Business as usual

In an interview with the BBC the other day, Audi’s CEO Rupert Stadler was asked whether the worldwide scandal that is currently egging the face of the Volkswagen concern (of which his company is part) will have any long-term impact. After acknowledging that some very serious things had gone wrong, that customers had been let down and that things had to be ‘cleaned up’, Stadler made the following blood-curdling – not to say stomach-churning – statement:

There will be a slight short-term reaction in markets. A little insecurity. In the long run no impact.

Read that again. ‘No impact’ – and hence no need for any fundamental changes.

Remember, we aren’t talking here about some peccadillo like the boss being caught with his pants down in the wrong bed, or some piece of incompetent middle management such as ‘rogue trader’ Nick Leeson’s panicky financial shenanigans that led twenty years ago to the collapse of his venerable employer, the 233-year-old Barings Bank. No, as the saying goes, this really is ‘something else’.

With at least tacit approval from the top, VW – a flagship of the German economy – has deliberately manipulated environmental standards by fitting its cars with sophisticated software that can produce substantially more favourable results for toxic emissions during testing (but only then) than the cars are capable of in everyday driving. Nor are we talking here about a 5% shaving, bad enough though such a deception would be. In fact, it’s precisely the other way round: the test results are less than 5% of the real ones, so the shaving is over 95%. Cars that have passed the USA’s stringent environmental standards with flying colours then go out onto the roads to release 20, 30 or 40 times more nitrogen oxides into the atmosphere – but, having ‘passed’ the initial test, they are seldom checked again. Worse still, those US customers who buy a VW generally do so in the belief, encouraged by advertising, that it isn’t a gas-guzzling polluter-on-wheels. Someone back in Wolfsburg (the concern’s German headquarters) must have been laughing all the way to the bank.

Just as in the infamous LIBOR scandal (in which ten of the world’s leading banks systematically misled markets, and hence society at large, by conspiring to manipulate a key interest rate – something they managed to do so undetected for years), VW has lied through its teeth to the regulators. Just as long as the figures look right…. The fact that environmental standards are there for a very good purpose, and hence that there’s a serious ethical issue here, seems not to have bothered the concern’s directors – I won’t say ‘didn’t occur to them’, for it surely did, only to be dismissed out of hand. The bottom line was, quite simply, the bottom line.

Now the whole thing’s blown wide open, you might perhaps expect something approaching contrition, self-criticism and even such serious consequences as mass resignation or dismissal of the culprits.

All this may yet happen (with much rolling of scapegoats’ heads), for the American regulators are about to insist that VW buy back over 100,000 of its ‘doctored’ cars from environmentally conscious customers who purchased them in good faith. But of course that’s just a drop in the ocean – at least 11 million vehicles are known to be involved, and that may just be the tip of the iceberg, for it’s hard to believe that VW is the only car manufacturer to have indulged in such screw-you-Jack skulduggery, or even that the 11 million figure is anywhere near the truth.

Yet, when questioned about all this, CEO Rupert Stadler blithely states: There will be a slight short-term reaction in markets. A little insecurity. In the long run no impact.

All that seems to matter to him is what ‘the markets’ will do, and who will be feeling ‘insecure’ (by which he certainly doesn’t mean the car owners). No wrongdoing; no breach of ethics; no moral turpitude. Just a blip in VW’s share prices.

This from a man whose annual income from various positions on boards of management around the world runs in millions (by now maybe tens of millions) of euros. He can afford to sit out the storm.

At this rate, folks, we’ve got a very long way to go before the financial crisis is over.

Meanwhile, it’s business as usual.