The Volkswagen debacle

By Eric Crampton 24/09/2015


Oliver Hartwich sums things up nicely over at Business Spectator.

In a way, Volkswagen’s crime was a very Germanic response to a business problem: It rendered regulatory standards useless by sophisticated engineering. Or, to say it with the famous Audi slogan, it tried to gain Vorsprung durch Technik (‘Advancement through technology’).

This is a corporate PR catastrophe of the first order, easily dwarfing previous disasters like the Deepwater Horizon explosion, the sinking of the Exxon Valdez or Merck’s recalls of its Vioxx drug. It calls into question not just one company, but a whole industry in one of the world’s leading business nations.
It is a common misconception to believe Germany is a place for ‘whiter than white’ business practices. That is, of course, how Germany likes to see itself and how it likes to advertise itself to the world. Self-righteousness is a virtue invented in Germany. Just look at the ways the Germans have tried to teach other nations lessons on fiscal policy, energy policy and now refugee policy.
The problem is that there is a gulf between this self-image and the reality of German life. The Germans are probably not worse than everybody else. But they certainly aren’t better, either.
Volkswagen itself has had its own experiences with, well, suboptimal business practices. The German system of co-determination in which employees play a role in a company’s management had led the Volkswagen leadership to bribing its own employees’ representatives. They received cash, were taken on luxurious locations and invited to lavish sex parties. The scandal resulted in high-profile convictions, including a prison sentence for the head of the employees’ council.
If this had happened with Great Wall or another Chinese car company, imagine the demagoguery and the calls for bans on Chinese car imports.

I note as well that not all organisations headed by Germans reward staff with lavish sex parties..