Volkswagen and the Diesel Emissions Cheat

The story

In the late 2000s, Volkswagen wanted to sell many more cars in the United States. One big part of its plan was "clean diesel." Diesel engines can get great gas mileage, and VW advertised its diesel Jettas, Golfs, Passats and Audi A3s as both fuel-efficient and kind to the environment. Many buyers paid extra for them for exactly that reason.

There was a problem. Diesel engines give off nitrogen oxides, often shortened to NOx, gases that help create smog and can harm people's lungs. U.S. rules for NOx are strict, and meeting them while also keeping good mileage and performance is hard and expensive. According to regulators, VW's answer was to cheat. It installed software, called a "defeat device," that could tell when a car was being tested in a lab. During the test, the pollution controls worked fully. On the open road, they were turned down, and the cars could give off up to 40 times the allowed amount of NOx.

The cheat was uncovered by outsiders. A nonprofit group, the International Council on Clean Transportation, hired researchers at West Virginia University to test diesel cars on real roads instead of in a lab. The VW cars polluted far more than they should have. The researchers shared their findings, and the U.S. Environmental Protection Agency (EPA) and the California Air Resources Board began investigating. In September 2015, after regulators demanded an explanation, the company admitted the cars had defeat devices. On September 18, 2015, the EPA publicly accused VW of breaking the Clean Air Act in about 482,000 diesel cars sold in the U.S. from model years 2009 to 2015. Worldwide, the number of affected cars was about 11 million. On September 23, chief executive Martin Winterkorn resigned.

The consequences were enormous. In June 2016, VW agreed to a U.S. civil settlement worth up to $14.7 billion. Just over $10 billion was set aside to buy back or fix about 475,000 cars with 2-liter diesel engines and to pay owners between $5,100 and $10,000 each. Another $2.7 billion went to clean up the extra pollution, and $2 billion went to zero-emission vehicle projects. In January 2017, VW agreed to plead guilty to three federal felonies, including conspiracy and obstruction of justice, and to pay $2.8 billion in criminal penalties plus $1.5 billion in other civil penalties. By late 2017, VW had paid more than $20 billion in fines and settlements.

Individual people faced justice too. Oliver Schmidt, who had led VW's environmental and engineering office in Michigan, pleaded guilty and was sentenced in December 2017 to seven years in prison and a $400,000 fine. He told the judge he had made bad decisions and was sorry. U.S. prosecutors charged several other current and former VW executives, but most live in Germany, which generally does not send its own citizens to other countries for trial.

The deepest damage was to trust. VW had sold customers a promise, cleaner air with great mileage, and the promise was false. Owners who thought they were helping the environment learned they had been driving some of the dirtiest cars on the road. For any business, the lesson is that rules and tests exist to protect real people. Finding a clever way around them does not make the harm go away. It only hides it until someone looks closely.