The real problem with Volkswagen

The problem with being Volkswagen right now is that you lied.

The other problem with being Volkswagen right now is that your company's value dropped by $18 billion or so in a day and you had to take a charge of about that same amount against earnings to account for the fines and fixes that are likely to come speeding down the autobahn. And that's only in the U.S.; Italy and other countries are conducting their own investigations to find out whether they were duped, too.

The problem with being Martin Winterkorn right now is that you're Volkswagen's CEO, and you might go to jail.

You know all that, unless you've been climbing Mt. McKinley Denali this week and the Wi-Fi up there just wasn't up to snuff. Volkswagen apologized for cheating on years' worth of diesel emissions tests. There were quick comparisons to the sins of other carmakers and the penalties assessed: General Motors paid only $900 million for faulty ignition switches, hidden for more than a decade, that killed at least 124. Toyota paid $1.2 billion for denying its sticky gas pedals killed at least 89. Volkswagen's penalty will likely dwarf that.

There is clamor; not that punitive measures against Volkswagen will be too harsh, but that those levied against Toyota and General Motors were much too lenient. After all, Toyota and GM lied, repeatedly, for years, while their dirty little secrets were killing people. Volkswagen's deceit didn't kill anyone, at least not directly. It just made the air dirtier. It's hard to conceive of dirty air being 17 times more valuable than 124 lost human lives.

Volkswagen, like GM and Toyota before it, put its CEO in front of the cameras to act humble, apologize and assure everyone that drastic cultural changes would be implemented swiftly.

"I realize there are no words of mine that can ease their grief and pain," GM CEO Mary Barra said last year. "But as I lead GM through this crisis, I want everyone to know that I am guided by two clear principles: first, that we do the right thing for those who were harmed; and, second, that we accept responsibility for our mistakes and commit to doing everything within our power to prevent this problem from ever happening again."

"I regret that this has resulted in the safety issues described in the recalls we face today, and I am deeply sorry for any accidents that Toyota drivers have experienced," Toyota CEO Akio Toyoda said in 2010. " ... and I will do everything in my power to ensure that such a tragedy never happens again."

And this week, Winterkorn posted a video apology in which he said, "I'm very sorry, I'm utterly sorry. The violations of these diesel motors by our company go against everything that Volkswagen stands for. ... At this time I don't yet have the answers to all the questions. I'm utterly sorry that we have damaged trust in this way. I offer my deepest apologies to our customers, the authorities and to the public at large for our misconduct."

And, not surprisingly, he promised swift, comprehensive changes.

What appalls us is not that a company found a corner to cut that increased profitability. No, we are offended that they lied about it. We feel betrayed, and a little bit stupid, as though we were the marks in a great corporate con.

If any of those CEOs were to ask (they won't), I'd offer this advice as a means to save a few billion dollars while ensuring it never happens again: Stop lying.

Published: Fri, Sep 25, 2015