Volkswagen has admitted to fitting 11 million vehicles on the planet with fraudulent emission-detection software. Meanwhile Leonardo Di Caprio has announced that he will be coproducing a movie about the scandal at a time when the VW corporation is facing enormous financial repercussions and brand depreciation for their deception around the world. This scandal is putting in the spotlight how corporate fraud can derail an entire quality management system in a company that prides itself on its quality and have dire consequences.
On 18 September 2015 the U.S. EPA served a Notice of Violation (NOV) on Volkswagen Group alleging that approximately 480,000 VWs and Audis, equipped with 2-litre TDI engines, and sold in the U.S. between 2009 and 2015, had non-compliant emissions software installed. But the consequences have been felt in many parts of the world. There are recalls, inquiries, government interventions and numerous class actions taking place in Canada, China, India, the European Union, and the United States.
Australian Owners
Volkswagen owners in Australia are launching a class action over the emissions-rigging scandal with possibly more than 91000 Australian owners being affected. Mr Scattini from Maurice Blackburn lawyers argues that Australian owners of cars with fraudulent software were emitting many times above the accepted level of poison into the atmosphere. Mr Scattini suggests to drivers that cars fitted with the fraudent emissions-reducing software chip might be noncompliant with Australian emissions laws. Models affected in Australia include Golfs, Polos and Skoda Octavias built within particular years.
Shifting blame?
“This was a couple of software engineers who put this in for whatever reason,” Michael Horn, VW’s U.S. chief executive, explained to the subcommittee hearing. “To my understanding, this was not a corporate decision. This was something individuals did.” Horn, revealed that three VW employees had been suspended in connection with software that detects emissions in the company’s diesel vehicles. Reuters is reporting that VW will dismiss the heads of R & D of Audi and Porsche, as well as US chief executive Michael Horn. Only a couple of engineers were to blame?
Challenge to Toyota on quality and innovation
Back in 2007 at VW’s headquarters in Wolfsburg, Germany, former Audi chief Winterkorn was optimistic about transforming the VW automaker into a world-leading car manufacturer by delivering strong profits and challenging the market leader Toyota on quality and innovation. “We will bring the Volkswagen group to a new and higher level,” said Winterkorn, the incoming CEO in January, 2007. VW were attempting to gain greater market share on quality so they would have had a strategic direction in quality management.
Quality Management
From the 1920s when Bell Labs developed statistical control charts to the 1990s during which ISO 9000 standards gained acceptance in the United States, quality management has been evolving for more than a century in manufacturing. VW would have a quality management system to ensure that all the attributes of an automobile’s quality- performance, features, reliability, comformance, durability, serviceability, aesthetics and perceived quality are taken into consideration. The quality of a VW Golf, for example, would comprise of measurable characteristics and their limits of variability. The same applies to the software components.
Any quality management system necessarily needs to be a strategic management decision which pervades the entire organization. See the chart below for a model of how various dimensions (eg. people, processes, products) of a quality management system might be visualised within an organisation.
(source: Manfred Seika)
When the outgoing US executive stated that there were just 3 rogue engineers to blame who devised the fraudulent software, my sense is that it is not credible. One can only speculate that it is more probable that managers and engineers from different departments (product development, mechanical, electrical and software engineering) collaborated on the solution in designing the emissions-detection algorithms. The trade-off between fuel efficiency, power and emissions would have been discussed and built into the hardware/software solution. The result was that it created an attractive product for customers, appealing to their environmental conscience, not compromising on power, while appearing to conform to the EPA and other regulations under various conditions.
It is impossible to know at this time the full extent of the relationships and decisions that went on within the organization that lead to this crisis. Were the managers and engineers trapped in their role to conform to the dominant logic of the US subsidiary, while having poor sleep, with elevated levels of stress hormones?
We must learn that passively to accept an unjust system is to cooperate with that system, and thereby to become a participant in its evil. M. L. King Jr.
Tesla driven by the environmental Zeitgeist
In contrast Tesla has been scaling up in U.S. their electric car battery charging station infrastructure. Earlier in March this year, the innovative automaker, Tesla, announced that it had reached a milestone of having 2,000 battery rechargers worldwide, located at almost 400 Supercharger Stations in North America, Europe, Asia, and Australia for their electric vehicles.
On being questioned about the effects of consumer’s perception of green technologies: Tesla Motors CEO Elon Musk: “What Volkswagen is really showing is that we’ve reached the limit of what’s possible with diesel and gasoline. The time has come to move to a new generation of technology.”
Whether we have reached the limit of what is possible with diesel is another discussion. But as far as the quality management system at VW is concerned, it appears to have been ineffectual in the face of dishonest and fraudulent behavior at various levels of the organization, not least in the U.S subsidiary in a culture of complicity. Ethical principles must prevail in corporate governance. VW Golfs, rogue engineers, clandestine software development, car scandal of the 21st century…. maybe it will make a good movie Leonardo.
robjauer 
Thank you Rob, a really interesting read – insights into quality management and accountability, and future directions for efficient energy technology. Will watch how this unravels.
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