Volkswagen is Another Black Eye to the Auto Industry

For car buyers who were looking to buy a car that both performed well and supported the clean energy movement, Volkswagen’s diesel line was the perfect fit – until recently.

FILE - In this May 23, 2011 file photo Martin Winterkorn, CEO of Volkswagen, participates in a news conference at New York's Museum of Modern Art. Winterkorn promised full cooperation with the government following the company's admission it rigged nearly a half million cars to defeat U.S. smog tests. (AP Photo/Richard Drew)

Just yesterday, Volkswagen confessed that 11 million vehicles worldwide are equipped with the now-notorious software that was used to cheat the EPA as well as their customers. They claim that they were concerned that meeting the EPA’s high standards would degrade the power of their engines. The VW executives have been lying to us for more than at least a year and while some are calling this criminal, at the minimum it is extremely damaging to the brand and reputation of Volkswagen.

Let’s take a look at how VW came to this decision. First, instead of spending their money on research and development to find a way to either meet or exceed the EPA’s strict emission guidelines, the executives at VW decided that it would be a better idea to cheat the system. They thought that no one would find out, of course until countries like Germany and China started to audit the auto industry to ensure results. It was not until they felt pressure that they admitted to doing something wrong. Now, Volkswagen has come forward and said that the device was installed on more than double the amount of cars that they had previously stated.

imagesWhile the VW crisis does not threaten customer’s lives like the problems at GM or Toyota, it is still just as bad because they are showing that they have no respect for laws or environmental health. It truly reflects negatively on the whole auto industry – showing that they all react to crisis the same way. All CEOs have pledged total transparency and ask an outsider to find out what happened within the company. We know from past experiences that these events do not just occur by accident – engineers to not install incorrect software or faulty equipment without the knowledge and recognition of higher powers. This behavior is a representation of a business culture that permeates a whole organization.

As the New York Times said, “Volkswagen is known for being a tightly controlled, autocratic organization, raising questions about how such a sophisticated system could have been installed in nearly half a million vehicles without knowledge of top management.”

While Volkswagen will try to do everything they can to mitigate future risk and quickly end this catastrophe, they will have to set aside $7.2 billion in this quarter alone – as well as the huge fall out of customers that they will experience. In the mean time, the VW CEO was replaced with the CEO of Porsche how will “clean house” and reset the organizational culture and will absolutely not tolerate any unethical behavior.

While VW gets through this difficult time, we have to remember that GM and Toyota had to do the same. This is really a black eye on not just the VW reputation, but also the entire auto industry.

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