VW’s Cheat Was Not Ingenious

Flickr/Kenny Louis
Flickr/Kenny Louis

An article by Jeffrey Liker over on the HBR site “Assessing the Sins of Volkswagen, Toyota, and General Motors,” got under my skin, so I thought I ought to respond to a few of the ideas/claims made therein.

Here’s the first one:

It does seem to me that if one were keeping score, Toyota got a more serious punishment than GM for a far lesser crime. It even appears that the relative cost to VW of its nefarious manipulation of emissions is disproportionate compared to the cost to GM when so many lives were lost. -Jeffrey Liker

Two points here:

  1. We won’t know what the costs to VW will be for a long time.
  2. We’ll get to a discussion of lives lost in just a moment.

A bit further down:

VW’s case is a different animal entirely. It did not involve a failure to recall defective vehicles that could cause safety issues. Rather, the company’s engineers intentionally added software designed to allow its diesel engines to evade emissions standards and then, in normal driving, emit 40 times the acceptable levels. This was a deliberate, and quite ingenious, way to break the law and avoid detection.

Point of order: Young Einstein’s splitting of the beer atom was ingenious. Deliberately manipulating emissions tests to evade regulators and mislead consumers is insidious. (Splitting hairs, I know, but with Yahoo Serious on the brain, it was a foregone conclusion.)

As a counterpoint to my intuition, I’ve included the following thought from the Marginal Revolution blog:

We are more outraged by deliberate attempts to break the law, compared to stochastic sloppiness leading to mistakes and accidents.  But it is far from obvious that the egregious violations should be punished more severely in a Beckerian framework.  In fact, if they are harder to pull off, compared to sheer neglect, perhaps they should be punished less severely, at least from a utilitarian point of view.  I am not saying we should discard our intuitions about relative outrage, but we ought to look at them more closely rather than just riding them to a quick conclusion -Tyler Cowan

I’m not sold, but it’s a point that’s at least worthy of consideration.

Now, back to the regularly scheduled skewering.

There was no immediate harm to individual drivers in the VW case, but the disclosure of the excessive emissions comes at a time when there is grave concern about climate change. -Jeffrey Liker

As an engineering professor, who teaches (and has written extensively) about the automotive sector, I assume Liker has at least a cursory understanding of the health effects of vehicle emissions.  So what I think we have here is a very carefully worded statement which suggests that no one died in a horrible crash due to the emissions cheat (Something something ingenious efforts to evade…), in an attempt to redirect attention to the climate change “debate.” Folks, don’t fall for that banana in the tailpipe.

A couple of clips from related articles might help fill this seemingly intentional gap.

David Bach in the Financial Times:

First, whereas Enron’s fraud wiped out the life savings of thousands, Volkswagen’s has endangered the health of millions. The high levels of nitrogen oxides and fine particulates that the cars’ on-board software hid from regulators are hazardous and detrimental to health, particularly of children and those suffering from respiratory disease.

And Brad Plumer for Vox:

Volkswagen’s 482,000 problematic US cars are currently emitting between 5,800 to 14,200 additional tons of nitrogen oxide pollution (NOx) each year, assuming the cars are driven the US average.* This is over and above the pollution the cars would have emitted if Volkswagen had adhered to the legal limit.

Extrapolating that to 11 million cars around the world, and assuming the rest of the cars are driven the European average, we get somewhere between 86,800 and 212,500 additional tons of NOx emissions per year.

Now, there are lots of assumptions and simplifications embedded in those estimates, particularly around how many miles VW’s cars are actually driven. But that’s … potentially a large amount of extra NOx pollution. At the high end globally, it’s 20 times what a typical coal plant without emission controls puts out in a year.

Further down Plumer suggests the potential damages these emissions might cause:

the extra pollution from Volkswagen’s US cars can be expected to lead to an additional 5 to 27 premature deaths per year. If we extrapolated worldwide to all 11 million vehicles, that would come to somewhere between 74 and 404 premature deaths each year.

(Please do go read Plumer’s full post to see his methodology and the statements around its limitations.)

Liker then suggests that contrition will win the day, while taking a swipe at government and attorneys. (Hey, who doesn’t hate attorneys, amirite?!)

So crime clearly does not pay. That said, it seems that if a company apologizes and carries on, it can survive and prosper in the long term. (For the most part, automakers have been quick to recall vehicles and contrite when accused of taking too long to do so.) In the meantime, many lawyers and the U.S. government are making a lot of money from the auto industry.

What is less clear is why there have been record numbers of U.S. recalls, and the United States has become so vigilant in going after automakers. In the Toyota recall, NHTSA, which had previously had been criticized for being soft on automakers, seemed to want to prove how tough it could be.  In this relatively hostile environment in the United States, Volkswagen will now pay dearly for brazenly cheating on diesel-engine emissions.

Liker would seem to suggest that if we don’t stop strictly enforcing the laws, maybe automakers will take their cars and go home. (Good riddance.) Meanwhile, others are suggesting that the industry needs better oversight, and while I’m guessing the firm will find a way to survive (If BP is still around…), I’m also guessing they’ll take a solid hit to customer retention.

I’ll close with a thought from Henry Mintzberg, a clear-headed, humane thinker if there ever was one:

“What was Volkswagen thinking?” This question makes a big assumption: that the Volkswagen people were thinking, about anything beyond their greed. About decency, about our environment, about their progeny.