Facing Jail Time for Diesel Cheating, VW CEO Winterkorn Quits

The odds are good that if you are reading this, you have at least some idea what is going on with Volkswagen Auto Group. On the off chance that you do not know what is going on, the company has gotten caught using the vehicle’s engine computer to cheat on emission tests. Basically, the only time that the diesel powered 2008-2015 VWs actually reach their expected emission levels is when they are hooked up to the machine. When not hooked up to the emission testing computer, the engine adjusts the tune to make more power – but it does so with engine emission levels that are up to 35 times the allowed figures.

As a result, Volkswagen will have to recall some 11 million vehicles to address the fact that under normal driving conditions, these “clean diesels” are among the most polluting cars on the road. To pay for the fallout, VW has already set aside almost $8 billion and just for the US case, the automaker could face almost $18 billion in fines. That is 18 billion with a “B”. Company stock value has crumbled, owners in the US are concerned about being able to drive their cars legally in the nation’s strictest emission states and the reputation of the entire diesel industry has been badly tarnished with a segment leader being exposed as a cheater.

Things are very bad for Volkswagen right now and they could get worse, as the European market VW diesels are now being examined as well. Regardless of whether or not the company cheated in their domestic market as well, there are now discussions that criminal charges could be brought against members of the VW team.

To top it all off, CEO Martin Winterkorn - who has become one of the most powerful men in the automotive world since taking the reins back in 2007 – suddenly stepped down this morning. He states that he is making room for a fresh management team, but is it about helping the company or packing up his office before the police come knocking with arrest warrants?

Winterkorn Jumps from a Burning Ship
Martin Winterkorn’s departure from Volkswagen AG comes as a surprise, with just a brief statement explaining and announcing his resignation:
“I am shocked by the events of the past few days. Above all, I am stunned that misconduct on such a scale was possible in the Volkswagen Group.

As CEO I accept responsibility for the irregularities that have been found in diesel engines and have therefore requested the Supervisory Board to agree on terminating my function as CEO of the Volkswagen Group. I am doing this in the interests of the company even though I am not aware of any wrong doing on my part.

Volkswagen needs a fresh start – also in terms of personnel. I am clearing the way for this fresh start with my resignation.

I have always been driven by my desire to serve this company, especially our customers and employees. Volkswagen has been, is and will always be my life.

The process of clarification and transparency must continue. This is the only way to win back trust. I am convinced that the Volkswagen Group and its team will overcome this grave crisis."

Winterkorn’s Responsibility
Whenever a corporate legal issue like this comes up, some people rush to blame the man at the top while others will insist that he is just one of a big management team. The issue here is that the decision to cheat the US emission tests was not one made by an engineer in the diesel program. A decision like this most certainly had to involve the highest levels of management, if only because the implications of being caught would be so severe.

Martin Winterkorn likely doesn’t have any input on the wheel options of the new Jetta, but he would have definitely been looped in on a discussion about designing their cars to cheat in order to meet emission regulations around the world.

Winterkorn Wont Be the Last
With company boss Martin Winterkorn departing from the troubled automaker, we are very likely to see others leave the company – either by choice or as scapegoats for the problem. When a corporation is caught pulling a shady move like this one, especially when jail time is discussed, those folks involved in the decision making process are likely to face the biggest personal hit. Because of this, when corporations get busted, we almost always see executives running away as quickly as possible. The ones who do not are left to face some harsh music, with those most closely involved with the actions that led to the wrongdoing being publically fired, thus bringing some closure to the process in the legal world.

It sounds outrageous, but that is how this kind of legal matter works, with some members of the corporation fleeing while others will become the people directly blamed for the issue.

Winterkorn says that he accepts responsibility for the issue, but he is also smart enough to take his vast fortunes and lay low for a few years. Winterkorn is well enough connected in Europe that he should be able to avoid jail time, but it will be interesting to see how involved he remains in the coming weeks.

Were I in his position with his bank accounts, I’d be making sure that no one took my picture for the next year or so – unless a warrant is involved.

Image: VW AG