[Urbanstudy] The Volkswagen scandal : What really happened at VW

Vinay Baindur yanivbin at gmail.com
Thu Jun 8 14:22:37 CDT 2017


The Volkswagen scandalWhat really happened at VW

Why the emissions scandal still hangs over the German carmaker
 Print edition | Books and arts <http://www.economist.com/sections/culture>Jun
1st 2017

*Faster, Higher, Farther: The Volkswagen Scandal.* By Jack Ewing. *W.W.
Norton; 352 pages; $27.95. Bantam Press; £20*.

WHEN an American policeman pulled over a Volkswagen (VW) Jetta in 2013, he
suspected that the array of pipes sticking out of the back of the car and
the grey box and portable generator in the vehicle were a sign of something
fishy. He was right. The West Virginia University researchers inside the
car had nothing to hide. But the tests they were conducting on the exhaust
fumes, meant to prove the cleanliness of modern diesel engines, uncovered
one of the biggest and boldest frauds in corporate history. The decision by
VW, a pillar of Germany’s car industry, to fit “defeat devices” and cheat
emissions tests in up to 11m cars has so far cost the company $21bn in
fines and compensation in North America alone.

He delves into VW’s origins, when Adolf Hitler ordered the construction of
a “people’s car”, or *Volkswagen *in German. VW set up shop in the German
countryside. Wolfsburg bred a “headquarters mentality” that insulated the
firm from outside influence. Unprecedented union power, handed over in the
1960s as the price the federal government paid for floating the firm on the
stockmarket, and the sway of the state of Lower Saxony, which retained a
20% voting stake in the company, gave outside shareholders little say.Why
did the company deliberately set out to engineer cars that spewed out up to
35 times more poisonous nitrogen oxides on the road than stated in official
tests? Jack Ewing, a journalist for the *New York Times*, offers a timely
guide to the scandal, setting out in detail why VW’s corporate culture led
to the deception.

This allowed autocratic bosses to have their way. Ferdinand Piëch became
chief executive in 1993 at a time when the company was struggling. To win
back sales, Mr Ewing argues, he created the conditions that allowed the
fraud to “fester”. To keep workers onside, the company had to carry on
growing. Managers were kept quiet through fear. The ruthless Mr Piëch
replaced almost the entire management board by his second year in the job.

His successor as CEO, Martin Winterkorn, a man cut from the same cloth,
wanted the firm to become the world’s biggest carmaker. An assault on the
American market, where VW was weak and emissions regulations much tighter
than in Europe, was vital to overtaking Toyota and General Motors. To meet
that demanding target, though, VW had to cheat.

Mr Ewing explains why VW cheated, but pinpointing who was responsible has
been much harder. The company insists the deception was cooked up by middle
managers and that senior bosses, despite a reputation for microscopic
attention to detail, knew nothing of the fraud until it was too late. If
there is clear evidence implicating bigger fish it has yet to emerge.

The scandal still haunts VW, despite a settlement with American law
enforcers and compensation for American car-buyers. European customers are
pursuing class-action lawsuits for compensation, though VW insists it did
nothing wrong in Europe, where the rules are laxer. Mr Piëch left the
company before the scandal erupted and Mr Winterkorn has since resigned.
Several employees have been arrested or charged with criminal offences in
America. German prosecutors are investigating nearly 40 employees and have
begun a probe into Matthias Müller, the latest CEO and another long-serving
insider, for failing to warn shareholders in a timely manner about the
scandal. The company has denied those allegations. In any event, Mr Ewing’s
tale will need a new edition with extra chapters.
This article appeared in the Books and arts section of the print edition
under the headline "Bad smell"
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