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VW's Diesel-gate bust a cautionary tale for CEOs

May 5, 2018

Apparently, hell hath no fury like environmental regulators who've been deceived.

Just ask Martin Winterkorn. The former Volkswagen CEO was indicted this week on federal conspiracy charges that he defrauded the United States, committed wire fraud and violated the Clean Air Act.

The reckoning was inevitable. Ever since regulators discovered VW’s scheme to evade diesel emissions rules almost three years ago, it’s only been a matter of time for ol’ Winterkorn to get the book thrown at him.

Credit Daniel Howes / Detroit News

This is a guy who ran technical development for the whole company before ascending to the top job. This is a guy who was a loyal lieutenant to VW scion Ferdinand Piëch, the closest thing to Dr. Evil anywhere in the global auto industry. Winterkorn’s the guy who the government says approved a plan to game U.S. emissions rules.

Geniuses, these people. They’re the ones who cooked up the idea to sell, quote, “clean diesel” to Americans weaned on gas engines and the halting rise of hybrids. And they’re the ones who, because they couldn’t actually produce the cleanliness of their marketing, developed a device to deceive American emissions testing.

Instead, they tore the whole proverbial house down.

Diesel is in disarray. German authorities last month raided VW’s headquarters looking for more incriminating evidence. European governments are following the American lead and cracking down on diesel engines, long a favorite over there. Some cities are even moving to ban diesel cars altogether.

A couple of years ago, I was in Germany on a reporting swing and found myself across the table from a former VW executive. He knew a lot of players in this sordid mess, but he knew the culture better. Do you think Winterkorn and Piëch knew what was going on, I asked?

He pleaded ignorance on the specific question. But did the culture of quicker, stronger, and a dollop of world domination make it possible? Absolutely.

Arrogance is corrosive. And that’s an important point here: Top Volkswagen executives green-lit such risky corporate duplicity because they believed themselves to be too smart to get caught.

But they did, by a few academic researchers in West Virginia. Ha! And they woke two America giants – environmental regulators and America’s uniquely litigious plaintiffs bar.

The result: a nearly $15 billion settlement with the Environmental Protection Agency. There’s a $1.2 billion settlement with VW’s American dealers, many of whom drank the “clean diesel” Kool-Aid. And the meter is still running.

Winterkorn’s now under criminal indictment. His successor was retired by VW’s board. German authorities are ransacking VW offices. And American environmental regulators are making an emphatic statement: they will not tolerate liars.

Detroit’s arguably the world’s Motor City. It’s seen CEOs come and go. It’s seen corporate scandals and big legal messes. It’s endured the humiliation of bankruptcy and mounting losses. But seeing a CEO forced to resign in disgrace and then criminally indicted by the feds? That’s a new one – and a cautionary tale.

America’s tolerance for corporate deception is evaporating. And Exhibit No. 1 proving the point is the former CEO of Germany’s top automaker. His name is Martin Winterkorn.

Daniel Howes is a columnist at The Detroit News. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.