Are profits and corporate values treated equally? Did Volkswagen compromise its core values? On its website the stated strategy that drives the company’s actions is: “We see high customer satisfaction as one of the key requirements for the company’s long-term success.” That would be a “yes” to the core values question.
VW did emphasize profits over values by installing a “defeat device” in its diesel cars with software specifically designed to evade government pollution tests. The company has admitted that it rigged diesel vehicles to pass lab emissions tests, even though they emitted as much as 40 times the legal limit of pollutants on the road. VW disclosed that the irregularities on diesel-emission readings extend to some 11 million vehicles globally.
VW followed an egoistic approach to ethical decision-making. One where earnings results rule the day; the pursuit of self-interest is the key driver of behavior; and where putting the interests of the driving public take a back seat. By rigging the system the company has sacrificed customer loyalty to the brand and its actions have the unintended consequences of reducing the resale value of affected cars. After all, in these environmentally conscious days who would want to buy a used VW with higher emissions than those reported upon testing?
It didn’t take long for former CEO Martin Winterkorn to bail out after VW’s mea culpa. He resigned on Sept. 23, taking responsibility for an emissions cheating scandal that has gravely damaged the carmaker’s reputation. “As CEO, I accept responsibility for the irregularities that have been found in diesel engines,” Winterkorn, said. He then turned around and undid all the good by apologizing when he qualified it by saying that he had personally committed no misconduct. “I am not aware of any wrongdoing on my part,” he said.
It may be too strong a word to call Winterkorn a “dummkopf.” He needs to realize that even if he knew nothing about the emissions scam, he should have known and that puts him into the “bonehead” category. Not knowing about fraud that occurs under one’s nose and during one’s watch is just as bad as knowing and doing nothing about it. Not knowing the truth when one should know it is not a defense for irresponsibility.
Editor Henry Dubroff points out in his editorial on Sept. 25 that large car companies are prone to make mistakes. This is strikingly true. What is it with the automobile industry? How many times are we going to stand idly by while another car company issues another disclosure about ignoring defects or gaming the system, as did Volkswagen?
Just a few days before VW’s admission, General Motors agreed to pay $900 million to resolve a federal criminal investigation of ignition-switch flaws linked to at least 124 crash deaths and the recall of 2.59 million cars. So far, no individuals have been criminally charged in the GM case, but prosecutors have said the probe is continuing.
In an earlier case concerning cars that allegedly accelerated spontaneously, Toyota reached a $1.2 billion settlement with the Justice Department, the largest-ever U.S. criminal penalty for a car company. I could go back to the 1960s and rehash the Ford Pinto debacle when crash testing at low speeds determined that the gas tanks regularly ruptured and the cars could be engulfed in flames, causing accidents or deaths.
Trust is the basis for good business. If the driving public cannot trust that their cars will operate safely under all conditions, then the guilty companies should be punished.
Irresponsible behavior is unacceptable, especially in an industry where people’s health and welfare – and very lives – are at stake.
VW should be ashamed of itself. It has forfeited the right to be considered an elite car company. Let’s hope consumers think twice before buying any VWs in the future, if for no reason other than to teach the company a lesson that actions have consequences.
• Steven Mintz is a professor in the Orfalea College of Business at Cal Poly, San Luis Obispo.