicles.  In the same period, Ford sold 484,800 F-Series light trucks.

The last thing that VW needed was a reason for people not to buy.

The investigations in Wolfsburg have come to the conclusion that one of the drivers for the deployment of the defeat devices in the EA 189 engine was an initiative to really push diesel vehicles in the U.S. market starting in 2005.

“Clean diesel” would be a competitive advantage, they thought.

However, it was determined that the nitrogen oxide requirements in the U.S. were—and are—such that the engines wouldn’t meet the requirements, so the defeat devices were implemented.  Voila! The dirty diesels seemed to be clean.

Pötsch admitted, “No business transaction justifies overstepping legal and ethical bounds.”

This is not just about Volkswagen.  This is about all companies, OEMs and suppliers alike.

The Volkswagen Group Audit that is looking into the matter has found that there were three factors at play in the implementation of the defeat devices:

  • • The misconduct and shortcomings of individual employees
  • • Weaknesses in some processes
  • • A mindset in some areas of the company that tolerated breaches of rules.

And they acknowledge, “It is clear that, in the past, deficiencies in processes have favored misconduct on the part of individuals.”

You need to get that engine shipped: You do what it takes because otherwise you might find yourself in trouble with the boss—possibly out of a job.

Matthias Müller, who has been appointed chairman of the Board of Management, stated, “We can have the best people, and a great organization, but we can do nothing without the right attitude and mentality.”

And that starts at the top for any company and it needs to cascade down through each and every level of management.

If your boss thinks misbehavior is OK as long as it serves his or her interests, it is tough to push back unless there is a high degree of confidence that someone above your boss will have your back.

Müller said, “We don’t need yes-men, but managers and engineers who make good arguments in support of their convictions and projects, who think and act like entrepreneurs.  I am calling for people who are curious, independent, and pioneering.  People who follow their instincts and are not merely guided by the possible consequences of impending failure.”

That last bit bears repeating: “not merely guided by the possible consequences of impending failure.”

Whether or not Volkswagen passes the test that Pötsch mentioned will be played out in time.  But if they are able to instill in their people the characteristics that Müller calls for, chances are good that they’ll be more than slightly successful.

Don’t think for a minute that there is a company that something like this can’t happen at.  The litany of companies that have paid enormous fines and penalties of late is a long and sad one.

This is about corporate culture.  About having a culture where doing the right thing transcends merely doing what the boss wants.  Without that, then the consequences can be profound—and not in a good way.