Do you know of Lupin the mysterious thief? Trickery and fraud is what he does best and he is famous for never getting caught. Lupin is just an imaginary figure from a novel but there recently come into the spotlight, a group that has tried to deceive customers, government, NGO’s, and actually the whole world. They actually even succeeded in blinding the eyes of the world for quite some period. The group’s name is called ‘Volkswagen’. Unlike the novel, however, the reality hurts. They were caught for manipulating the software that records the gas emissions that their diesel cars make and as a result they are paying the price with governments potentially suing them, not to mention their stock figures crashing back down to earth. Let’s find out how this fraud against the world happened.
1. How Do Frauds Get Caught?
The incident started like this. An NGO called ICCT or the International Council on Clean Transportation did a RDE (Real Driving Emissions) test in 2014 on about 15 different models of cars to see how much emission gas came out during real driving conditions. The result was shocking, in that only one out of the 15 models of cars kept to the standard nitrogenous compound while others went over nearly 7 times the amount of the standard. The Environmental Protection Agency of America found this result very strange so they investigated this further and disclosed that Volkswagen had manipulated the software amount of emission gas. Even the most famous and representative models of the company such as Porsche or the Beetle emitted 40 times more gas in actual driving conditions compared to the official tests that checked the emission amounts.
This manipulation of the emission amount meant that the NGOs and indeed the whole world were tricked by this massive organization. How could Volkswagen pull off such a feat? They were very smart in the way they did it. Cars produced nowadays have an electronic regulation device called an ECU inside them. This device keeps record of the emissions and the speed of the car and Volkswagen used this device to make their fraud possible. A ‘Defeat device’ is software that makes the ECU reduce the record of the amount of emissions. The company installed this in their cars to avoid going over the emission regulation standards.
It is estimated that over 500,000 cars have been sold to USA and if this is true, the government can sue the company for up to about 20 trillion won for illegally selling cars that do not meet the environmental regulations of the USA. After this famous incident in the USA, countries all around the world have claimed that they will do similar tests to find out whether emission gases are under the standards in a real driving environment. Volkswagen then confessed that there was illegal software installed in the diesel cars as it would only be a matter of time before other countries all find out about the manipulation. This means that there are about 11 million cars out in the world that have been sold with illegal software by Volkswagen.
As a result, recall instructions were given out by the company and the 11 million diesel cars are going to be collected all over the world. If it goes according to plan cars in Korea will be withdrawn starting from next year also.
2. Folks, This is What Happens to Swindlers
- No More Trust for You
The reason this incident became such a big issue is because Volkswagen is one the largest and globally recognized companies in the automobile industry and ‘they’ actually pulled off such a scam. What’s more is that this was not just to their customers but to the governments and indeed the whole world. Perhaps if some small business or enterprises did this out of desperation to keep the company going, it would be understandable. It would still be wrong, unjustifiable and should get all the criticism but still, people would understand the logic behind it. Selling one car more or leaving even little more profit would have been important and so they committed fraud. However, in the case of a company that sells such a huge number of cars both inside and outside of Germany, this sort of action is something that is hard to even understand. Volkswagen surely has the technology and the capital to develop and compete with other outstanding companies, surely they could earn enough profit without having to resort to such cheap trickery. Was their historical and long experience of handling cars and the capital they had not enough? It almost makes one curious. They have the technology to make engines that produce less emission. The problem is that it would cost more to make them and that would mean a loss in profit. However, it seems that they overlooked what might happen if they were caught manipulating the emission amounts. They lost huge amounts of money in the process of trying to make what little profit they could.
Also the way that Volkswagen handled the incident was disappointing. The CEO before resigning claimed that he did not have any information about the emission gas manipulation and that he had nothing to do with it. This makes no sense at all. How could the top superior of the company not know what was happening to the companies most famous and representative model Porsche, for instance? If this were true, it would mean that the business system in the company is so ineffective that the top managers of the company have no information whatsoever about the 110 million diesel cars sold all over world. Surely, a company with such a system could not be so successful for such a long period of time. What the CEO said only seems like a bad lie to excuse himself from this incident.
- Not only diesel?
Obviously, after this incident there was a more wide spread investigation done on the Volkswagen group. Over 80,000 cars with emission levels that were too high were found. That number, compared to 110 million, is not much and means little. However, the problem was that there was a petrol engine car in that 80,000. Although only one model of the petrol engine car was found to have had manipulated gas emissions, this still means that there might be a possibility that not only the 110 million diesel cars were fixed, but even more cars with a petrol engine might have had their emission amounts manipulated too. This is more serious as the petrol engines came long before the diesel ones and there are more models that run on this type of engine.
- The Butterfly Effect
This Volkswagen incident did not just stop at the automobile industry. The company itself is so large that it represents many of the images that people have of Germany so this incident has affected the country’s image also. Germany, one of the most developed countries in the world that should be in the front line of the fight to reduce environmental pollution, has just had its image ruined by the very company that helped them became a wealthier country in the first place. In fact, the prime minister of Germany apologized, and the ministry of transportation claimed that they will do a thorough investigation on the cars. Besides Germany, the EU has showed signs of punishing the company if the CO2 emissions are over the regulation standards. The fact that this incident goes against environmental regulations and that it is criminal activity has made a lot of other organizations act.
3. Rather Not Uncommon?
This Volkswagen incident is a big problem indeed. But when taking a closer look at the automobile industry such cases like manipulation are actually more common than one would think. According to the New York Times there have been many incidents similar to this in the past. In 1970 the first environmental laws took place in America and Fords was one of the first companies to pay a fine for breaking them and from then on starts the various incidents of fraud to avoid violating the law. An automobile company a few years after the Fords incident made a device that removes the pollution regulator device from an engine, and another company manipulated the mileage of a car and sells it like a brand new car so that they had to recall 60,000 cars sold this way. Most recently a Japanese brand had to recall their cars because of airbag problems. As such it seems that the automobile industry itself needs more strict management and monitoring.
Volkswagen it seems, got unlucky to become such a hot potato even though there were so many other companies before them that had committed acts of fraud, but not necessarily so. It betrayed the brand name that possesses an image of a craftsmanship so that is one reason as to why it became so infamous. This incident should become the example for other big brand companies not only in the automobile industry but for all companies, particularly in Korea, where there are many conglomerates that have powerful influence, just as Volkswagen does in Germany. These companies from time to time have been caught doing things that they shouldn’t which shows how little they care for consumers. The company that made crackers from spoiled eggs or the Korean imported beer companies that deceive the expiration date should take this incident as an example and companies should once again think of what is the right thing to do. It is never right to commit fraud and in this age of technology and mass media, it is only a matter of time before they caught out.
The stock of Volkswagen has shrunk to one third of its original size after this incident. To add a bit of exaggeration, stockholders almost disappeared in a matter of seconds. Although the CEO resigned and the stock went up about 5% after this, it seems that it will be difficult for the company to recover perfectly and even if they can it will take a really long time. The citizens of Germany have lost faith in the company and they will find it hard to sell cars as well as they have done from now on. In Korea, the organization has become a laughing stock where they joke about how “it was really us that did not know”; the Volkswagen catchphrase used in the recent commercial broadcasted in Korea. The rights of the company to produce as much profit as they can should be respected. However, when they try to find ways of deceiving customers and trying to find loopholes, profit is far from what they will find at the end of the road.