Case Study: Why Did Volkswagen Cheat Work?
1.2. How did the cheat work ?
During a public statement organized in March 2016, it was revealed that thenCEO Martin Winterkorn had received in 2014 two memos revealing the discrepancies between laboratory and onroad emissions.
Moreover, it was stated that he « did not have understood the gravity of the situation » and that engineers may have installed illegal defeat devices without clearly refering to their management.
As in Kurozawa cult movie Rashomon, it is highly difficult to know where the truth is but the current investigation will perhaps help us know more about what happened.
2. Why did Volkswagen cheat ?
We should look more precisely at the reasons which led VW executives and engineers to adopt such a « defeat device ». …show more content…
During the current investigation, most of them stated that they got to work under time pressure within a ‘climate of fear’. Indeed, they had to deliver clean diesel motors which were also able to respect standards on fuel economy and low emission of gaz. Such standards were very difficult to reach. Indeed, Volkswagen prioritized the development of Diesel vehicles, highly popular in Europe, instead of electric cars. Thus, to reach the American market, traditionally diesel-averse, VW engineers got to deliver a clean diesel to respect U.S. regulations. Due to the eternal belief of executives into innovation to solve any problem, such a situation involved huge costs in terms of R&D. Thus, it is possible to assume that the defeat device permitted to launch new models like Jetta TDI in 2009 and Golf TDI in 2010 with great success and without the implication of such high R&D …show more content…
Moreover, the agency costs of such a situation will be huge : corporate management, due to the influence of shareholders, adopted decisions which were in contradiction with the global interest of the company ; huge fees will have to be paid.
Third, we can assess that the VW scandal is part of a larger issue. According to sociologist Colin, Crouch, managers of companies are increasingly driven by the will to reach short-term profitability at the risk of damaging long-term reputation. This implies that, « when top management does not deliver concrete decisions and that profitability demands gets along with conflicting expectations, it may create a culture of « pragmatism » that favors cheating and misconduct, not only for individual gain but also simply to ‘get things done’. »
This statement illustrates a confirmation bias through which people adopt decisions to confirm a belief they have. What belief ? The idea of ever growing profits to make shareholders satisfied, a storytelling based on the myth of perpetual development. Thus, it can be assumed that executives, due to their unability to reach the standards of this myth, got to adopt extreme measures to fulfill shareholders’expectations: the implementation of defeat
During a public statement organized in March 2016, it was revealed that thenCEO Martin Winterkorn had received in 2014 two memos revealing the discrepancies between laboratory and onroad emissions.
Moreover, it was stated that he « did not have understood the gravity of the situation » and that engineers may have installed illegal defeat devices without clearly refering to their management.
As in Kurozawa cult movie Rashomon, it is highly difficult to know where the truth is but the current investigation will perhaps help us know more about what happened.
2. Why did Volkswagen cheat ?
We should look more precisely at the reasons which led VW executives and engineers to adopt such a « defeat device ». …show more content…
During the current investigation, most of them stated that they got to work under time pressure within a ‘climate of fear’. Indeed, they had to deliver clean diesel motors which were also able to respect standards on fuel economy and low emission of gaz. Such standards were very difficult to reach. Indeed, Volkswagen prioritized the development of Diesel vehicles, highly popular in Europe, instead of electric cars. Thus, to reach the American market, traditionally diesel-averse, VW engineers got to deliver a clean diesel to respect U.S. regulations. Due to the eternal belief of executives into innovation to solve any problem, such a situation involved huge costs in terms of R&D. Thus, it is possible to assume that the defeat device permitted to launch new models like Jetta TDI in 2009 and Golf TDI in 2010 with great success and without the implication of such high R&D …show more content…
Moreover, the agency costs of such a situation will be huge : corporate management, due to the influence of shareholders, adopted decisions which were in contradiction with the global interest of the company ; huge fees will have to be paid.
Third, we can assess that the VW scandal is part of a larger issue. According to sociologist Colin, Crouch, managers of companies are increasingly driven by the will to reach short-term profitability at the risk of damaging long-term reputation. This implies that, « when top management does not deliver concrete decisions and that profitability demands gets along with conflicting expectations, it may create a culture of « pragmatism » that favors cheating and misconduct, not only for individual gain but also simply to ‘get things done’. »
This statement illustrates a confirmation bias through which people adopt decisions to confirm a belief they have. What belief ? The idea of ever growing profits to make shareholders satisfied, a storytelling based on the myth of perpetual development. Thus, it can be assumed that executives, due to their unability to reach the standards of this myth, got to adopt extreme measures to fulfill shareholders’expectations: the implementation of defeat