Editorials

VW scandal a case study in bad corporate ethics

Matthias Mueller, chief executive officer of Volkswagen AG, spoke to VW shareholders in late June during an annual general meeting in Germany.
Matthias Mueller, chief executive officer of Volkswagen AG, spoke to VW shareholders in late June during an annual general meeting in Germany. Bloomberg

Volkswagen’s diesel emissions fiasco offers a valuable lesson to corporations on how not to react when they’ve put themselves in a ditch — and, ultimately, how to get back on the road.

In a federal court in San Francisco, the once-admired German automaker recently agreed to a civil settlement of up to $15.3 billion, by far the largest in the history of the auto industry. It stemmed from VW’s decision to dodge clean-air laws by installing “defeat devices” on 11 million diesel cars around the world, including 475,000 sold in the United States.

They were equipped with software that turned on their pollution control systems when they were being tested but largely disabled them when they were actually on the road. As a result, the cars — Jettas, Golfs, Passats, Beetles and Audi A3s manufactured in various years — got great fuel efficiency on the road (north of 40 miles a gallon) but spewed nitrogen oxide at levels 40 times the federal limit.

When the testing oddity came to light two years ago, VW officials dismissed it as a “technical error” but later acknowledged their actions were deliberate. Now they’re about to pay $10 billion to U.S. consumers in a mix of compensation, buybacks and repairs, $2.7 billion to an EPA remediation fund and $2 billion for genuine cleaner-vehicle projects.

Another $600 million will settle claims by 44 states, including Missouri and Kansas, as well as the District of Columbia and Puerto Rico.

An estimated 8,750 vehicles in Missouri are involved, with settlements reaching $40 million.

There were 2,000 affected vehicles in Kansas, with settlements totaling $11.1 million.

Volkswagen’s deception was an egregious breach of trust, akin to an organic farm-to-table restaurant stocking its kitchen with pesticide-laden produce from a chain grocery store. Business owners who have an ounce of respect for their customers simply don’t behave that way.

When they were caught, VW officials made matters worse by denying what they did. Then they made a half-hearted effort to compensate the people they’d lied to, offering them a paltry $1,000 and free emergency roadside assistance.

Volkswagen isn’t the first corporation to dupe consumers or government regulators and it certainly won’t be the last to try. But if there’s a silver lining in this smoky cloud of a story, it’s that the truth eventually won out and the betrayer will be forced to compensate the betrayed.

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