Up until only a few weeks ago, very few people had heard of the International Council on Clean Transportation, an NGO that offers technical advice on environmentally friendly means of transport. Tipped off about suspicious emission readings from Volkswagen diesel cars in Europe, the NGO tried to investigate the situation in the US, given that country's high technical capabilities regarding such measurements and its more stringent air-quality standards.

The discrepancies noted in Europe also showed up in the US. This was odd. Volkswagen cars had already been lab-tested for emissions so why were tests giving different readings when driven in a real-life situation on the roads? Investigators informed the regulator, the Environment Protection Agency which, in good faith, relayed the information to Volkswagen. The German car manufacturer shrugged off the study as being flawed, but recalled a few vehicles for a remedial software update.

 

Meltdown

That was last year. After much to-ing and fro-ing, and a confession from Volkswagen that it had installed 'cheat software', the American regulators went public. Since then, the sheer magnitude of the fraud and its consequences are now coming into sight: an estimated 11 million cars worldwide are thought to have this software installed, the value of VW shares is in freefall and legal cases are piling up, from class-action suits to a criminal probe.

The size of the fraud is not the only issue here. There is a long history of car companies trying to cheat regulators, but the sophistication of this one is truly amazing, if not diabolical. Can you imagine the brain power needed to create software that "knows" when a car is being tested for emissions in a laboratory and adapts the engine accordingly? And, if those brains were so smart, did they really believe that the fraud would never be discovered? As the New York Times headline ran: 'Volkswagen, what were you thinking?'.

 

Unintended victims

But the greatest loss is definitely to the prestige of the brand and the trust Volkswagen had built over many decades with its clients. The contagion of loss of trust is spreading not only to Volkswagen subsidiaries such as Audi and Skoda but also to other German car-makers or manufacturers of diesel cars. They have not been charged with anything (as far as we know) but simple association means that the mistrust spreads.

Another victim was, of course, the environment. Diesel cars have been gushing considerable quantities of gases into the atmosphere which had not been taken into account. The initial study on VW cars was actually carried out to prove, especially to the US market, that diesel can be a clean fuel without diminishing the efficiency and performance of the car. Unintentionally, the outcome of the research made this look like pie-in-the-sky. And last, but certainly not least, are politicians. Despite globalisation, car companies still have strong national associations. Over the years, knowing that voters made the link, German politicians have been more than happy to show up and be seen whenever there was a launch or major event in the industry, hoping to ride on its wings. While unlikely to have been involved in the scandal itself, it does caution politicians when it comes to hitching their wagon to rising industrial stars in future.

 

Trust

I will always cherish the words of a shopkeeper I knew: it takes a lifetime to build your business reputation and five minutes to destroy it. He ran his small but successful enterprise based on that principle, investing time and money in making sure his customers left satisfied and avoiding anything that introduced a shred of doubt regarding the way he conducted business. When he decided to retire, the value of the 'social capital' he had amassed far surpassed that of the remaining stock. It's a very good principle to live by - and not just for car makers.