Why German car makers may be yet to clean up their act | #cybersecurity | #cyberattack

Volkswagen’s chief executive, Martin Winterkorn, said he was “stunned” to discover the company had cheated emissions tests when he revealed the “dieselgate” scandal to the world.

In September 2015, the German executive stepped down after being told of investigations into the “defeat devices” on the company’s cars by the US Environmental Protection Agency. 

Ultimately, the scandal boiled down to internal culture. Winterkorn’s employees, it emerged, had been too scared to tell him Volkswagen would be unable to meet public targets for cutting emissions. Instead, the parent of Audi, Lamborghini and Bentley ended up cheating.

Ever since, VW has been counting the costs of its failure to maintain a healthy corporate culture: it has paid £30bn in fines and compensation to regulators, buyers and shareholders and shifted its entire production efforts away from diesel cars. 

Winterkorn and four others, meanwhile, have been charged with serious fraud for their role in the emissions testing scandal, with the case ongoing. 

In attempts to stress a culture reform, the 68-year-old carmaker has also appointed a board member in charge of integrity and legal affairs, and set up a programme designed to make sure any wrongdoing is reported.

But it has landed itself in hot water once again. Earlier this week the Financial Times reported a senior employee was fired after alerting VW to fraud risk in its payments arm. 

The warning came just days after the car maker announced JP Morgan would buy a 75pc stake in the venture, and the subsequent dismissal has renewed concerns about whether VW values employees who point out failings. 

Professor David Bailey, a car industry expert at Birmingham University, says the latest development suggested the company still needs to reform its internal culture.

“For far too long there was an attempt to cover up dieselgate, and downplay its significance. Then when it did break, it was hugely damaging for the company. They should have been much more open to the issues earlier,” he says.

Culture issues continue?

Bailey argues VW had been resistant to recruiting external advice to help fix its problems. “What we saw with dieselgate was the company reorienting their investment quite considerably towards electric cars and away from diesel – but VW didn’t bring in outside experts to help open up the culture internally. They should have brought in external experts to look at what went wrong and learn the right things from it.”

That attitude, he says, is in stark contrast to the strategy adopted by Toyota when it was forced to announce a global recall of all its 7.5m third-generation Prius cars manufactured before 27 January 2010. It also suspended the sale of eight of its most popular cars.

“Toyota made a deliberate point of appointing external experts to come in, look at what went wrong, and think about how to avoid that. I still think VW has lessons to learn in terms of opening things up and avoiding an inward-looking culture.”

VW’s share price fell by almost 30pc when dieselgate was revealed. The share price has since recovered after it shifted strategy to focus on electric vehicles, which Bailey says may have ultimately saved the company. VW’s shares did not respond to the news of the latest fraud warning.

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