A large-scale cheating by Volkswagen
On September 18, the greatest scandal ever in the automotive industry erupted in the United States with the revelation of large-scale cheating by the Volkswagen group, the world leader in car sales. How do we explain the series of events which led to fraud on such a huge scale?
Using software, Volkswagen had found a way to sidestep pollution standards for diesel engines on their vehicles. An investigation is underway to establish the exact facts and the responsibility of the various participants in this disaster for the German brand. As in the case of another scandal, that of FIFA, the origin of the scandal came from the American push back. The American regulatory body (EPA) had already issued a warning concerning the cheating. A tenacious organisation, it took up the case once again, and it would be fair to say that this was soon seen as a challenge by the Americans.
This is an extraordinary case, both in terms of its scale and repercussions. How did German managers, known for scrupulously complying with the rules and avoiding risk, come to decide on and approve this planned fraud by knowingly avoiding the applicable standards? To answer this from an intercultural viewpoint, we consulted our specialists in the two countries central to this story: Germany and the United States.
Scandals and sanctions in Germany
Scandals concerning unethical behaviour occur everywhere in the world, and Germany is no exception. Here are a few relevant examples:
- An ex-President of Bayern Munich receiving 3 ½ years’ imprisonment for tax fraud.
- The downfall and resignation of politicians following financial scandals such as those of ex-President Christian Wulff or the former Chancellor Helmut Kohl.
- The resignation of ministers for plagiarism in a doctorate, a highly respected qualification in Germany.
- The collapse of the ADAC, the German automotive club, a powerful and influential institution with 19 million members, following the fraudulent allocation of the award for the best car to a model from Volkswagen.
Faced with such scandals, the moral and public reaction is both severe and rational. Politicians, in particular, are expected to display irreproachable behaviour and the slightest misconduct can lead to them falling from grace. “Post-scandal reactions” are carefully managed and sanctions are generally applied quickly, being hard-hitting and taking the form of the condemnation and resignation of those concerned. This is exactly what happened in the case of the “VW Affair”, the CEO, Managing Director, and Sales Director have all left.
And what about the application of rules?
These reactions are closely related to the importance that Germans attach to the correct application of the rules. Respect for rules is a matter of “common consent” and is very much part of the German collective subconscious. Germans are convinced that the rules a democratic society sets for itself are both useful and necessary for the operation of that society. Protestant ethics have heavily influenced what seems to be a very binary way of thinking: “In Germany, things are often black or white!“, explained one of the experts in German culture. The “grey zones” often envisaged and knowingly created in Latin cultures leave some uncertainty over what is allowed and what is forbidden. In a given situation, it can be subject to interpretation and the way people view it may differ from one viewpoint to the next. For a Frenchman for example, it wouldn’t be considered incorrect to say that an orange light offers a choice (or even an opportunity): should I accelerate or brake? In Germany, this “grey zone” cannot be envisaged in the same way: the orange light means that green is now switching to red, therefore I must brake.
An individual from a culture in which rules are strictly respected will have a precise definition of what is allowed or prohibited, and will, therefore, be fully aware of the nature of his final choice (I cheat or don’t cheat).
A systemic problem
To understand what is going through the minds of those who perpetrated the fraud (engineers and managers) we must consider the fact that in German companies the decision-making process is bottom up. We should point out here that we are presenting the way things generally happen in a German company and in no way seek to presume what may have actually gone on at VW. In this bottom up process, the experts issue recommendations which are then approved by the manager. The final decision is therefore the culmination of a process. It is for this reason that no one challenged it subsequently. In Germany, all the work is done before the final decision is made. Once it’s made, that’s it. It’s final.
In such a system, when the “fraud” is voluntarily incorporated in the process and it gets beyond the confirmation stage, it can immediately assume terrible wide-scale proportions.
The image of “German reliability” is partially built on respect for processes, applied in a very objective and pragmatic manner. This is widely publicised in the marketing for German cars.
It is estimated that a third of Germans have lost confidence in this manufacturer’s brand. As they see it, such trust and confidence can only be regained when the processes have been corrected. This was highlighted by the outgoing President when he said that VW needs to change its corporate culture. Within German culture, it is certainly true to say that confidence can quickly be rebuilt after the application of sanctions and corrective measures which are quickly applied and which become quickly effective.
German crisis management
The reactions also show that there is a very German crisis management style. Once the scandal broke, the whole world saw a full-scale “war machine” roar into life in the form of crisis communications (with press statements, resignations, or communication via the social networks, etc.). Many of the actions implemented were certainly planned in advance.
As an example, in Wolfsburg, the town in which Volkswagen’s head office is located, recruitment by the town council was put on hold until more is known about the scandal and its economic impacts assessed. This is a result of anticipating risks and calculating their consequences in as much detail as possible. The whole environment got involved in the crisis.
In the view of our intercultural experts, it is difficult to imagine that the German engineers and managers could have taken such risks without at some time or other assessing them, and without having considered the losses which such fraud could one day generate.
A German would rather resign, assuming his responsibilities, rather than deny them.
At the same time, investigations immediately got underway with a very precise aim: to find the truth as quickly as possible. The VW managers were cooperative, open and available to the American investigators from the very outset. This total transparency and availability is very deliberate, with the aim of quickly correcting errors in order to be able to turn the page and to regain the trust and confidence of the company’s disappointed consumers. In this respect, they share the idea that accountability, which can be described as a combination of responsibility and transparency, should be a central aspect of business and public life.