VOLKSWAGENS DIESEL SCANDAL 1

Volkswagens Diesel Scandal and Ethical Implications

Wendy Gray

CSU Monterey Bay

CST 373
VOLKSWAGENS DIESEL SCANDAL 2

Introduction

My name is Wendy Gray, and as a student in the CSU Monterey Bay Online Computer Science

program (CSIT), I am currently enrolled in CST 373, which is Ethics in Technology. I live in Santa Clarita, a

suburb of Los Angeles, and currently work from home doing data manipulation and other administrative

work for Cotti Foods, which owns nearly one hundred Wendys restaurants. As a Southern California

resident, I have often experienced heavy smog due to vehicle emissions, since Southern California is a

significant commuter area. The Volkswagen, or VW, scandal that surfaced in 2015 brought to light the

fact that the car maker was cheating on emissions tests by installing defeat devices on many of their

diesel models, which ran software that allowed the vehicles to change their performance when they

detect that such a test is being run. VW was able to market clean diesel cars that, unlike the rest of

the market, also boasted high performance. I will investigate the ethical implications of this issue and

explore potential resolutions.

History

According to the United States Environmental Protection Agency, or EPA, on their Clean Air Act

website, the Clean Air Act, or CAA, was created in 1970 at a federal level to combat the newly

recognized air pollution problems such as acid rain and damage to the stratospheric ozone layer (Clean

Air, 2017). The CAA was later amended in 1990 to require higher vehicle performance standards in

order to improve air quality by reducing fine particle and ozone levels. In 2011, the EPA ran a study that

determined that in the year 2020, the amendments will avoid more than 230,000 early deaths, as well

as large numbers of other adverse health effects, through improvements in fine particle and ozone

levels (Clean Air, 2017). Also noted was an estimated reduction of about 160,000 deaths already in

2010.

Emissions testing has, to this point, not evaluating real-world driving. In 2011, Martin Weiss,

Pierre Bonnel, and others with the European Commission compared emissions tests done via the
VOLKSWAGENS DIESEL SCANDAL 3

standard chassis dynamometer procedure with tests done via real-world driving with a Portable

Emissions Measurement System, or PEMS. The nitrogen oxide determined by PEMS of all of the tested

cars exceeded the levels determined by the standard procedure by 260 130%, proving that the

current type-approval procedure does not adequately capture the on-road NOx emissions of diesel cars

(Weiss, et al., 2012). But real-world road emissions tests did not yet become standard.

In 2008, VW released their model year 2009 diesel vehicles for public sales, which utilized a

technologically new common-rail fuel injection system by manufacturer Bosch, which gives engine

developers the freedom they need to reduce exhaust emissions even further, and especially to lower

engine noise (The Common Rail Diesel, 2004). VW additionally marketed their clean diesels as having

lower than normal noise and pollutant emissions for a diesel engine with, among other things, a series

of videos of elderly women debunking diesel old wives tales in a comical way (Volkswagen's 'Clean

Diesel', 2016).

In 2014, a series of road tests performed by a group of scientists from West Virginia University,

or WVU, and commissioned by the International Council on Clean Transportation, or ICCT, shed new

light on what was going on beneath the VW diesel hoods. Designed to test the accuracy of the standard

chassis dynamometer test against real-world conditions, the ICCT decided to evaluate vehicles according

to United States emissions standards, as they were the most stringent of the time. The WVU team

tested three diesel cars (two VW and one BMW) first via the chassis dynamometer test (in which all

three cars were certified to EPA and California emissions standards), and then with PEMS on highways

between California and Washington (Thompson, 2014). So varied and extensive were the driving

conditions, that the much higher nitrogen oxide emissions recorded by the team specifically on the VW

vehicles could not be attributed to extreme or untypical driving in most cases (Franco et al, 2014).

On September 18, 2015, the EPA, after evaluating the data gathered by the WVU team, sent VW

a Notice of Violation (NOV) stating that VW did not meet emissions standards and installed defeat
VOLKSWAGENS DIESEL SCANDAL 4

devices on their light-duty diesel vehicles from model year 2009 through 2015 (Brooks, 2015). They also

stated that in the year since the WVU data was published, when questioned by the EPA or by the

California Air Resources Board, or CARB, VW continued to blame the differences of results from the

standard tests versus the PEMS tests on technical issues and unexpected in-use conditions (Brooks,

2015). They also noted that the voluntary recall VW issued in late 2014 did not resolve the issues, and

that further testing demonstrated that the increased emissions output could not be explained by VWs

justifications. The potential penalty listed for each such VW vehicle sold was $37,500 (Brooks, 2015).

