The Volkswagen Scandal

The car company Volkswagen (VW) indicates that one of its core values is honesty, “We do the right thing out of inner conviction, even if no one is watching.” ^[2]

In September 2015, the Environmental Protection Agency announced that VW had installed special software in its cars to manipulate emissions levels, making it appear that the cars were less polluting than they are. In fact, the engines emitted nitrogen oxide pollutants up to 40 times what is allowed in the U.S. Those vehicles should not have even entered the U.S.^[3]

A week later, VW disclosed that 11 million diesel vehicles contained the devices, and CEO Martin Winterkorn resigned. The price of VW stock plunged—losing 30 percent of its value overnight—and the company scrambled to understand what had happened and control the damage to its reputation. In the months following the discovery of the deceptive devices, investigators identified a team of VW employees who thought of the plan and implemented it over a number of years. An internal evaluation identified a “culture of tolerance” for rule breaking at the company. It also came to light that management’s emphasis on “results at any cost” had contributed to the breach in ethical standards. However, in this case, the breach in ethics was also illegal.

In the following years, VW agreed to civil and criminal sanctions in the U.S. VW plead guilty to fraud and obstructing justice by destroying documents and paid a total of $4.3 billion in fines.^[4] Industry experts believe that the company’s violation of consumers’ trust will be exceedingly difficult to repair and that it may take years to rebuild the VW brand.

Even with the widespread publicity of the VW case, other companies like Cummins (makers of engines for Ram trucks) and Stellantis (owner of the Ram brand) were  fined in 2024 for similar actions.^[5]