Dieselgate: Managerial insights into the Volkswagen scandal.

Abstract

The introduction of tight regulations on car emissions has posed many problems to carmakers all over the world. The environmental issue has become a fundamental point in an increasing number of board meetings and some managers struggle to find an effective way to solve it. Projecting and creating a low emissions car is not so easy as it could be thought: the engine has to be fixed in order to burn the lower quantity of fuel possible without decreasing the performances; the control unit has to be continuously improved in order to check efficiently the combustion and the exhausts emissions; the exhaust pipe and the other environmental devices installed in the car should work perfectly and last for many years; moreover, lots of other constraints should be taken under consideration. If engineers do not manage to solve all the environmental problems, the easiest way to bypass them is cheating on official tests. The automotive industry has a long history of cheating abortive attempts and the most recent, also called Dieselgate, is the one that involves Volkswagen Group. The German carmaker had intentionally programmed its TDI diesel engines to activate certain emissions controls only during laboratory emissions testing. The central unit programming caused the vehicles' nitrogen oxide (NOx) output to meet U.S. standards only during regulatory testing, but produced up to 40 times higher NOx output in real-world driving. However, further VW's investigations have found that CO2 emissions and fuel consumption figures were also affected by irregularities, increasing the scale of the scandal to other car types. The scandal raised awareness over the higher levels of pollution being emitted by all vehicles built by a wide range of carmakers, which under real world driving conditions are prone to exceed legal emission limits. Software-controlled machinery is generally prone to cheat and the environmental regulatory tests are easily detachable by the control unit, thanks to fixed procedures and long periods without updates or significant changes. Unraveling the knot of internal decision making processes could lead to many interesting insights into this scandal. What are the main incentives for cheating? Did the use of wrong data and manipulated figures help them to obtain advantages in the market place and to manipulate customers’ perceptions? Who is responsible for? Is it a matter of mismanagement or engineers’ misconduct? Why has the two tier organizational structure with a specific independent supervisory board not worked properly? Answering to all these questions is also useful in order to show how companies produce and use statistics for their purpose. Stakeholders must carefully examine all the sources of information provided by organizations around the world. Moreover, this analysis could lead to a deeper understanding of the learning processes inside the companies, which seem not to internalize industry best practices in order to avoid failures.