VW Scandal: Time for German Industry to Abandon Its Arrogance

by Armin Mahler (Der Spiegel) Made in Germany isn't the seal of quality it used to be. Arrogance and complacency are widespread in Germany industry, with Volkswagen becoming just the most recent example. For the German economy to remain healthy, fundamental changes are necessary.

The best commentary on the Volkswagen scandal came courtesy of former CEO Martin Winterkorn himself, well before he resigned last week. "Arrogance and complacency are the worst things that could happen to us," he said. The quote does not come from in his recent video message, where he attempted to apologize for the company's self-destruction. Rather, it is from an interview with SPIEGEL that took place exactly a year ago. And he meant it merely as a description of a hypothetical danger. He didn't yet realize that the worst had already long since happened.

A belief in their own invincibility is widespread among Germany's captains of industry. When it comes to reaching the goals they've set for themselves, they will resort to any means necessary. In the case of Volkswagen, it was undone by its desire to outstrip Toyota as the world's biggest carmaker. In the case of Deutsche Bank, it was its all-consuming aim to achieve a 25 percent return on equity. The pursuit of this goal made it guilty of almost every one of those financial-sector transgressions that ultimately led to the crisis. In the aftermath, the bank sought to fundamentally change its company culture, a shift that failed badly. Today, Deutsche Bank is but a shadow of its former self.

How will German manufacturers survive the competition when there is now serious doubts about their basic competence, and the reliability of the German engineering they like to trumpet overseas. That its trustworthiness is gone, its reputation ruined, will damage not only Volkswagen but will take its toll on the entire sector and indeed Germany's entire industry.

It will also take its toll on the general public, whose identity is so closely bound up with the strength of the economy and the solidity of German products. Germans don't see themselves as a nation of cheats. Others might be -- chief among them the Greeks, according to popular opinion, on whom the Germans like to look down. READ MORE and MORE (Variety) and MORE (Bloomberg BNA)

Excerpts from Bloomberg BNA: Research suggests there may have been hints of the still-unfolding diesel emissions scandal at Volkswagen AG hidden in corporate sustainability reports.

Volkswagen devoted less than 1 percent of its latest report to NOx and other non-carbon gases or particulates that affect air quality, compared to almost 14 percent on carbon and other greenhouse gases, according to an analysis by environmental, social and governance (ESG) data firm eRevalue.

In fact, eRevalue’s research shows that non-carbon gases have been mentioned less and less often in VW’s sustainability disclosures in recent years, despite the fact that the reports have grown in size.

“Clearly here what we saw was, in the sustainability reports of Volkswagen over time, they really went silent on the topic,” said Marjella Alma, who recently founded eRevalue after spending several years working with the Global Reporting Initiative, the most widely used standard for sustainability disclosure. “There was very little description, very little narrative. There was just a couple little tables and that was it.”

The only mentions of NOx in Volkswagen’s latest report were in relation to pollution generated by the process of making and shipping its cars—not from the cars themselves, despite their potentially significant impact.

The last time Volkswagen mentioned regulations for tailpipe NOx or other air pollutants was in its 2013 report, published in the spring of 2014—around the same time that Michael Horn, the head of VW’s American operations, said he first found out about a possible problem with emissions compliance.

The company’s next sustainability report was free of any such references. A company spokeswoman did not return requests for comment on whether this was intentional or simply a coincidence. READ MORE