Overseer Faults Volkswagen’s Reform Efforts Since Emissions Scandal
Posted April 22, 2018 2:40 p.m. EDT
FRANKFURT, Germany — Volkswagen’s attempt to remake its company culture and become more law abiding has received poor grades from the former U.S. prosecutor who is enforcing the carmaker’s compliance with a deal that settled emissions cheating charges.
The German carmaker acknowledged Sunday that a progress report found that it had failed to hold executives accountable for wrongdoing that led to the huge emissions fraud, and that it was not making a serious enough attempt to remake its culture. The report was prepared by Larry Thompson, a former U.S. attorney who later spent several years as deputy attorney general during President George W. Bush’s administration.
The conclusions of Thompson’s confidential report, first reported by the Bild am Sonntag newspaper and confirmed by a Volkswagen spokesman, are the latest sign that a ballyhooed campaign by Volkswagen to become an exemplary corporate citizen has been floundering.
Last week, nearly 200 German police officers and prosecutors raided offices of Porsche in Stuttgart and other locations, seizing documents as part of an investigation into what role the sports carmaker, a division of Volkswagen, may have played in a conspiracy to conceal excess diesel emissions from regulators.
The raid threatened one of Volkswagen’s biggest moneymaking divisions and showed that German prosecutors are intensifying an investigation that they have said targets more than 50 suspects, including a member of Porsche’s top management.
But there were also tentative indications that Thompson’s report, which he is required by court order to keep secret, could prompt a change of behavior at Volkswagen under a newly appointed chief executive.
Herbert Diess, who was named chief executive of Volkswagen earlier this month, delivered a stern lecture to top managers last week, complaining that the company generates too many scandals and must become more ethical.
“Ethics, integrity and compliance are core for him as a necessary foundation for our future business,” Peik von Bestenbostel, Volkswagen’s vice president for global group communications, said in an email Sunday in which he confirmed Diess’ remarks.
Von Bestenbostel said that the objectives outlined in the report by Thompson are valid and “will help to change Volkswagen in the right direction.”
Diess replaced Matthias Müller, who had prevented a collapse in Volkswagen sales in the wake of the scandal but struggled to remove the cloud it cast over the company’s reputation. A former BMW executive, Diess began working at Volkswagen only a few months before the emissions cheating became public and is less tainted by it.
Diess is likely to be less restrained by personal connections to Volkswagen managers or other employees linked to the emissions wrongdoing. Müller spent his entire career at Volkswagen or its divisions and had worked closely with some of the people suspected of playing a leading role.
Despite promises to reform, Volkswagen remains dominated by longtime insiders, and there have been few visible legal or disciplinary consequences for people involved in the emissions cheating. Volkswagen did not keep a promise to publish an internal report on the causes of the scandal prepared by the Jones Day law firm.
As he tries to take a tougher approach, Diess is likely to face resistance to change within the sprawling Volkswagen empire, which is famous for its insular, hierarchical corporate culture.
Thompson is one year into a three-year assignment that was part of Volkswagen’s guilty plea last year to U.S. Justice Department charges that included obstruction of justice and conspiracy to violate the Clean Air Act. Under the terms of the plea agreement, Volkswagen promised to take steps to prevent the same kind of thing from happening again.
Thompson’s job is to make sure that Volkswagen complies, and the report he submitted this month to the Justice Department is the first of three annual assessments.
Since being appointed the Volkswagen monitor in April 2017, Thompson has avoided the limelight but, as the report indicates, he has made his presence known at the company’s Wolfsburg headquarters. Though based in Atlanta, Thompson has an office in the same building as members of the management board and has made an effort to learn German.
Thompson has substantial leverage over the company. If he concluded that Volkswagen was violating the terms of the plea agreement, it could be voided and the company would land back in court.
Among other things, Thompson has been urging Volkswagen to create a more effective whistleblower system to allow employees to report suspected wrongdoing without endangering their careers. He has also been pressing the company to improve its systems for vetting vehicle software. The emissions scandal occurred after a group of employees, including some who reported to top management, devised software that caused diesel engines to emit less nitrogen oxide pollution when the engine computer detected that the car was being tested.
The software was installed in 11 million cars over almost a decade, but as far as is known no employees reported its existence to authorities until shortly before the company confessed in September 2015.
During a long career, Thompson has worked in both government and private industry, including stints as a federal prosecutor in Georgia and general counsel of PepsiCo. In 1991, Thompson advised Clarence Thomas in his battle to win nomination to the Supreme Court in the face of sexual harassment accusations.
Though Thompson is a Republican, he has been sharply critical of Donald Trump. He was among former high-ranking government officials who published a letter during the presidential campaign in 2016 that said that Trump “would be a dangerous president and would put at risk our country’s national security and well-being.”
The letter also said that “Mr. Trump lacks the character, values, and experience to be president.”