By on March 3, 2016

Martin Winterkorn, Image: Volkswagen AG [CC BY 3.0]/Wikimedia Commons

The first rumblings of an approaching crisis reached the highest levels of Volkswagen management in May 2014, but how much knowledge then-CEO Martin Winterkorn had of the looming diesel emissions scandal is still debatable.

It’s debatable because Winterkorn should have known about the initial study that raised red flags with environmental regulators — he was presented with a memo detailing the situation — but to this day Volkswagen can’t say if he even read it.

Later, the matter was discussed in the vicinity of Winterkorn … but Volkswagen doesn’t know if his ears picked up the dialogue.

When Volkswagen dropped a detailed document on March 2, it began by refuting the basis of a proposed shareholder lawsuit against the company. The automaker complied with capital markets laws, Volkswagen assured the army of potential litigators. There had been no knowledge of anything that could severely impact the company’s stock price, it said, arguing that the diesel issue was a relatively minor matter prior to the Environmental Protection Agency’s Notice of Violation.

Winterkorn’s job was an early casualty of the scandal that broke last Sept. 18.

He resigned on Sept. 23, stepping off the stricken boat and into a waiting severance package bound for the sunny shores of anywhere but here. In the background, his former company’s shares were falling like a Jetta dropped from a plane.

Six months on from Winterkorn’s departure, Volkswagen’s first detailed explanation of facts related to the scandal adds fuel to the questions swirling about his level of awareness.

After the International Council on Clean Transportation (ICCT) released a study in early 2014 showing emissions irregularities in certain Volkswagen products, the California Air Resources Board (CARB) called on Volkswagen to prove it wasn’t an egregious polluter. The ball was rolling, and it was gathering snow.

In Volkswagen’s words:

On 23 May 2014, a memo about the ICCT study was prepared for Martin Winterkorn, then-Chairman of the Management Board of Volkswagen AG. This memo was included in his extensive weekend mail. Whether and to which extent Mr. Winterkorn took notice of this memo at that time is not documented.

Mail piles up when you’re a CEO, it seems.

That summer, Volkswagen’s product safety committee formed a task force to deal with the diesel issue, and lawyers were hired to advise on American emissions laws.

According to current knowledge, on 27 July 2015, individual Volkswagen employees discussed the diesel issue on the periphery of a regular meeting about damage and product issues, in the presence of Martin Winterkorn and Herbert Diess. Concrete details of this meeting have not yet been reconstructed. In particular, it is not clear whether the participants understood already at this point in time that the change in the software violated U.S. environmental regulations. Mr. Winterkorn asked for further clarification of the issue.

Internal testing showed that the defeat device installed in its vehicles was in violations of federal and state regulators, and Winterkorn was notified of the situation in a note dated Sept. 4, 2015. For the next year, Volkswagen claims it was assured the fallout would be limited, that the number of vehicles affected didn’t exceed 1.1 million, didn’t extend to Europe, nor would it incur an unmanageable fine.

Volkswagen claims it expected to resolve the matter by bringing the affected vehicles to compliance and paying any associated fines, which it had estimated as not exceeding $100.1 million. It also implies the publicity heaped on the company by the unexpected Notice of Violation by the EPA pushed the company’s stock value off the ledge, forcing the company to scramble to assess the damage.

Volkswagen’s admission ends there. But last fall the scope of the scandal multiplied — and share values sank ever further — as more and more vehicles were discovered to contain the defeat device. Volkswagen’s diesel task force had a year to come up with an accurate tally of affected vehicles — a figure that proved to be a fraction of the actual number.

Don’t expect the lawsuits to go away anytime soon.

[Image: Volkswagen AG [CC BY 3.0]/Wikimedia Commons]

Get the latest TTAC e-Newsletter!

Recommended

22 Comments on “What Did Volkswagen’s CEO Know?...”


  • avatar
    CoreyDL

    “This memo was included in his extensive weekend mail. Whether and to which extent Mr. Winterkorn took notice of this memo at that time is not documented.”

    Hilarious.

    “Uh, we sent it to him on Sunday morning via passenger pigeon, and we put it on water-soluble paper and in light grey ink. It’s hard to say if he got it.”

  • avatar

    “Wir haben es nicht gewusst” Revisited.

    • 0 avatar

      I know that the EPA receives a lot of criticism. Some Republicans even want to get rid of it. I think it is probably the U.S. government’s smartest and biggest single-sweep moneymaker. Think about it, because of the EU’s faulty testing procedures, no European VW owner or government is able to sue Volkswagen, whereas American city and state governments, taxpayers and VW owners can. Down here on the ol’ continent we will all be bleeding the multi-billion dollar fines VW will have to pay on your side of the Atlantic.

