What One Lie Cost a Corporation
So, look. Diesel is better than gasoline in terms of mileage (a standard vehicle on diesel fuel can travel 30% further than its petrol counterpart) and emissions. Except for NOx emissions. And it’s a real challenge to bring the emissions within acceptable limits.
Other top companies who sell diesel vehicles are BMW, Audi, Chevrolet, Mercedes Benz. Another big user of diesel are heavy-duty trucks.
In 1998, several heavy duty diesel engine makers, such as Caterpillar and Cummins Engine Company found a way to bypass the stringent emissions standard by installing ‘defeat devices’ for passing the test, but disabled the emission control system during driving in real conditions. Caught, the US Justice Department required them to pay $83.4 M in civil penalties.
17 years later, in 2015, VW found itself in the same conundrum: we are unable to beat the emissions standard cheaply, so what do we do?
In a management déjà vu, VW opted to install software that recognized test conditions, and automatically turned the pollution control on, and when out of the test, having passed with flying colors, turned the pollution controls back on. The emissions standard was passed, EPA was happy, and no one was the wiser for it. For years.
Until Daniel Carter of the West Virginia Tech got hold of the VW Jetta and the VW Passat. In a small study funded by the International Council on Clean Transportation (ICCT) in late 2012 and completed in May 2013, they conducted field emissions tests for these two cars and did a double-take. Something must be wrong with what we did, they thought, because look: VW’s Jetta was emitting 15 to 35 times as much nitrogen oxide as the allowable limit, and the VW Passat, 5 to 20 times as much. Similar tests conducted by the US EPA and the California Air Resources Board (CARB) replicated their findings.
So what happened here? Humans are the micro building blocks on which systems, corporations, cities, and nations are built. Some individual in VW said, I don’t know the answer to this test, so let’s cheat. Others, including the VW CEO, Martin Winkerton, said, that’s a good idea.
There was any number of options VW could have espoused. Other companies solved this problem. This answer is currently available to mankind. I’m not saying steal other engineer’s solutions – that would mean cheating off of another’s paper. They could have hired someone to provide that solution. Even if it wasn’t, they could have invested in R&D to come up with safer solutions in the future. They could have opted for biodiesel as a fuel: a life-cycle emission test by the US Department of Energy (DOE) found the tailpipe PM10 emissions of biodiesel are 68% lower than conventional biodiesel, and life-cycle particulate emissions are 32% lower than conventional diesel fuel4. They could have done what I have been taught to do by my father when I don’t know during a test: write ‘I don’t know’ on the test, and ask the teacher what the answer is, so you know next time. I would proudly write ‘I don’t know’, and yes, get 0 marks. I was fine with that.
I suspect the argument VW would make is, we have people’s jobs to protect. Now, how on earth are you going to protect jobs when you are: endangering lives with pollution from your 11 million vehicles sold worldwide that tremendously harm the lungs, create smog, and break the law? Volkswagen effectively said, we know there is a law to protect people, and we as a company place our profits before safety. We choose to cheat, and lie. That is what I’d expect from a 5 year old who has not been given the lesson of honesty and integrity yet.
My father would say, the truth will always out. And it did. And look at the fallout – this one lie cost VW 1/3 of its market capitalization: VW experienced a 43% drop in share value, approximately $ 30.69 Bn (VW’s last year’s profit was $ 12 Bn); VW plans to set aside $ 7.3 Bn to cover the cost of the scandal, the US could impose an $18 Bn fine on VW. Add to that the loss of sales, employee turnover, the crippling blow to VW, considered #67 on Forbes ‘World’s Most Valuable Brands’, and the US Department of Justice is contemplating criminal charges, and we are looking at a blow that VW might not recover from. Everything Das Auto’s German engineering and claims of safety stood for, is out the window.
Do you, VW, really stand for business at any cost?
The three biggest words in a corporation have to be integrity, transparency, and accountability, in that order. You have to mean what you say, and say what you mean on a human level. Otherwise everything else will just be lies, with the billions of dollars of corporations behind you. You will receive this answer from all who believe in goodness, wellness and truth: to the power of NOx.