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(Solved): Volkswagen And Its Project To Cheat Emissions Tests ''Volkswagen Obfuscated, They Denied, And They U ...

Volkswagen and Its Project to Cheat Emissions Tests

''Volkswagen obfuscated, they denied, and they ulti-
mately lied.''
These were the words of U.S. Attorney General
Loretta Lynch, as she set out how the German carmaker
would be punished for attempting to willfully mis-
lead U.S. authorities over the emissions produced by
its diesel cars. This indictment by the Attorney General
capped a long investigation into Volkswagen's (VW)
decision to find a way around U.S. emissions testing,
opting, instead of redesigning its engines to run more
efficiently, to cook the books'' by deliberately creating
a system to cheat emissions testing. The story of the
scandal represents a serious ethical violation that ran
right through the organization, from the CEO down to its design engineers, who were asked to find ways to use
unethical means to achieve VW's goals.
The Volkswagen (VW) emissions scandal started
in 2006, when VW engineers began designing a new die-
sel engine for the U.S. market. The U.S. government had
been gradually tightening emissions standards, while
simultaneously raising fuel economy requirements. The
company's supervisors in the engine department real-
ized that they could not deliver an engine with more
power while also complying with the governmental
emission standards due to enter in force in 2007. Upper
management considered their options and decided to
ask their engineers to develop a unique software fea-
ture that they would bury in the VW's 2.0-liter diesel engine software. The code would identify when the
car was being tested in a laboratory, such as the con-
trolled settings used to test engine performance, and
turn on full emissions controls. In order to deliver a
high-performance ride, the code would then turn the
emission controls off when the car was back out on the
road, leading to higher pollutant emissions. The engines
emitted nitrogen oxide pollutants up to 40 times above
what is allowed in the U.S. In effect, the software iden-
tified the way the engine was being run and delivered
two very different levels of engine and emissions per-
formance accordingly.
This '' defeat device'' software was based on a
program developed by VW's subsidiary Audi, which
engineers had specifically stated should ''absolutely
not be used'' in the U.S. Knowing they were creating
a device that was environmentally harmful was not
widely popular within VW. In fact, engineers working
on the software were uncomfortable with its implica-
tions and several of them raised objections within the
organization regarding the propriety of the defeat
device as early as 2006, when the software was first
being developed. In response, an engineering manager
decided that production of the diesel engines should
continue, using the device. According to internal docu-
ments later acquired under subpoena, this manager also
''instructed those in attendance, in sum and substance,
not to get caught." The following year more software
engineers objected to the development and several left
the company in protest. Again, VW executives made the
decision to press on.
As years passed, the software was continually
refined and improved. For example, the early software-
cheating device had trouble transitioning from test
settings back to road performance. In fact, several car
breakdowns were blamed on the cars remaining in
''test'' mode while being driven on the road. Supervi-
sors worked with engineers to solve the problem and
'' encouraged further concealment of the software.'' The
engineers were also told to destroy documents relating
to the issue.
The deception was finally revealed when, in 2014,
the California Air Resources Board (CARB) approached
the company to find out why tests had shown that
its cars were emitting up to 40 times the permissible
amount of nitrogen oxides when driven on the road.
When answers were slow in coming, CARB and the
Environmental Protection Agency (EPA) decided to
launch a full investigation of the VW diesel engine.
Internal documents obtained from VW show that super-
visors '' determined not to disclose to U.S. regulators
that the tested vehicle models operated with a defeat
device." Instead, they '' decided to pursue a strategy
of concealing the defeat device ... while appearing to

