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Why the Volkswagen scandal is important today

When the Volkswagen scandal broke it rocked the automotive world. But Jack Ewing argues that this is important to everyone, particularly following Trump's election and the Brexit vote

The election of Donald Trump and the Brexit vote have emboldened those on both sides of the Atlantic who would roll back climate change regulations and rules on automotive emissions.

Yet the Volkswagen scandal should give those forces pause. The scandal provides a powerful argument for strong environmental enforcement, even for people who think climate change is a hoax and emissions rules place a needless burden on automakers.

There was more at stake in Volkswagen’s fraud than just clean air. Consider, for example, the implications for trade.

Not long after he came into office, President Trump launched a verbal attack on Germany because of its massive trade surplus with the United States. The implication was that Germany somehow competes in ways that are unfair.

That’s a questionable accusation to make against Germany as a nation. But in fact Volkswagen is an example of one German company that tried to compete unfairly in the U.S. market. By rigging its vehicles to cheat on emissions tests, Volkswagen spent less money on pollution control systems and was able to sell its cars for a correspondingly lower price.

Without the Environmental Protection Agency (EPA) and the California Air Resources Board (CARB), Volkswagen’s unfair advantage over domestic competitors would never have been discovered.

The United Kingdom’s auto industry was also put at a competitive disadvantage with Volkswagen, which owns Bentley but otherwise is not a major producer of passenger cars in Britain.

The EPA and CARB are not, strictly speaking, consumer protection agencies. But they also exposed a massive consumer fraud.

Volkswagen spent tens of millions advertising that its cars were “clean diesel.” Many people who bought Volkswagens thought they were doing something good for the environment.

After the lie was exposed, Volkswagen was forced to pay more than $22 billion in the United States, including more than $10 billion to compensate owners and buy back tainted vehicles. In the U.K. and Ireland, lawsuits have been filed that could result in further compensation to British owners.

The legal actions send a powerful message to other companies that may be tempted to lie to their customers in order to gain an edge in the marketplace.

Brexit supporters might cite the Volkswagen case as an example of the ineffectiveness of the European Union. They have a point. The EU has a law against “defeat devices” that is worded almost identically to the law in the United States.

But enforcement was a farce and the law has so many loopholes that most manufacturers didn’t need to cheat. They simply took advantage of rules allowing them to dial back pollution controls to protect the engine. This is why nitrogen oxide pollution in many European cities remains dangerously high even though emissions standards have, on paper, become progressively tighter.

On closer examination, though, the Volkswagen case may be an argument for a stronger European Union. The reason Volkswagen’s cheating was never discovered in Europe, even though there were 8.5 million diesels with illegal software on European roads, is because most member nations did not enforce the rules. Some had never bothered to incorporate E.U. emissions standards into national legislation.

The fault lay not in Brussels, but in European capitals.

Environmental enforcement is clearly in danger in the United States. Trump’s appointee to lead the EPA, Scott Pruitt, spent much of his career suing the agency he now leads. Special interests are pushing Theresa May to use Brexit as a way for the UK to go its own way on climate change regulations.

Volkswagen shows that such policies might have unintended consequences even for people who don’t think of themselves as “green.”

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Faster, Higher, Farther

Jack Ewing

A shocking exposé of Volkswagen’s fraud by the New York Times reporter who covered the scandal.

When news of Volkswagen’s clean diesel fraud first broke in September 2015, it sent shockwaves around the world. Overnight, the company long associated with quality, reliability and trust became a universal symbol of greed and deception. Consumers were outraged, investors panicked, the company embarrassed and facing bankruptcy.

As lawsuits and criminal investigations piled up, by early 2017 VW had settled with regulators and car-owners for $20 billion, with additional fines and claims still looming.

In Faster, Higher, Farther, Jack Ewing rips the lid off the scandal. He describes VW’s rise from “the people’s car” during the Nazi era to one of Germany’s most prestigious and important global brands, touted for being “green.” He paints vivid portraits of Volkswagen chairman Ferdinand Piëch and chief executive Martin Winterkorn, arguing that their unremitting ambition drove employees, working feverishly in pursuit of impossible sales targets, to illegal methods.

With unprecedented access to key players and a ringside seat during the course of the legal proceedings, Faster, Higher, Farther reveals how the succeed-at-all-costs culture prevalent in modern boardrooms led to one of corporate history’s farthest-reaching cases of fraud—with potentially devastating consequences.

As the future of one of the world’s biggest companies remains uncertain, this is the extraordinary story of Volkswagen’s downfall.

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