Today Marks 2nd Anniversary of Dieselgate Scandal
September 2015 began promisingly for Volkswagen.
The automaker was on track to surpass archrival Toyota as the number one manufacturer and seller of automotive vehicles (the key goal in its 2018 corporate strategy plan).
Additionally, its sporty Audi A3 hybrid was a finalist for the annual “Green Car of the Year” award from Green Car Journal, an award previously won by Volkswagen in 2010 by the automaker’s Volkswagen Jetta TDI Clean Diesel car and in 2011 by its Audi A3 TDI Clean Diesel car. In 2014 its Audi A3 TDI and its seventh-generation Volkswagen Golf line-up were both finalists for the “Green Car of the Year” award, as was its Audi A6 TDI in 2013.
Across North America, Volkswagen and its car dealers were riding high as they sold the VW Golf range of cars, which Motor Trend magazine named “2015 Motor Trend Car of the Year.” In fact, in announcing this award the previous November, Motor Trend wrote, “The Golf was a near-unanimous choice among our judges by virtue of its strong performance in each of our six Car of the Year criteria.”
Earlier in the year the 2015 Golf and 2015 Golf TGI were also named the North America Car of the Year in their respective segments. This prestigious industry award is selected by 60 automotive journalists in the U.S. and Canada and is presented each year in January in conjunction with the North America International Auto Show (NAIAS) in Detroit.
And in Europe, the VW Passat was named European Car of the Year 2015 at the Geneva Motor Show.
The World’s “Most Sustainable Car Company”
Topping all this good news is the September 9th announcement that Volkswagen has been named the world’s most sustainable car company by RobecoSAM AG. In fact, Volkswagen is one of only two automakers listed in both the Dow Jones Sustainability Index World and the Dow Jones Sustainability Index Europe.
In its self-congratulatory press release on this achievement, Volkswagen writes, “For investors, the Dow Jones Sustainability Index is the most significant benchmark for measuring the development of the world’s most sustainable companies.”
The review by the “experts” at RobecoSAM analyzed the corporate performance of 33 automotive manufacturers. Volkswagen was given top marks with 91 out of 100 points. Remarkably, the company was scored 93 on economic sustainability, 91 on social sustainability, and 89 on ecological sustainability.
In the press release Volkswagen AG CEO Martin Winterkorn, who reportedly was already aware of the nitrogen oxide emissions testing issues the company was discussing with the U.S. Environmental Protection Agency (EPA), boastfully states, “This distinction is a great success for the entire team. It confirms that the Volkswagen Group is well on the way to establishing itself long term as the world’s most sustainable automaker.”
Ironically (as the world is about to find out), the RobecoSAM analysis highlighted one of Volkswagen’s most important achievements being “sustainability is the foundation of Volkswagen’s corporate policy.”
The organization oozed confidence and had a stellar brand reputation for producing a wide range of vehicles for buyers seeking trustworthy German engineering at both the affordable mass-market and the luxury pricing points. And the annual Oktoberfest was just around the corner!
In fact, one suspects the attitude in Volkswagen’s Wolfsburg, Germany headquarters was undoubtedly one of das leben ist gut (life is good)!
The Notice of Violation Announced
Then the morning of September 18 dawns along the eastern seaboard of the United States, particularly in Washington, D.C.
As Volkswagen headquarters in Germany is shutting down for the day, the Environmental Protection Agency announces in Washington that it has issued a Notice of Violation of the Clean Air Act to Volkswagen AG, Audi AG and Volkswagen Group of America, Inc.
The Notice of Violation alleges that Volkswagen and Audi diesel cars equipped with 2-liter engines from the model years 2009-2015 include software that circumvents EPA emissions standards for nitrogen oxide (NOx). The EPA stipulates that the software is a “defeat device” as determined by the Clean Air Act and is installed in approximately 500,000 vehicles across the United States. This figure is later revised to 480,000 vehicles.
The EPA also reveals that the affected cars, which include many of Volkswagen’s most popular models, can emit more than 40 times the legal limit of NOx, a pollutant known to cause respiratory problems in humans.
As we all learn in the subsequent months, this was a deliberate cheating scandal of epic proportions. The cost to Volkswagen to date has been over $24B, one executive is serving an 18-month jail sentence in South Korea, and engineer James Liang, who pleaded guilty to three federal charges, was sentenced recently to 40 months in prison and a $250,000 fine. A third executive sits in a U.S. jail thousands of miles away from his home in Germany pending his own trial or plea bargain agreement.
Sadly, the Volkswagen Saga is still far from over. And the lessons for organizational leaders runs the gamut from corporate ethics and governance to branding, crisis communications, transparency, corporate culture, corporate responsibility, and individual accountability.
Simply put, the repercussions from Dieselgate will continue for years to come. Happy Second Dieselgate Anniversary Volkswagen!
This article is partially excerpted from my book Leadership Lessons from the Volkswagen Saga, available in paperback and Kindle formats at Amazon.