Fallout after the NOV came quickly. CEO Martin Winterkorn resigned just five days later,

accepting the responsibility, but denying personal wrongdoing in the whole matter (Ewing, 2015). The

parts manufacturer Continental declared that they provided fuel injectors, fuel pumps and equipment

to manage the motor, but Volkswagen provided the specifications and was responsible for installing and

configuring the software (Ewing, 2015). Countries such as Germany and South Korea began their own

investigations into the diesel tests; some even wondered whether such deceit was representative of all

German cars, and not just VW (Volkswagen admits, 2015).

VW subsequently began to dig deeply into the extent of the scandal. It hired outside auditors

and evaluators in an effort to responsibly come to the truth. Christine Hohmann-Dennhardt, previously

from VW rival Daimler, was hired to be the director of integrity and legal affairs (Layton, 2015). Other

external firms were hired by VW to perform independent investigations in multiple countries, and the

company stopped selling all cars that had the affected diesel engine in the United States. The Federal

Financial Supervisory Authority in Germany began an inquiry to determine whether VW had notified its

shareholders in due time, with fines if they had not (Ewing 29015). Many nations around the globe

required mandatory recalls for affected VW vehicles as well as financial penalties, and the United States

Federal Trade Commission even sued over false advertising (Randazzo & Spector, 2016). However,

unlike the penalties deemed necessary for the emissions violations in the United States, governments in
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Europe had not yet found VW guilty as of September 2016; an estimated 29 million affected vehicles

were still being driven throughout the continent, according to a report by Transport and Environment

(Archer, 2016). The report goes on to say that this is due to feeble regulation of cars by national

authorities that have focused on protecting their own commercial interests or those of domestic

carmakers even though further research shows that between 64% and 79% of registered diesel vehicles

did not meet the Euro standards for nitrogen oxides and were composed mainly by European

manufacturers (Archer, 2016).

According to a press release by the United States Department of Justice, VW engineer James

Robert Liang admitted he and the rest of the design team configured the defeat devices when they

failed to design a diesel engine that would output higher performance than others on the market

(Volkswagen Engineer, 2016). He also admitted lying about this to emissions regulators.

Media Views

BBC News business reporter Russell Hotten reported on the scandal in December 2015 after the

scandal came to light. He discusses many of the facts mentioned previously here, but does not make it

clear that the defeat devices were the brainchild of a small subset of employees and not a decision by

the company itself, apart from a brief mention that VW launched internal inquiries (2015). Similarly,

through the majority of media exposure since the EPAs Notice of Violation, VW has been denounced for

lying to their consumers about the impact their vehicles are having on the environment.

However, as top executives such as CEO Martin Winterkorn began to resign, it became clear that

the highest levels of the company were likely not even aware of the fraud. So even if the head and

majority of the company did not perpetuate the fraud, theirs was an environment in which the fraud

was able to exist. VW, like any other major car manufacturing company, cannot blatantly disregard

emissions in order to peddle high-performance vehicles, but this is what the media was reporting. Its

interesting to note that the internal workplace environment was rarely being called into question in the
VOLKSWAGENS DIESEL SCANDAL 6

media, even though that is the underlying issue except during the period of executive resignations.

Scant business-focused sources, such as the NY Times article reporting on Winterkorns resignation,

even discuss the role that the companys culture played in the scandal (Ewing, 2015).

Their public stance before the EPA Notice of Violation came to light, especially seen in their

advertising, was that being eco-friendly is one of their highest priorities. Their failure to fulfil this

promise is what the media is reporting on, and not that their workplace was flawed to the extent that

emissions fraud occurred and went unnoticed. As they continued to take flak from various

governmental bodies and the media, it is clear that they are not solely apologetic for putting

fraudulently eco-friendly vehicles on the market, but also for not having accountability in place to detect

such fraud within their company itself.