      • 0 avatar
        NickS

        I don’t disagree but I find the injection of political ideology (of either “religion”) in practically every forum out there to be simplistic and ultimately fruitless. I know … harsh words.

        More to your argument: the value of having a regulator or not was never meant to be argued on the basis of the amount of money they generate. That is a flawed basis from the get-go, but this is how far the conversation has devolved. Money collected from fines was never the intent or purpose behind regulation.

        A better question might be whether the model of self-regulation paired with high potential fines is working, how well, where it is failing and what we can do to correct it. If funding for enforcement of these agencies is curtailed to a minimum, we need a less ideological conversation (unrealistic as it may sound) about how to fix that.

        There is very little value in trying to convince someone to take a more moderate or nuanced stance. Fundamentalism/religion is not about reason, or nuance.

  • avatar
    HotPotato

    It’s an amusing little sideshow to us in the US, since TDI market share is negligible, but the diesel scandal has real health impact in Europe. I was just in the Czech Republic and out of curiosity I spent time logging cars as they passed. Roughly 80% were VW brands (Skoda, VW, Audi, Seat, in that order); at least 80% of those were TDI powered, and probably 80% of them would fall within the recall years. Did the same thing in Hungary and Austria and again, massive representation of VW brands with TDI-power. (And I still wonder when the other shoe will drop with the “unusual” emission results reported in magazines with certain BMW, Renault, Opel and Fiat diesel engines too.)

    On the plus side, the needs of European city driving — clean, torquey propulsion at low speeds over short distances — can be met even better with electricity than diesel. Charging, particularly in an urban environment without private garages, is a key obstacle. A massive buildout of charging stations would enable European city dwellers to literally breathe free, and potentially help rescue Europeans from their troublesome need for Russian oil and gas, depending how they generate the electricity.

    • 0 avatar
      NickS

      Uuugh, I have been to several cities in the EU in the last few years. It was noticeable for sure, but completely unreal in Paris, London, and most major cities in Germany. I don’t know what the numbers say, but the real world experience is horrid. Paris for me was the worst consistently, London very close behind.

      They are all big cities for sure, with more traffic (especially the small delivery truck/van kind), but if anything it matters all that much more to have stricter NOx limits.

      The proportion of diesels was what I observed too. The EU has completely screwed up: it incentivezed diesel and then gone soft on its emissions regulations. The end result is the ridiculous loopholes on emissions standards that pretty much side with auto makers at the expense of urban pop health. Even if (a big if) they had the resolve to mandate previous diesels be replaced in 3-5 years, that would mean replacing the majority of cars in Europe today. That is colossal. These cars will remain in use and harm kids and the elderly for a good ten more years if not longer. (It does pay to have universal health care, as the costs are very much under control for most users, but health care systems are not problem-free anywhere).

  • avatar
    klossfam

    I love all these ‘who knew about it’ stories…When you are the CEO, you are SUPPOSED to know or at least be RESPONSIBLE for knowing…but like everywhere, there will always be fall guys in the lower ranks to take the bullet…

    I truly believe that this diesel issue WILL attach itself to the other mfrs soon…I’m just being realistic – I’m not a diesel hater (I drive a RAM 1500 EcoDiesel)…

  • avatar
    stuki

    Who the heck cares what some dude does and does not know?

    If a test fails to uncover a problem, fix and/or amend the test. Then move on. Unless, of course, you live in a Dystopia where your whole purpose in life, is to cheer on a politico legal establishment, that keep inventing and presenting a never ending series of imaginary hobgoblins they can “save” poor little ankle grabbing you from. In exchange for the better part of your income. And all of your freedom.

    • 0 avatar
      CoreyDL

      It is important because “I have no recollection of the event in question.” is a valid legal defense unless they can prove otherwise.

      Do you understand lawsuits, or the legal system, or burden of proof?

    • 0 avatar
      VoGo

      We’re not talking about ‘some dude’; we’re talking about the CEO of one of the biggest corporations in the world. If he knew that his company was purposely installing devices to cheat and pollute, then he has exposed himself and his company to all manner of legal peril.

      • 0 avatar
        bumpy ii

        And conversely, if he was consistently unaware of issues regarding illegal diesels, then he and/or various underlings may be liable for failing to safeguard shareholder value.

        • 0 avatar
          stuki

          So, in other words, as I expected; the whole circus is important only for what is the usual reason for most things these days: Overfeeding and aggrandizing lawyers.

