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A Moral Lapse Creates a Scandal

Jun 1, 2017


Situation

In the middle of the last decade, the German car manufacturer Volkswagen embarked on an ambitious plan to improve its global market share. Crucial to this new plan was growth in the United States, a market in which Volkswagen had for many years seen significantly lower sales than its primary competitors. Volkswagen's chief expertise lay in the design of small diesel autos. Such models are highly popular in Europe, where an estimated 75 percent of all diesel engines are sold. These same models, however, were unable to meet the United States' tougher standards on nitrous oxide emissions, and the technology required to meet these standards was too costly to include in a line of midpriced vehicles.
In 2006 a team of Volkswagen engineers was charged with designing a diesel engine that would succeed in the U.S. market. But almost from the outset these engineers recognized that it would be impossible to meet U.S. emission standards if the vehicles were to meet their targets with respect to fuel efficiency, performance, and price. Instead of acknowledging this failure and attempting to adjust the company's high expectations, the engineers decided to design and implement a software system that would circumvent U.S. emissions testing.

U.S. regulators test emissions using a special platform called a chassis dynamometer, in which a car is locked into place and run through a set of standard drive cycles. The Volkswagen engineers' software was built to recognize those particular testing conditions and to respond by switching into a special "emissions-tight" mode, in which the vehicle would sacrifice other performance elements in order to reduce emissions to an acceptable level. Conversely, under normal driving conditions, these same vehicles would operate without this heightened emission control, causing the vehicles to emit up to 40 times the allowable levels of nitrous oxide. Volkswagen submitted certification to the U.S. Environmental Protection Agency falsely affirming that the engine met the emission standards prescribed by U.S. law, and the new "clean diesel" vehicles were approved for sale in the United States.

While the design engineers may have intended this "defeat device" to serve as a stopgap that would provide time for the development of technology capable of meeting U.S. standards, the scheme became entrenched. Over the next several years, the new software system was installed in more than a dozen different Volkswagen Group models. Total sales amounted to some 580,000 vehicles in the United States alone and an additional 10.5 million in other countries around the world.

In 2014 Volkswagen's team of engineers became aware of high rates of warranty claims on older diesel vehicles for parts related to the emissions control. Recognizing that some vehicles were spending too much time in the emissions-tight mode, Volkswagen issued a software update purportedly to improve performance. In fact, the update improved the defeat device so that it could better distinguish between emissions testing and real-world driving.

Volkswagen's fraud came to light partly by chance. A 2011 European study had reported that diesel cars were emitting significantly more nitrous oxide on the road than in laboratory tests. Engineers at West Virginia University theorized that this discrepancy was the result of Europe's spotty enforcement measures and that vehicles subjected to America's more rigorous testing would not show the same variance. To test this notion, they selected four vehicles at random and subjected them to both laboratory and road testing. Two of the vehicles seemed to confirm their theory, delivering real-world emissions that were comparable to those detected in testing. The other two, however, showed real-world nitrous oxide emissions up to 35 times the allowable levels. Both were Volkswagen models.

The results of this report were shared with California's Air Resources Board, which led the subsequent investigations. Volkswagen's engineers continued to obscure the truth, offering various falsified technical and mechanical explanations. In 2015 Volkswagen issued a voluntary recall that it claimed would "fix" the emissions issue. Although this fix resulted in slightly lower emissions, it did not address the true cause of the problem. 

Finally, under increasing pressure from regulators, in September 2015 Volkswagen engineers admitted their use of a defeat device. Since then Volkswagen has been subject to some $17 billion in settlements with U.S. customers and dealers, with an additional $4.3 billion in criminal penalties imposed by the federal government. One U.S.-based Volkswagen engineer has pleaded guilty to a charge of conspiracy to commit fraud, and six other Volkswagen employees have been indicted on similar charges. Investigations in Volkswagen's home country of Germany are in progress.


Question

If this case had involved ASCE members, how would their actions have violated the Society's Code of Ethics?

Discussion

Canon 6 of ASCE's Code of Ethics reads as follows: "Engineers shall act in such a manner as to uphold and enhance the honor, integrity, and dignity of the engineering profession and shall act with zero tolerance for bribery, fraud, and corruption." Category (a) in the guidelines to practice for this canon also is relevant: "Engineers shall not knowingly engage in business or professional practices of a fraudulent, dishonest, or unethical nature." By intentionally designing a system to thwart U.S. emissions regulations, the Volkswagen engineers defrauded not only regulators but also the many customers who purchased what they believed to be environmentally friendly automobiles. Had these engineers been ASCE members, it is likely that their conduct would be seen as violating canon 6. 

Furthermore, the engineers offered numerous false reports regarding the vehicles' compliance with emissions standards, in breach of canon 3's insistence on "objective and truthful" statements, and these reports enabled Volkswagen to gain an unfair advantage on competitors, in violation of canon 5. They also enabled the manufacturer to foil regulations designed to safeguard the health, safety, and welfare of the public, in contravention to canon 1.

The extent to which others in the Volkswagen hierarchy may have directed or at least condoned the scheme is not known, and an independent report commissioned by the company has not been made public. However, many individuals with knowledge of the company's operations have offered opinions on the institutional causes of the scandal. The New Yorker quotes one source as noting that Volkswagen's culture was "fueled by intimidation at every level," while Reuters described a "special pressure" at Volkswagen unlike that at comparable organizations. Still another source, quoted in Fortune, opined that the engineers' decision was "an act of desperation" because "[n]o one had the courage to admit failure.

Although embracing engineering ethics requires one to be able to make sound decisions even in the face of countervailing pressure, it is still true that corporate culture has a profound influence on the actions of those operating within it. If, as is suggested, Volkswagen's culture fostered the belief that corporate aims should be pursued even at the expense of legal and ethical mandates, then this case stands as yet another example of the role that corporate leaders play in creating an organization that encourages and rewards good behavior or does just the opposite.

FURTHER READING: 

• Andreas Cremer and Tom Bergin, "Fear and Respect: VW's Culture under Winterkor," Reuters.com, October 10, 2015.
• Jeffrey Rothfeder, "The Volkswagen Settlement: How Bad Management Leads to Big Punishment," NewYorker.com, July 1, 2016.



Members who have an ethics question or would like to file a complaint with the Committee on Professional Conduct may call ASCE's hotline at (703) 295-6151 or (800) 548-ASCE (2723), extension 6151. The attorneys staffing this line can provide advice on how to handle an ethics issue or file a complaint. Please note that individual facts and circumstances vary from case to case, that some details may have been altered for purposes of illustration or confidentiality, and that the general summary information contained in these case studies is not to be construed as a precedent binding upon the Society.

© ASCE, Civil Engineering , June 2017