Volkswagen, Why?

Management by Default, Defeat and Inertia

The simple answer is this: “Disabling the emissions controls brought major advantages, including much better mileage — a big selling point in Volkswagen’s push to dominate in America.”

So wrote The New York Times. That put VW’s actions in the category of deliberate deception. In the light of today’s news stories about how it built its advertising campaign on those deceptions, it becomes egregious fraud, analogous to a Ponzi scheme. They promised – and aggressively sold — what they knew did not exist.

That is an extremely risky strategy for a multi-billion dollar global company. So one wonders why they did it.

Some have speculated that it made those claims while planning and hoping to find the technology that could make it work. But while that may have been the initial intent, it’s clear that they soon gave up trying to make it work, settling for “defeat technology,” instead, and fraud.

The Times suggested the motive was their ambition to displace Toyota as the world’s largest auto-maker. That seems more plausible. But whose ambition was that? I doubt that the workers on their assembly lines cared, or even if it mattered to investors, so long as the company turned in a good profit and its share price rose. It must have been the CEO and other top executives who stood to get the credit for a “victory” that would burnish their reputations.

In that case, it was a form of narcissism, but a pathological narcissism built on lies. Or is VW living in another world where ordinary measures of truth don’t apply?

Actually that may be the answer. Background stories that are now coming out about the scandal reveal that European carmakers “are used to getting away with a great deal,” according to The Guardian. “Their trickery is an open secret within the industry.” Volkswagen maintained for years that there was a problem with the testers, not the vehicles, a strategy that may have worked in the past, as lax European regulators left a lot up to the manufacturers themselves. They may have felt invulnerable.

But it is also true that the coherence and integrity of the company may be largely an illusion. Another way of putting this is that there may not be as much “they” as we tend to think when we talk about it. VW may have a legal structure, and it may contain a collection of well-known brands, but, in the final analysis, it may actually be a poorly managed collection of bits. That would be difficult for an outsider to see

It is an unusually structured company, to begin with, responsibility divided among board members elected by shareholders, some chosen by unions, and some by government. Moreover, it is iconic, its identity coming largely from external factors, including it role in German society. Add the fact that it is global with diverse products, we have a recipe for internal conflict and disarray.

In other words, there may be little that actually holds it all together. A fitting analogy in terms of US business might be a bank that’s deemed “too big to fail,” which actually means too big to manage, too sprawling and diverse to be controlled.

And here is another thought that may be too big to think: are our governments capable of rising to the challenge of regulating such anarchy in the private sector?