Dieselgate: How Volkswagen Engineered a Lie

On my way to the gym two days ago, a Quartz alert flashed on my phone. It read “Volkswagen executives get prison time in ‘Dieselgate’ scandal”. It caught my attention. This was a scandal I had been wondering when it would finally get closure. A scandal that cost one of the world’s most respected carmakers $38 billion. And counting.

It is the story of Dieselgate: a scandal that started with a software trick and ended with handcuffs and the permanent tarnishing of the Volkswagen name.

It was 2006, and inside Volkswagen’s engineering offices in Germany, a handful of minds were confronted with a problem. The company’s ambitious new diesel engines, marketed as clean and innovative, were struggling to meet U.S. environmental standards.

Rather than fixing the engines, someone proposed a different solution: trick the test. Whoever says a particular race is susceptible to fraud at the highest level is talking based on ignorance or mischief.

These guys developed a software that could detect when a car was undergoing emissions testing. During these tests, the engine would comply with emission limits. But once the vehicle returned to the open road, it would revert to performance mode, emitting nitrogen oxide at levels up to 40 times the legal limit.

It was called a “defeat device.” And it would sit silently in millions of cars for nearly a decade.

Volkswagen launched its new “clean diesel” fleet in 2009, backed by a glitzy marketing campaign. The cars were powerful and fuel-efficient. And, supposedly, green. It was the heydays of ‘saving the planet’ and Americans embraced them. So did regulators. So did Europe.

Behind the curtain, VW was basking in its deception. The vehicles were not only performing well, they were cheating well. And no one seemed to notice.

The company soared. By 2015, it had overtaken Toyota to become the world’s largest car manufacturer.

Then came a graduate student from West Virginia University.

A team of researchers at WVU, funded by the International Council on Clean Transportation, began testing real-world emissions on diesel vehicles. What they found was inexplicable: certain VW models were emitting massive levels of pollutants, levels impossible if the cars were truly compliant.

They alerted the EPA. That’s the U.S. Environmental Protection Agency.

The EPA, after its own investigation, cornered Volkswagen. After months of denial, the company finally confessed: they had rigged the tests. Deliberately. Systematically. Globally.

On September 18, 2015, the EPA publicly accused Volkswagen of cheating. The news exploded.

By the next day, Volkswagen’s stock had plummeted by a third. CEO Martin Winterkorn resigned. Governments opened investigations. Lawsuits poured in. Diesel technology, once a darling of the industry, became radioactive overnight.

Almost half a million cars in the U.S. were affected. Eleven million worldwide. The deception was not a bug. It was the product of intent, of planning, of years of willful misconduct.

Volkswagen’s public apology did little to stem the tide.

In the U.S., the company agreed to a $25 billion settlement, the largest in automotive history. They were forced to buy back vehicles and compensate customers. In the deal was also for them to fund environmental initiatives.

In Europe, the costs kept climbing.

Several executives were indicted. Some fled. A few were extradited. One, Oliver Schmidt, was arrested while vacationing in Miami and sentenced to seven years in federal prison.

In Germany, over 30 employees were placed under investigation. But prosecutions moved slowly. Justice, in the land where the fraud was born, seemed elusive.

Until now.

On Monday, in a court in Braunschweig, just miles from Volkswagen HQ, the final verdict was delivered.

Jens Hadler, former head of engine development, and Hanno Jelden, ex-VW manager, were sentenced to prison. Two others received suspended sentences. The presiding judge described their actions as “particularly serious fraud” and likened their coordination to a criminal gang.

The scandal had finally come home.

When I checked Wikipedia about this scandal, I discovered the cheat was not limited to VW.

In the race to be environmentally complaint, many more car companies rigged the system. But VW paid the highest price, both in value and reputation.