Five years after the Volkswagen emissions scandal, also known as Dieselgate, a court-appointed monitor from the Justice Department has found that Volkswagen has met the conditions of its 2017 plea bargain. As part of the plea bargain, Germany-based automaker Volkswagen agreed to reform its internal culture and compliance systems to avoid similar wrongdoing in the future.
The scandal began in September 2015, when the Environmental Protection Agency issued Volkswagen a notice of violation of the Clear Air Act. The EPA found that Volkswagen had used illegal software to skirt around emissions regulations — diesel engines were programmed to activate emissions controls only during laboratory testing, allowing their cars’ NOx output to meet US standards. However, these cars emitted up to 40 times more NOx when driven in the real world.
Since 1998, researchers from Sweden and the United States had shown that emissions tests could allow for large emissions differences during testing and in real-world conditions. In 2014, scientists at West Virginia University showed that three diesel cars — including a Volkswagen Passat and a Volkswagen Jetta — exceeded US emissions limits “by a factor of 5 to 20” and “by a factor of 15 to 35,” respectively. By the time that the EPA issued the 2015 report, Volkswagen had implemented this illegal software in approximately 11 million cars, including 500,000 in the United States.
At the outbreak of the scandal in September 2015, the response from Volkswagen’s corporate leaders were swift, albeit sometimes contradictory. According to the EPA, Volkswagen had lied to the regulators for a year that technical glitches were responsible, but executives soon acknowledged that there had been intentional deception.
“Our company was dishonest with the EPA, and the California Air Resources Board and with all of you,” said Michael Horn, Volkswagen Group of America’s CEO. However, executives continued to disagree over whether only engineers knew, or if senior management had either ignored warnings or participated in the deception. Volkswagen announced plans to refit the diesel engines of all 11 million affected vehicles, with some countries like Germany ordering full recalls.
A July 2020 report by the Federal Trade Commission also found that Volkswagen has paid out over $9.5 billion in settlement funds. In total, the emissions scandal has likely cost Volkswagen over $30 billion.
Ultimately, the 2017 plea bargain required Volkswagen to allow Larry Thompson, a former US prosecutor, to monitor Volkswagen over three years and enforce changes that make it easier for employees to report wrongdoing. Despite meeting some resistance, Thompson pressured Volkswagen into dismissing high-ranking managers who were under criminal investigation. Volkswagen has also implemented an employee whistle-blower system and tried to modify its hierarchical culture by giving lower-level managers more responsibility.
With Thompson’s role ending with the satisfactory conclusions of his final report, Volkswagen managers, who are struggling to meet sales targets and resolve supply chain disruptions amid the pandemic, are no longer operating under strict oversight. However, the company continues to field civil suits in Britain and other countries. Trials are also in progress or scheduled for former managers and engineers, including former CEO Martin Winterkorn, in Germany.
Volkswagen’s current CEO Herbert Diess told The New York Times that the report is just a starting point and the company needs to remain vigilant.
“We have to be ambitious. We have to be competitive. We have to push for results. But we have to find a balance,” Diess said, acknowledging the importance of ethics in Volkswagen’s operations.