Jack Ewing presents a surprisingly suspenseful, shocking tale of Volkswagen’s maleficence, how they were caught and the consequences they face.
New York Times journalist Jack Ewing has worked in Germany since 1994, and he demonstrates how well he understands German culture in this unlikely thriller. He details how Volkswagen marketed its diesel cars as green enough to rival electric cars in low emissions. That was a fraud. Although Volkswagen overtook Toyota as the global leader in car sales, VW’s illegal “defeat device” and the company’s attempts to cover it up cost VW about $15 billion in the United States alone. Potentially VW could face $50 billion losses worldwide.
Ewing reports that Volkswagen (VW) grew from Hitler’s desire for a “people’s car.” Volkswagen’s factory produced military vehicles, weaponry and goods.
Ferdinand Porsche designed the Beetle, founded the company and remained “blind” to wartime “slave laborers,” who made up, at times, 80% of VW’s workforce.
By 1944, two-thirds of the labor at the Volkswagenwerk, some 20,000 people, was forced.Jack Ewing
Porsche served prison time after the war, but the Porsche company became the largest dealer franchise in Europe.
Ferdinand Piëch worked with the Porsche racing program and moved to VW’s Audi division in 1972. Piëch, an engineering genius, was combative and gained outsized power at the company.
VW’s renowned US “Think Small” advertising campaign increased VW bug sales to a peak of 570,000 in 1970, when the US Clean Air Act took force. It required 90% reductions in carbon monoxide, hydrocarbon and nitrogen oxide (NOx) emissions.
The company was willing to accept Piëch’s rough edges as long as he continued to deliver growth.Jack Ewing
In 1993, Piëch took over VW; his goal was “total dominance.” Within five years, sales brought a $650 million profit.
Clean Air Act of 1990
The US Clean Air Act of 1990 empowered regulators to conduct lab tests with cars on rollers. An EPA engineer re-tested diesel truck emission compliance on the road.
Very little escaped [Piëch’s] gaze, and his word was law.Jack Ewing
The EPA fined seven diesel truck manufacturers more than $1 billion. Diesel passenger cars never faced on-road tests. Diesel engines produced less carbon dioxide, but their NOx contributed to smog, acid rain and serious health issues.
Chairman Ferdinand Piëch
When Piëch retired as CEO in 2002, the VW supervisory board elected him chairman. Thus, Piëch could thwart any unwanted changes.
It is often impossible to optimize both fuel economy…and emissions at the same time.Jack Ewing
The supervisory board promoted Piëch supporter and former Audi CEO, Martin Winterkorn, a more intimidating version of Piëch. Winterkorn announced an initiative to sell 10 million cars within 10 years, winning a greater share of the US market and of diesel car sales. Winterkorn’s demand for a diesel engine with fuel economy comparable to Toyota’s Prius left engineers pursuing the opposing goals of fuel economy and low emissions.
Volkswagen’s global ambitions had bumped up against the law of physics.Jack Ewing
Engineers put software in the VW engine control unit (ECU) which activated when inspectors tested the car in a lab to set emissions lower than they would be on the road. Engineers and their managers knew this was an illegal defeat device.
VW began green ad campaigns for VWs and Audis, which educated, environmentally conscious people bought. VW engineers told the head of engine development about the defeat device. He told them to “destroy” their presentation.
The closer VW came to surpassing Toyota…the more powerful Winterkorn and Piëch became.Jack Ewing
Experts distrusted the clean diesel claims. A clean air advocate created the International Council on Clean Transportation (ICCT), which questioned how diesel engines could pass US tests while failing Europe’s.
In 2012, the ICCT sought to test the vehicles in California, where the California Air Resources Board (CARB) had stricter emission standards than the EPA.
Thousands of miles of road tests found that a Jetta produced up to 35 times the legal emissions limit and a Passat up to 20 times; CARB told the EPA that VW’s responses were “evasive, nonsensical or dismissive.”
Ewing explains that VW offered to recall all diesels from 2009 and “optimize” the emission equipment, knowing this would not fix emission problems. Internally, VW dismissed fixing the problem as “too expensive.”
Instead, VW improved the defeat device, but when CARB tested an updated car on the road, emissions soared. The agency threatened to not approve the 2016 models for sale in California, which meant the entire United States. The EPA stated that 500,000 VW vehicles violated emissions standards.
VW officials confirmed the existence of the defeat device. VW shares dropped by 20%. Winterkorn resigned, denying knowledge of the device. The EPA charged that Audi, VW and Porsche SUVs still utilized the defeat device. The company denied any wrongdoing under European law.
VW had exposed itself to the full wrath of the American justice system.Jack Ewing
The US Department of Justice (DOJ) filed a civil suit against VW. Owners, used car dealers and competitors filed hundreds of similar lawsuits. A judge pulled all the cases together.
A German hacker reverse-engineered the ECU and found the hidden default system software, proving that VW lied about not knowing of the device.
The parties agreed on a maximum of $14.7 billion in penalties – $10 billion for car owners, $2.7 billion to reduce NOx and $2 billion for a program promoting battery-powered vehicles. The agreement didn’t cover 80,000 Audi, Porsche and VW cars, federal penalties, state-generated lawsuits or DOJ criminal charges. VW might eventually pay up to $50 billion.
As the scandal raged, VW’s supervisory management board received $65 million in compensation; Müller received $4.3 million and Winterkorn $8 million.
The great film director Alfred Hitchcock described suspense thus: The audience knows what will happen, but they don’t know when or how. Ewing plays this kind of suspense like a violin, building greater and greater tension as the dominos of his facts fall, one by one. Everyone knows VW lied about emissions and got caught, so you might think there is no suspense to this tale. But Ewing, vesting in grand personalities, corporate politics and determined amateurs, shows how each functioned in their universe and unveils how those universes intersected to bring VW to ruin. Few true corporate crime stories move so quickly or prove so immersing.
Jack Ewing also wrote Germany’s Economic Renaissance. Other compelling reportage of corporate fraud includes Bad Blood by John Carreyrou; Billion Dollar Whale by Bradley Hope; and The Big Lie by Anthony Bianco.