Why VW still has not fully confronted its diesel scandal past | #employeefraud | #recruitment | #corporatesecurity

In June 2018, Audi’s then-CEO, Rupert Stadler, was accused of obstructing an investigation and will stand trial in late September.

The state is only expected to make the case he should have stopped the sale of affected cars when learning of the fraud in the summer of 2015.

He might not have been accused of any crime had he resigned immediately like Winterkorn. In a 692-page indictment, the Brunswick public prosecutor filed charges of aggravated fraud against Winterkorn. They face an uphill battle, however, since the case hinges on proving Winterkorn knowingly and intentionally failed to stop the fraud — a difficult argument to prove, according to lawyers.

Three judges in Brunswick are still debating whether to allow a trial to proceed at the city’s district court, where Winterkorn’s case has been languishing since last April. A spokesperson declined to comment on the reasons, nature or duration of the intermediate proceedings prior to a decision. Winterkorn also faces extradition to the U.S., but could conceivably remain a free man as long as he remains in Germany.

Burkhard Fassbach, a white-collar crime expert and attorney at the Schneiders & Behrendt law firm, worries the court will reject the case in the hopes a settlement might be reached. Public prosecutors would be likely to appeal, costing more time and further delaying Germany’s already slow-grinding wheels of justice.

“This case needs to go court. The public pressure is too high,” Fassbach said. In the recent case of Wirecard, a German blue-chip company whose CEO was accused of falsifying financial accounts, Fassbach expects justice will be swift.

The evidence against Winterkorn is less clear and the former VW executive contests any guilt.

“These kinds of crimes are very difficult to prove. It takes years for the prosecution to establish a case,” Fassbach said.

Trivializing the scandal

The question remains then whether the scandal led to any wider changes at the company beyond its ambitious shift toward electric cars.

Winterkorn successor Matthias Müller made reforming VW Group’s corporate culture one of his top five priorities during his brief term in office.

In March 2018, however, the frustrated CEO admitted openly this was the area where he had made the least amount of progress.

Unethical behavior has “concrete consequences and a measurable impact on our reputation, capital market ratings, financing costs, active risk management, and ability to attract the best young talent around,” Müller warned at the time.

A former senior manager involved in the internal investigation fears little has changed: “When I talk to some of the people in engine development today, I still get the feeling they trivialize the scandal and don’t understand the damage they caused.”

Critics say part of the problem might be just how lightly VW also got off in the courtroom of public opinion. Consumers in Europe remained loyal while China, its largest market by far, barely took notice of the scandal.

In 2016, VW Group passed Toyota as the world’s largest automaker by vehicle sales. That year also marked VW’s return to the black following a historic loss, and the company’s subsequent annual accounts never reported a net profit below 11 billion euros from 2017 onward.

Even in the U.S., where VW continues to bleed red ink following a heavy beating to its reputation, things are looking up because of a focus on SUVs such as the Atlas.

“Our market share is stable, more than 75 percent of our Atlas volumes are conquests from rivals, and the brand image is continuously recovering after the hit in 2015,” VW brand sales chief Jürgen Stackmann said at the end of July. “We’re very optimistic we’ve overcome the diesel crisis in the U.S.”

Given VW’s recent results, Müller’s message that ethics and compliance were no esoteric “wellness” principles, but vital for the commercial success of the company may still be ignored.

Werner would not say whether she felt VW’s problems were systemic, but approaches her job as head of integrity and legal affairs as if they were. Every department could be the source of the next scandal, Werner said.

“Corporate culture is inherently instable: every minute it is either deteriorating or it improves. And as soon as you lose focus, it begins to degrade,” she told ANE.

Impervious to criticism

Company insiders say the problem can be found in Wolfsburg’s sprawling development, production and administrative operations — around which a city was literally built.

The atmosphere at VW’s headquarters had long been deeply authoritarian and intrinsically tribal, they say Management and unions were hostile to criticism from outsiders and impervious to external pressure, often exhibiting a siege mentality.

This made VW more susceptible to the actions of morally gray individuals quick to rationalize unethical behavior by convincing themselves it is for the greater good of the company, the insiders say.

Werner acknowledged internal employee surveys show a large minority of subordinates still fear openly informing their superiors of risks.

Nonetheless, she believes the workforce is beginning to understand the scandal is a permanent part of the company’s history, even if there is more work ahead reaching all 670,000 employees worldwide.

“Now that we are transitioning into a new phase without the monitor, the next 24 months will be important to see how the company behaves and what actions are taken when issues arise. Then you can judge whether things have really changed,” she said.

Ironically just as New Volkswagen is becoming a reality, the company’s ambitious EV model offensive may be under threat like never before.

“Volkswagen is currently experiencing its most difficult year since Dieselgate, and there has been a high concentration of product-related problems, which is unusual for the company,” said Jürgen Pieper, autos analyst at Metzler Bank.

VW brand is also undergoing a major shake-up of its top leadership.

  • The brain behind the MEB platform, Christian Senger, lost his job as head of the new, high-profile vehicle software unit, CSO.
  • Production boss Andreas Tostmann was sent to Munich to restructure the parent’s underperforming German truck subsidiary, MAN.
  • Finance chief Arno Antlitz, like Diess a keen cost cutter, was swapped out for Audi colleague Alexander Seitz earlier this year.
  • Purchasing boss Dirk Grosse-Loheide also moved to Audi in April.
  • Sales chief Stackmann, who overhauled dealer contracts and designed the VW brand campaign, is under fire internally and expected to leave, according to media reports.

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