The majority of the media coverage available is US-based and condemning of the company, and

the US-based publications did little reporting of the fallout in Europe. It was more difficult to find

European coverage, presumably because they didnt want to harm the capitalism the company

represented in Europe and jeopardize the European citizens that worked for it. Of course, car-focused

publications, such as Car and Driver, focus on the exact fixes taking place during the recalls, and their

effect on the driver, instead of focusing on the ethical implications (Atiyeh 2017).

Other Views

From an environmental standpoint, VW lost significant prestige, especially after touting

themselves as extremely eco-conscious. The Department of Transportation reported that before the

EPA Notice of Violation, VW was registered with a Corporate Average Fuel Economy, or CAFE, of 34.1

mpg according to EPA testing in 2014, which was lower than several other diesel carmakers (Hicks,

2014). Emission numbers were so low for two Jetta models in 2009 that buyers of these models

received $1,300 each in federal green car subsidies, for a total of nearly $51 million, according to Jerry

Hirsch at the LA Times (2015). The company had been awarded the Green Car of the Year for two of the
VOLKSWAGENS DIESEL SCANDAL 7

impacted diesel vehicles, which were rescinded, which had never been done before in the history of the

award.

"Rescinding the Green Car of the Year awards for the VW Jetta TDI and Audi A3 TDI is

unfortunate but appropriate," said Ron Cogan, editor and publisher of the Green Car Journal

and CarsOfChange.com. "These models were selected as Green Car of the Year above others

for compelling reasons, including high fuel efficiency, reduced carbon emissions, a fun-to-drive

nature, and the ability to meet 50 state emissions requirements with advanced diesel

technology." (Cogan, 2015)

And the environmental factor has continued to be a problem. Owners who care more about the high

performance of their cars may be reluctant to bring them in for the recall fixes, according to the LA

Times Charles Fleming, as opposed to those who identify the resolution of the emissions problem as

being much more of an issue (2015).

The diesel technology as a whole is being affected the scandal as well. VW had been responsible

for over half the diesel market in the United States on the premise of diesel being a clean fuel, which

calls all other diesel manufacturers into question as well, said TrueCar analyst Eric Lyman (Fleming

2015).

Ethical Perspectives

It is clear that from a cultural relativism stance, the existence of the defeat devices is unethical.

Distinctly illegal in several nations, including the United States, and demonstrably environmentally

irresponsible on a worldwide scope, VW let the public down. Furthermore, by duping the regulators,

Volkswagen turned nearly half a million American drivers into unwitting accomplices in an

unprecedented assault on our atmosphere, said U.S. Department of Justice Deputy Attorney General

Sally Q. Yates in a statement (Volkswagen's 'Clean Diesel', 2016).

VOLKSWAGENS DIESEL SCANDAL 8

From a self-interest perspective, we can view VW as trying to encourage consumers to buy their

vehicles by assuaging their guilt over the environmental impact that high-performing diesel engines

normally have. In an effort to expand their bottom line and build their brand value by offering products

that were ostensibly environmentally responsible as well as fun to drive, VW ignored their social

responsibility to their consumers and to the environment. However, since an arguably limited number

of midlevel employees at the company were aware of the fraud being perpetuated, the company as a

whole can be considered to not be guilty; perhaps the major players honestly believed that they were

indeed presenting an environmentally responsible and high performing product.

Reports also indicate that the employees responsible for the defeat devices could have put them

in out of fear of losing their jobs. Reuters quoted VW supervisory boards Bernd Osterloh after CEO

Winterkorns resignation, We need in future a climate in which problems aren't hidden but can be

openly communicated to superiors We need a culture in which it's possible and permissible to argue

with your superior about the best way to go (Cremer & Bergin, 2015). This immediate recognition of

the changes needed indicate that the culture at the company cared only for an employees impact on

the bottom line under Winterkorns control. It seems that VW is taking efforts to change this kind of

toxic work environment.

From a social group relativism standpoint, perhaps those who were aware of the fraud believed

that it was permissible since the drivers who purchased their vehicles were entitled to the highest-

performance possible. With the mindset of what they dont know wont kill them, they could ignore

the effect of the high emissions to the whole public in an effort to consider only the desires of the

narrower group of their particular consumers.

