The resignation of Martin Winterkorn as Volkswagen AG’s CEO isn’t even the end of the beginning in the exploding emissions scandal roiling German business and the global auto industry.
Unceremonious ousters seldom are, save their ability to momentarily quench the lust for someone, anyone, to pay. He is with his job, if not what’s almost certain to be a very comfortable severance package for the highest paid executive in Germany.
The payers will be the company and its shareholders, considering that regulators, members of Congress and American trial lawyers are just getting warmed up. In two days, $26 billion in market value has been erased by investors dumping shares because they know a financial trainwreck when they see it — whatever the 7-percent recovery Wednesday.
This thing is moving at lightning speed because the details are so damning. It took less than five days for confirmation of rigged emissions tests on potentially 11 million vehicles in Europe and the United States to claim Winterkorn, signaling a massive corporate bloodletting that will do absolutely nothing to slow regulators, angry customers or the plaintiffs bar.
More, it strains credulity to hear Winterkorn say that he accepts “responsibility for the irregularities that have been found in diesel engines,” but he is “not aware of any wrong doing on my part. The process of clarification and transparency must continue. This is the only way to win back trust.”
In theory, anyway. This from a hands-on engineer known for his attention to automotive detail; known to have overseen product development and research and development; known to be a protege of Ferdinand Piëch, the indomitable former chairman and grandson of VW’s founder whose fingerprints are likely somewhere in this fiasco.
These Masters of the Automotive Universe are crashing into a wall of their own making. To rebuild the VW brand in the rich U.S. market, they touted “Clean Diesel” VWs in what is the toughest regulatory regime for diesels in the world — only to deceive regulators and customers into believing VW diesels were cleaner and better performing than they are.
To rebuild the VW brand in the United States, they Americanized their trademark Passat and Jetta sedans, diluting the brand and alienating would-be customers drawn to the Teutonic riffs and driving dynamics embedded in the German-inspired metal.
To win favor with German union leaders on VW’s governing supervisory board, they cozied up to the United Auto Workers and tried to open a back door to organizing the automaker’s new plant in right-to-work Tennessee. The effort stalled, and the emissions scandal is unlikely to jumpstart it.
To blame Winterkorn for his failing U.S. strategy, Piëch pushed to engineer his ouster earlier this year. He failed, rebuffed by fellow supervisory board members — including family — and forced to resign; Winterkorn survived, thanks to labor members who deserted him this week, understandably.
To skirt regulation by the Environmental Protection Agency, the California Air Resources Board and the Clean Air Act, they or their minions conspired to develop software that would engage anti-pollution controls only during official testing. In normal driving conditions, the engines emit 40 times the allowed nitrous oxides, or NOX.
Engineering a product or part that fails or malfunctions is bad enough, as General Motors Co.’s ignition-switch debacle and its death toll amply demonstrate. Intentionally scheming to evade standards while touting “Clean Diesel” and reaping the commercial rewards is duplicity of the worst kind.
VW’s massive gaff opens a new front in the battle to discredit diesel technology in the United States. It’s a metaphorical club anti-diesel environmentalists can wield against a technology they hate in favor of what they (and the Obama administration) love more than the market does: hybrid and plug-in electric vehicles.
The result is a good ol’ American triple-whammy of regulation, litigation and politically driven opprobrium heaped on Wolfsburg. The morass will undermine VW’s brand, pressure its balance sheet, further stall its already-faltering U.S. strategy, enrage dealers and customers, and earn VW a reputation as a company that lies.
That’s a deep hole. GM and Toyota Motor Corp., Hyundai Motor Co. and Kia Motors Inc., Honda Motor Co. and Fiat Chrysler Automobiles NV, have all tangled with Obama-era regulators over targets, standards and claims, continuing a long industry tradition of gaming the increasing thicket of federal regulations.
VW’s scandal arguably is more egregious and potentially criminal. Stunningly brazen, it strikes directly at an image of corporate credibility and rectitude so carefully cultivated by Deutschland AG, the mythical construct burnishing German industry and its products worldwide.
And we’re not even a week into the public phase of this. As dramatic as it was to see Toyota’s CEO testifying to Congress, or GM CEO Mary Barra doing the same, the imagery of a VW CEO parrying one-liners from grandstanding members of Congress should send shudders through Wolfsburg. It won’t be pretty.
However slowly the U.S. judicial system grinds, the court of public opinion moves quickly, greased by 24-7 news cycles and social media. Winterkorn’s resignation will release a modicum of pressure, but not nearly enough to keep VW’s comeuppance from getting very ugly.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays and can be found at http://detroitnews.com/staff/27151.
Catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.