Tuesday, July 19, 2016

Stating the obvious, again


New York has filed a suit against Volkswagen asserting that the emissions cheating evolved from corporate corruption that extended all the way to the top.
But the New York civil complaint, drawing on internal Volkswagen documents, emails and witness statements, depicts a corporate culture that allowed a “willful and systematic scheme of cheating.” The evidence paints the most detailed picture yet about how the deception unfolded and who was responsible.

For the first time, the New York complaint connects Volkswagen’s chief executive, Matthias Müller, to the scandal. Mr. Müller, according to the suit, was aware of a 2006 decision to not equip Audi vehicles with equipment needed to meet American clean-air standards. To save money, the company opted instead to install defeat devices in the cars. The suit stops short of accusing Mr. Müller of having specific knowledge of the device.

At the time, Mr. Müller was head of project management at Audi, Volkswagen’s luxury car division. He became chief executive of Volkswagen in September, replacing Martin Winterkorn, who resigned days after the Environmental Protection Agency accused the company of the diesel deception in September.

The New York complaint claims that more than two dozen Volkswagen engineers and managers were involved in the deception, including Wolfgang Hatz, the former head of engine and transmission development at Volkswagen and Audi; Ulrich Hackenberg, former head of development for Audi; and Heinz-Jakob Neusser, former head of development for the Volkswagen brand. While several executives have been identified by the news media, German prosecutors, because of the country’s strict privacy laws, have named only one suspect, Mr. Winterkorn.

The suit, filed in New York State Supreme Court in Albany, also criticized Volkswagen’s supervisory board for awarding 63 million euros (about $70 million) in salary and bonuses to Mr. Müller and other members of the management board last year. “Recent actions,” the complaint said, “demonstrate that the company’s culture that incentivizes cheating and denies accountability comes from the very top and, even now, remains unchecked.”

The deception, the complaint described, was an “iterative process,” saying there were six separate defeat devices in more than a decade.

While scrutiny has focused on the Volkswagen brand, the use of defeat devices was pioneered by Audi, according to the complaint. Engineers at Audi had developed a way to eliminate the clattering sound that diesel engines tend to make after starting. But the solution increased pollution to impermissible levels.

So Audi in 2004 programmed its diesels in Europe to turn off the noise reduction technology when software recognized that the cars were undergoing emissions tests, the complaint said. The defeat device was euphemistically labeled the “acoustic function.” The same software was later adapted after engineers determined that a new generation of diesel motors could not meet American emissions standards, according to the complaint.

The New York complaint is the first to explicitly present evidence that top managers, at the very least, were aware of the engineering problems that led to the use of defeat devices.

According to the New York suit, Mr. Müller and Mr. Winterkorn were informed in 2006 that Audis with 3-liter diesel engines needed additional equipment to meet American standards. Specifically, they needed a larger tank to hold the chemical solution used to neutralize nitrogen oxide emissions in the exhaust.

But Volkswagen and Audi, the complaint said, did not want to spend the money necessary to redesign the cars to accommodate larger tanks. Instead, the company decided to deploy defeat devices. Both Mr. Winterkorn and Mr. Müller held senior positions at the Audi unit at the time.
Muller and Winterkorn got to the top by succeeding with their emissions cheats. And the ones who got away with it are the ones who rewarded those two for their efforts.

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