Corporate scandals, like political scandals, start with shocking revelations and then move inexorably into the who-knew-what-and-when stage. That is where executives can start rehabilitating their reputation — or deepen the damage.
Since they were forced to admit one of the biggest frauds in auto industry history last month, the executives at Volkswagen have offered apologies, a few suspensions and promises to fix the devious defeat devices wired into 11 million of their diesel cars. But they haven’t explained who ordered, approved and designed the software that enabled the cars to cheat on emissions tests while belching pollutants on the road. Nor has VW said how and when it plans to fix the cars, which many customers bought in the belief that they were fuel-efficient and clean.
These and many more questions were angrily hurled at Michael Horn, the head of the Volkswagen Group of America, when he appeared before a congressional hearing on Thursday. Yet beyond more apologies and an admission that he did hear of “possible emissions noncompliance” back in the spring of 2014, Horn had few answers. In May 2014, a nonprofit environmental research group alerted government regulators that Volkswagen and Audi cars with certain diesel engines in the U.S. were spewing far more emissions on the road than in tests. That was also when Volkswagen began misleading regulators with claims that the study was flawed, and then with a recall that failed to fix the problem.
Given the huge emphasis Horn’s American operation was putting on “clean diesel” to boost VW’s flagging American sales at the time, it is hard to believe that he did not follow up those initial reports with corporate leaders at Volkswagen headquarters in Wolfsburg, Germany. Instead, on Thursday, he offered the standard defense that no one of any importance knew anything of a fraud that has now caused the company’s share price to decline by a third in value. Horn would only say that this deception was the work of “a couple of software engineers” and not a corporate decision.
On Thursday, German prosecutors raided the corporate offices as part of their investigation. Meanwhile, Matthias Müller, the newly appointed Volkswagen chief executive, continued to insist that his predecessor, Martin Winterkorn, who resigned shortly after the scandal broke in September, knew nothing. “Do you really think that a chief executive had time for the inner functioning of engine software?” he said in an interview with Frankfurter Allgemeine Zeitung, as if the problem were some minor malfunction and not an elaborate effort to deceive regulators and customers around the world.
If Winterkorn was not responsible, who is? Nobody believes that the handful of senior managers suspended so far, three of them involved in engine development, could have carried out this scheme without any support. Hans-Dieter Pötsch, newly appointed as supervisory board chairman, issued a statement on Wednesday saying it would take time before Volkswagen could make public the findings of its internal inquiries. “We must overcome the current crisis,” he explained, “but we must also ensure that Volkswagen continues to grow.” That seems to miss the point that Volkswagen will neither overcome the crisis nor grow unless it can produce some credible answers.
Even if they manage to fix millions of cars, VW executives will still face a monstrous challenge from lawsuits, potential prosecutions, lost sales and the blow to VW’s reputation for quality engineering. There is no defeat device to deflect the angry and urgent questions that lawmakers hurled at Horn. Apologizing is the easy part.
From an editorial in the New York Times