Martin Winterkorn should be fired, then handed a dictionary so he can learn the meaning of "clean" technology.
Mr. Winterkorn is chairman of the management board (CEO, in effect) of Volkswagen AG, Germany's mightiest industrial company. It is the world's No. 2 car maker and one of Germany's, and the world's, best-known brands – the very symbol of reliable Teutonic technology, performance and value. Volkswagen, whose marques include VW, Porsche, Audi, Lamborghini and Bentley, can be bought in almost every country; they are status symbols.
The Volkswagen brand, along with the Germany Inc. brand, is worth a lot less than it was before Saturday, when the U.S. Environmental Protection Agency accused the company of rigging the emissions data on almost half a million of its diesel-powered cars sold in the United States between 2009 and 2015. On Tuesday Volkswagen said that 11 million of its cars worldwide had been rigged to fool air-quality regulators, making a mockery of Volkswagen's "clean" diesel technology push.
On Monday and Tuesday, Volkswagen shares lost 31 per cent on the German bourse, shedding €25-billion ($27.8-billion U.S.) of value, and the company set aside €6.5-billion to cover crisis-related costs. The amount seems absurdly low given the cost of the car recalls, the legal onslaught and the potential fines – up to $18-billion from the EPA alone – that the company faces, not just in the United States but in other countries, including France, Germany and South Korea, that have or are about to launch investigations into the emissions cheating scandal. Already, one class-action lawsuit is rolling and others are inevitable. Criminal charges are not out of the question for the company that has been dubbed the "Lance Armstrong" of the automotive world.
Volkswagen deserves the pain, for using "defeat" software to fool air-quality regulators into thinking the cars are far less polluting than they really are. It was no technological accident on the company's part. By all accounts so far, it was a deliberate fraud on the EPA, the public and on Volkswagen customers. Because Volkswagen admitted so. In the five stages of crisis management – denial, anger, bargaining, depression and acceptance – the company immediately ditched the first three and embraced the last two.
On Monday night in New York, Michael Horn, the boss of Volkswagen U.S., dropped a bombshell. Speaking at a company event to launch the new VW Passat sedan, he said: "Our company was dishonest with the EPA, and with the California Air Resources Board and with all of you, and in my German words: We have totally screwed up …. This kind of behaviour is totally inconsistent with our qualities …We will pay what we have to pay."
Earlier in the week, Mr. Winterkorn said in a statement that he was "deeply sorry" for breaking the trust of the public and ordered an external investigation. On Tuesday, he apologized again, saying he was "endlessly sorry." Since then, the odds on his survival atop Volkswagen have shortened drastically. The German press was reporting that he might be gone as early as Wednesday, when the company's senior directors meet.
He has to go. If he didn't know about the emissions scam, he should have because he is no stranger to Volkswagen's deep – and evidently exceedingly creative – technological tradition and innovations.
A metals scientist and engineer, he has been part of the group since 1981, when he joined Audi. He became head of Audi's technology development in 2003 – Audi cars were nailed by the EPA, along with a variety of VW models with diesel engines. By 2007, he was Volkswagen's overall boss and also was appointed group head of research and development, where he would have been intimately involved in the company's drive to make the cleanest and most economical diesel engines on the market. Would he not have wondered how his VW and Audi diesels were breezing through the stringent EPA tests? When the EPA grew suspicious, its new tests showed that the cars were producing as much as 40 times the acceptable levels of NOx – nitrogen oxides – a pollutant that causes smog and potentially fatal respiratory illnesses.
The term "scandal" is used lavishly, to the point it loses its punch. But the Volkswagen scandal lives up to the original use of the term – a moral and legal outrage. In every sense, it is bigger than BP's Deepwater Horizon oil-drilling spill in the Gulf of Mexico in 2010, which nearly crippled the British company and turned it into a global pariah. The Deepwater disaster was the result of stupidity to the point of negligence. The Volkswagen disaster was apparently a calculated attempt to deceive the EPA and violate the U.S. Clean Air Act. Other car makers have run afoul of air-quality or fuel-economy regulations. But their sins were mostly the result of technological errors, not a wholesale attempt to rig the system.
The scandal is a catastrophe for Volkswagen and for Germany. It has completely undermined Volkswagen's effort to convince American drivers that diesel technology is cleaner than gasoline technology. It will cost Volkswagen shareholders a fortune. It has put the fine Volkswagen name in the gutter, perhaps for years, and embarrassed Germany's political leaders. Shame on Volkswagen.
Eric Reguly