The investigation also revealed how VW staff
were warned by an in-house lawyer that the authorities
were about to circulate a so-called ''hold notice," oblig-
ing them to retain and preserve documents under their
control. To prevent this notification from getting out
to the public, VW engineers were told to '' check their
documents," which several of those present ''under-
stood to mean that they should delete their documents."
This same message was repeated at several subsequent
meetings, and ultimately thousands of documents were
As the scandal went public, VW's response was
to first deny everything, while blaming lower-level
employees for the depth of the disaster. For example, the
company's former U.S. chief executive, Michael Horn,
blamed ''a couple of software engineers." Court docu-
ments, however, clearly show that dozens of people
were involved in the original project and the subsequent
cover-up attempts.
How widespread are VW's problems?
To understand how very serious this issue is for VW, it
is important to recognize that the company's strategy
for the past decade has been to pursue higher sales of
diesel-powered automobiles as a response to the U.S.'
tighter emissions controls and fuel economy standards.
Their major push to sell diesel cars in the U.S. was
backed by a huge marketing campaign purposely adver-
tising its cars' low emissions. The EPA' s findings cover
482,000 cars in the United States only, including the
VW-manufactured Audi A3, and the VW models Jetta,
Beetle, Golf, and Passat. However, VW has admitted
that about 11 million cars worldwide, including eight
million in Europe, are fitted with the so-called ''defeat
device." As a result, what started in the United States
has spread to a growing number of countries. The UK,
Italy, France, South Korea, Canada, and Germany, have
opened investigations. Throughout the world, politi-
cians, regulators, and environmental groups are ques-
tioning the legitimacy of VW' s emissions testing.
In 2016, VW announced that it would recall 8.5
million cars in Europe, including 2.4 million in Germany
and 1.2 million in the UK, in addition to the 500,000 in
the United States as a result of the emissions scandal.
The company's share price has fallen by about a third
since the scandal broke. Its CEO and Chairman, Martin
Winterkorn, resigned in the fall of 2015, acknowledging
that the company had ''broken the trust of our custom-
ers and the public'' and claiming he was ''stunned that
misconduct on such a scale was possible in the Volk-
swagen Group." Matthias Mueller, the former boss of
Porsche, replaced Mr. Winterkorn as head of the com-
pany. Upon taking up his new post Mr. Mueller said,
''My most urgent task is to win back trust for the Volk-
swagen Group by leaving no stone unturned." Other executives chimed in too. VW America boss Michael
Horn stated, ''We've totally screwed up."
With VW recalling millions of cars worldwide,
it had to set aside $6.5 billion to cover costs. That
resulted in the company posting its first quarterly loss
for 15 years of nearly $3 billion in late October 2015.
The company has reached an agreement with the U.S.
government to pay $14.7 billion in fines for its role in
the diesel emissions violations, with the likelihood of
even more penalties to come. The EPA has the power
to fine a company up to $37,500 for each vehicle that
breaches standards a maximum fine of about $18
billion. According to VW, ''The costs of possible legal
action by car owners and shareholders cannot be esti-
mated at the current time."
It turns out that Volkswagen is not the only cheater. The
scandals that plagued Volkswagen have broadened, as
several Japanese firms are now admitting a systematic
culture of cheating. In May 2016, Mitsubishi president
Tetsuro Aikawa announced he would step down fol-
lowing his company's admission to cheating fuel effi-
ciency tests, something that dates back to 1991 when Japan introduced new regulations. Elsewhere, two other
Japanese carmakers now have their names involved in
the controversy. Suzuki has also announced '' discrep-
ancies'' in fuel economy and emissions testing of 16
Japanese market models. Nissan, meanwhile, has faced
accusations from South Korea that some of its UK-made
Qashqais have defeat devices fitted to their engines.
The South Korean government apparently plans to fine
Nissan nearly $1 million, but the Japanese company
firmly denies any wrongdoing. Investigations are still

1. How do you think Volkswagen executives could
justify this behavior? How do you think the
actions of the Japanese automakers influenced
VW' s decision-making?
2. How would you personally respond if you were
a member of a project team developing a device
that was designed to cheat environmental testing?
What if you were the sole support for a large fam-
ily with three children in college?
3. Is there a ''moral'' to this story for you? What
would that moral be?

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