          As well as keeping the well indoctrinated in thrall to the notion that the important things in life, are who amongst an anointed gaggle of some dudes knew something, felt something, said something blah, blah. And that because one some dude is now being called a bad dude on TV, we should all be mad at him and lynch him, while cheering on other some dudes, who the man on TV now says are good dudes.

          Again, if the tests you run fail to alert you to what you hoped they would alert you to, you change the tests. And start contemplating whether your whole approach to testing may in fact be a bit flawed. If lawyers wanted to do something useful about “cleaning up the air”, they would walk around waving hepa filters.

          • 0 avatar
            Erikstrawn

            Many years ago the Air Force decided to get rid of QA inspections and go to “process improvement”. Instead of getting written up for failing to do your job properly, they were going to create better processes so that you couldn’t fail. After a few years they realized it was a joke and we went back to writing people up for QA fails. Accountability is a requirement. If you don’t hold Winterkorn accountable, you are destined to repeat the problem.

          • 0 avatar
            stuki

            Holding Winterkorn accountable, is a matter for Volkswagen, should anyone there feel so inclined. The pertinent “failure” from a US air quality perspective, was relying on a test that flagged green when it should have been red.

            VW engineers built cars that passed required tests. By playing Steve Jobs and “thinking outside the box,” as is so fashionable these days even. If the tests were later deemed less than ideal, improve them. Ain’t that hard. Nor that expensive. Nor that disruptive.

            Childish catfights between technically incompetent self promoters, over who gets to lay their grubby hands on billions of dollars earned by others, is one heck of a poor way to “improve” anything, air quality included. Versus simply paying at least minimal attention to corner cases when writing acceptance tests.

          • 0 avatar
            CoreyDL

            Right, so if a rule can be thwarted, it’s on the rule maker to make it better – otherwise continue on with no consequence. The only punishment to occur should be internal. At the corporate level.

            That’d work. NOT.

            Where do you live, Nigeria?

          • 0 avatar
            stuki

            I’m sure it works much better to stick ones head in the sand and continue on unchanged with useless, gameable rules that doesn’t test for much meaningful at all.

            And then, occasionally, to get some airtime, launch into petty witch hunts over, of all things, what some dude “knew” or “said”, or “thought”, or “felt”, or may have dreamed of. Surely solid foundations upon which great feats of engineering is constructed, all of them.

            NOT.

  • avatar
    brettc

    Winterkorn knew. If he didn’t, they have a serious communication problem.

    But these are Germans and everything is done with precision and thought.

    Piech knew and Winterkorn knew. And they knew back when the engines were in development.

    If the answer is anything else, I’ll eat my toque…

  • avatar
    dusterdude

    “This memo was included in his extensive weekend mail.” Germans don’t use word email, they say “mail” to describe email, so he knew. (unless you believe that he doesn’t read his emails )

  • avatar
    thejohnnycanuck

    The best part is the longer this whole sordid affair drags on the more likelihood of VWoA disappearing altogether. Every time another marque blows past them their relevance diminishes even further. By the way Mazda will be next to take them down another notch. So after all the inevitable billions in fines are tallied up at what point is it simply no longer feasible to sell VWs in North America? Audi meanwhile has come out of this virtually unscathed. And as they continue to move down market the business case for VW becomes even more cloudy.

    As for Winterkorn who gives a damn what the old dinosaur knew or didn’t know. By every account he was a tyrant. They’re better off without him.

    • 0 avatar
      Robert.Walter

      Sordid affairs usually drag on.

      Reason? Those to be held accountable, if not immediately and overwhelmingly demonstrated to have committed, or been caught in, the act, then there is a process whereby prosecutors have to hunt for facts and evidence both to flesh-out the story and to substantiate the supposed guilt.

      Often documentary evidence has been hidden, destroyed, or not created (as in “Vieraugengesprache”, the famous “discussion under 4 eyes”).

  • avatar
    motormouth

    I think Winterkorn and other execs knew what was going on. His background is in engineering and this must have been one of his key interests.

    I still find it mind-boggling that they elected to use the defeat system instead of simply developing a new engine which could use the urea system. For somewhere between EUR1 billion and EUR2 billion – not exactly chump change, but not excessive in the wider picture – they would’ve had a diesel engine for the next decade (or more) and the VW Group would still be the golden boy of the automotive world.

    I get the impression that in their hubris, VW thought they could do no wrong, but it all came back to bite them in the ass in a massive reality check.


Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

New Car Research

Get a Free Dealer Quote

Staff

  • Contributors

  • Matthew Guy, Canada
  • Seth Parks, United States
  • Ronnie Schreiber, United States
  • Bozi Tatarevic, United States
  • Chris Tonn, United States
  • Moderators

  • Adam Tonge, United States
  • Kyree Williams, United States