When the Volkswagen emissions scandal first blossomed as a front page news item, I was busy preparing a workshop on Rationalization and Corruption for a group of internal auditors. Presenting for internal auditors is very rewarding, because these people really care about reducing fraud and corruption, and are highly motivated to search out tools and strategies to reduce corruption inside their own organizations.
Developing my workshop, my mind kept returning to the emerging facts of the VW scandal.
Emergence of the VW Emissions Scandal
- In 2013 a U.S. group called the International Council on Clean Transportation (ICCT) decided to compare popular diesel-fuelled vehicles’ performance in emissions testing to on-the-road performance in the U.S.A. They had previously tested European automobiles, and expected to find that US emission levels would be lower, corresponding to stronger emissions standards in the United States. When the VW results came in, they discovered the VW had on-the-world emissions levels as much as 35 times the performance in the testing lab.
- In late September, 2015, the U.S. Environmental Protection Agency (EPA) alleged that VW had installed “defeat devices” on many of its diesel vehicles–a software cheat that sensed testing conditions and tricked the testing lab, giving fake emissions results. With this news, the scandal really broke in the media
- Shortly after the EPA allegations surfaced, on September 21 Martin Winterkorn, chair of the VW Group, responded to the EPA allegations by announcing he was “deeply sorry” VW had been shipping diesel vehicles with software settings designed to recognize when emissions were being tested and turn on emission controls, while also giving false readings indicating that the vehicles were compliant with nitrous oxide requirements when they were NOT. When the vehicles were not in the emissions testing mode, the software was set to turn off emissions controls so that the vehicles would show better fuel efficiency.
- Winterkorn announced that VW would respond with “transparency and urgency” and ordered an external investigation. Two days later, he resigned as chair of the VW Group, saying that VW needs a “fresh start.”
- Shares of VW, previously the largest auto manufacturer in the world, plummeted in late September, losing as much as 30% of their market value, and VW has been scrambling to deal with organizing massive recalls around the world amid management changes, while attempting to regain the credibility and trust they had previously enjoyed, and resolve the emissions fraud problems.
- VW may have shipped as many as 11 million diesel vehicles worldwide with software “cheating” on nitrous oxide emission results, but on November 3, the situation got worse with the announcement they had “set carbon dioxide emissions and fuel consumption figures too low when certifying some models.”
Who knew … and when?
I’m sure I wasn’t alone in wondering who did know, and WHEN they knew. And, of particular interest to me, what went on inside the heads of those people responsible for beginning what VW itself admits was fraudulent misrepresentation of the truth about VW’s diesel emissions?
Details have been emerging over the last few weeks.
- The Guardian reported that Martin Winterkorn may have known about the emissions problem since spring, 2014. (October 23, 2015)
- Michael Horn, Volkswagen’s U. S. CEO, testified before a U. S. congressional committee that he was told about “possible emissions non-compliance” in the spring of 2014. He stated that he was told the non-compliance could be rectified. (International Business Times, October 8, 2015)
- A report appeared in the German language publication Billd am Sonntag explained from an engineer’s viewpoint how the emissions-cheating software came about. For those (including me) who aren’t fluent in German, The Verge summarizes some of the details, including the following translation of a portion of the German article…
The paper additionally claims that engineers couldn’t match former CEO Martin Winterkorn’s promise in 2012 that by 2015, carbon dioxide emissions from the company’s vehicles would be 30 percent lower than they were in 2006. Employees, fearing the results of undershooting expectations, apparently decided to doctor the emissions tests instead. (The Verge)
As more answers to the who, what, why, and when questions about the emissions scandal emerge, I’ll be adding articles to The Fraud Chronicles Volkswagen Emissions Scandal magazine on Flipboard.