The Volkswagen ‘Dieselgate’ scandal is a new low in corporate malfeasance

Over the past few decades, we’ve become accustomed to the complexity of corporate evil. The Enron fiasco began as an esoteric set of bookkeeping discrepancies that only people who understood things like merchant-model accounting could comprehend. Parsing the report on BP’s Deepwater Horizon disaster involved wading through oil industry jargon like “variable bore ram” and “flexjoint riser adapter.” The financial crisis of 2008 had its genesis in a series of esoteric mortgage bonds with names like “ABACUS 2007-AC1” and “Timberwolf 2007-1.” Compared to these scandals, what happened at Volkswagen over the last week is actually pretty simple. The company admitted that it had programmed 11 million of its diesel cars—including popular models like the Volkswagen Passat, Jetta, Golf, and Beetle, along with cousin cars like the Audi A3—to cheat on their emissions tests, using something called a “defeat device.” When these cars’ software detected that they were being put through a standard nitrogen oxide emissions test, they switched into a low-emission mode that allowed them to pass the test. Then, once the test was over, the cars reverted to pumping out up to 40 times as many pollutants as the law allowed, while appearing to stay under the legal limit. WERBUNG What is new and notable about the Volkswagen scandal is not the behavior of the corporate executives involved in approving the use of defeat devices around the world. Lying and cheating are, unhappily, common in corporate America. As Jalopnik found, many of Volkswagen’s competitors have also been involved in regulatory sleight of hand over the years, and nobody expects Volkswagen to be the last car company to purposefully skirt environmental restrictions in pursuit of profit. What’s different about the Volkswagen lies is the sheer scale of the deception. Volkswagen cars account for one of every ten passenger vehicles sold in the world. By wildly understating the emissions of its passenger diesel fleet, Volkswagen spit in the face of regulators, falsely advertised to millions of customers all over the world, and effectively undid years’ worth of work to responsibly lower emissions targets and mitigate the effects of health-damaging smog and climate change. Unless you’re an automotive emissions expert, it’s hard to truly grasp the likely scope of the damage. But make no mistake: this is a big fucking deal. In fact, it may be the worst display of corporate malfeasance since Lehman Brothers. The Guardian attempts to put it into perspective (emphasis mine): The rigging of emissions tests may have added nearly a million tonnes of air pollution by VW cars annually – roughly the same as the UK’s combined emissions for all power stations, vehicles, industry and agriculture. According to a Guardian analysis, the 482,000 non-compliant US vehicles would have released between 10,392 and 41,571 tonnes of NOx annually at an average US mileage, rather than the 1,039 tonnes the EPA standards would imply. Scaled to the 11m global vehicles, that would mean up to 948,691 tonnes of NOx emissions annually. Western Europe’s biggest power station, Drax in the UK, emits 39,000 tonnes of NOx each year. In other words, the Guardian says, by programming its cars to cheat on their emissions tests, Volkswagen introduced as much pollution to the atmosphere as if it had built 25 exact replicas of Western Europe’s largest power plant, and let them all run around the clock, invisible to regulators and the public. But it gets worse. Research suggests that outdoor air pollution, including smog containing NOx (nitrogen oxide) emissions, contributes to more than 3 million premature deaths annually. In London alone, nitrogen dioxide has been linked by researchers to nearly 6,000 deaths a year. And diesel engines play a big part in the problem. According to estimates by the California Environmental Protection Agency regarding the emissions of off-road diesel vehicles, removing 220,000 tons of NOx and other diesel byproducts from the atmosphere over a 20-year period would reduce the number of premature deaths in the state by 4,000. Compare those numbers to the nearly one million tonnes of NOx that Volkswagen’s vehicles were supposedly releasing into the atmosphere every year, do some back-of-the-envelope conversion math, and it implies that tens of thousands of people could die prematurely due to health complications from the increased Volkswagen emissions. (Vox’s Brad Plumer puts the likely toll lower, in the hundreds rather than thousands of deaths, but it’s impossible to know for sure without more precise data.) Unlike most corporate scandals, Dieselgate appears to have a body count. This wasn’t even the first time Volkswagen was caught cheating on its emissions tests. In May of 2014, after a group of researchers from West Virginia University and the International Council on Clean Transportation found discrepancies in the actual emissions levels of VW cars compared to their stated levels, California and federal authorities ordered Volkswagen to fix the problem. The company falsely claimed it had fixed it. Then, after the EPA called the bluff, and threatened to hold back approval for Volkwagen’s new line of diesel cars, the company finally came clean. But what truly elevates the Dieselgate scandal from merely outrageous to get-out-the-pitchforks bad is that while it was artificially deflating emissions figures for millions of its vehicles, Volkswagen was running expensive ad campaigns promoting the eco-friendliness of its diesel vehicles. (It has since pulled many of these ads, but a few choice ones are below.) Volkswagen CEO Martin Winterkorn (who resigned today, claiming he was “stunned that misconduct on such a scale was possible”) has insisted that the defeat devices were attributable to “the grave errors of very few.” But that defies common sense. This could not have been a simple case of a low-level engineer cutting corners to meet a production deadline. Calls like these come from the top. It’s exceedingly likely that, at some point, someone in Volkswagen’s C-suite had two choices: spend more money and delay production to satisfy the legal emissions limits, or lie. That Volkswagen apparently chose option two is a stunning indictment of the company’s moral culture, and a flagrant abrogation of its corporate duties. Purposefully lying about the emissions levels of 11 million cars is dastardly; doing it while positioning the company as a champion of the “clean diesel” movement is a display of corporate hubris on a scale not seen since the halcyon days of Big Tobacco. Volkswagen is already suffering for its sins. Its CEO has resigned, its stock price has been cut by a third, and criminal and civil investigations are underway. The company has set aside $7.3 billion to cover costs associated with the scandal, and it could be forced to pay billions more in fines and penalties to customers and regulators. That’s a start. But Dieselgate wasn’t just a corporate failure, and it can’t be redressed simply by cutting a few checks, chucking a sacrificial executive or two over a cliff, and moving on. It appears to have been a malicious and predatory act committed knowingly by specific individuals, who put their own ambitions above the priorities of public health and safety. It’s an unthinkably selfish action whose environmental and public health consequences will affect millions of people for many years to come. According to the New York Times, Volkwagen executives aren’t likely to see U.S. criminal charges. “There are no criminal penalties under laws applying to the E.P.A. for violations of motor vehicle clean air rules,” the paper writes, “though there is a division of the Justice Department devoted to violations of environmental law.” The Times also explains that the problem wasn’t likely limited to Volkswagen—other automakers have, in all probability, been lying about their emissions statistics as well. But the company we caught is Volkswagen, and it would only be fitting to make an example of their executives by expending every effort to prosecute them criminally. At the scale of a global automaker, moral failings have catastrophic consequences. And if nobody goes to prison for Dieselgate, it would seem a staggering failure of justice.