Furthermore, when VW executives were made aware of the discrepancies of emissions testing

results between the standard test and the PEMS test, before the Notice of Violation was sent by the

EPA, they did not take sufficient action to prove that they were acting in the best interests of the public
VOLKSWAGENS DIESEL SCANDAL 9

as a whole. They performed voluntary recalls that did not sufficiently cause cars to run at legal

standards, all the while maintaining that the discrepancies were due to technical difficulties and

extreme driving conditions. The fact that over a year elapsed during this time indicates that VW did not

try to discover the root of the problem and eliminate it, but that it was just trying to smooth things over

in an effort to preserve their company image. Perhaps they were concerned for their consumers by

trying to avoid the hassle that extensive recalls would cause and avoid the guilt their consumers would

feel from having bought a car from a company that disregarded the environment by cheating on

emissions tests.

Future Challenges

Going forward, it is pretty clear that emissions testing will need to be performed in more real-

life conditions so as to gain a better picture of the kinds of emissions that a vehicle will output,

especially since they are mass-produced. It is more cost-effective for testing to occur in the standard

manner, and allow cars to be comparably evaluated in consistent conditions; conversely, there is not a

good way to test cars in the exact same real-world environments due to factors such as weather and

traffic (Franco et al, 2014). The downside to the standard testing is that while a given vehicle can be

assured to face the same tests as others in its class, its test may not be representative of what it would

actually experience on the road. VW programmers knew this and exploited it by including logic in the

software able to determine when it was not being put through the standard tests to limit the emission

control systems to improve performance (Brooks, 2015).

It seems as though regulators such as the EPA are increasingly seeing the need to include real-

world driving analysis, such as PEMS, in emissions tests instead of, or even in conjunction with the

previously standard tests. Greg Archer, the Clean Vehicles Director at Transport and Environment points

out that independent emissions testing demonstrates the still-major issue of discrepancies between the

standard tests and real-world tests; four-fifths of the older Euro 5 cars and two-thirds of the newer Euro
 VOLKSWAGENS DIESEL SCANDAL
10

6 cars produced more than three times the nitrogen oxide levels during real-world testing (2016). The

mayors of London and Paris have announced that real-world tests would be introduced to evaluate new

cars, and encourage others to follow suit (Revolta, 2017). However, even if these changes take place,

they do not preclude the possibility of smarter cheating taking place. What if there was logic

programmed into a vehicles software to detect when it was being evaluated by the PEMS system?

There should be a system in place to continually monitor the evolution of potential exploitation of

emissions testing.

Europe has a further challenge in this. As Greg Archer suggests in his Dieselgate report, the

European Commission must tighten and enforce legislation regarding defeat devices (no real

consequences have befallen VW in Europe regarding defeat devices due to a loophole), and ensure that

member states comply with any such laws (2016).

My Reflections

As I went through the process of compiling research for this paper, I first was completely

horrified by VW and what they did in the name of money. I understand the concept of exploiting a

loophole, or following the letter of the law, if not the spirit, and that even can be dangerous as it could

alienate those of its consumers that believe in the spirit of the law. However, VW did not even follow

the letter of the law, and that alienated me. As I began to research further and learned that it was a

very limited group of employees that knew about the defeat devices, I began to feel sorry for VW. Why

should they face the consequences for what a few of their employees did? Shouldnt VWs hands be

clean and the culpable employees be held liable?

As I had time to reflect and read even further, I discovered that, by several accounts, these

employees worked in an environment under CEO Winterkorn that only cared about the final deliverable,

without caring how it got there. I recognize the catch-22 the engineers found themselves in when they

discovered there was no way to build the diesel engine that also boasted high performance desired by
 VOLKSWAGENS DIESEL SCANDAL
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the company executives, especially if they believed their jobs were at stake. However, I believe that

despite this, they should have fully disclosed their findings to their superiors and to the regulators,

instead of including the illegal defeat device. So yes, I believe the culpable employees should be held

liable and prosecuted, but VW should take care to foster a company culture that is more focused on

lawful development and transparency, and has accountability at all levels in an effort to prevent such a

situation again. They committed wrongdoing and are responsible in that sense.
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