Volkswagen: a routine case of corporate-state harm production

Professor Steve Tombs
Friday, 16 October 2015

On 18 September, the US EPA revealed that Volkswagen (VW) had been using software and practices to cheat emissions-testing on almost 600,000 cars in US – marketed and sold as part of a major ‘clean-car’ initiative. The effect is that these cars will, on the road, emit nitrogen oxide pollutants up to 40 times above legal limits. Dubbed the ‘emissions-testing scandal’, or the ‘diesel dupe’ – but, just to be very clear, not crime – the days and weeks since the revelation have seen a classic case study of corporate crime unfold. For students of corporate crime and harm, the processes will be familiar. They involve denial, lies, obfuscation, blame-shifting, and scapegoating, attempts to neutralise and reframe the offence at issue, while evidence is rapidly revealed which undermines virtually all of these tactics – which is not to say that they do not proceed without varying levels of success. State officials are, of course, quick to voice their public condemnation – notwithstanding a history of collusion,  and pro-industry, behind-the-scenes lobbying and a raft of state support and subsidy, again all often unremarked upon characteristics of much corporate crime and harm production.

Thus, in the immediate wake of the allegations, senior management at VW denied all knowledge of the offence. Indeed, it continued to sell the affected products even after the ‘scandal’ broke in the US – cars with the “defeat devices” remained on sale in the UK, for example. Meanwhile, the scale of the fraud grows greater day-by-day: recalls soon spread to the UK, Italy, France, South Korea, Canada, Germany, Australia and China; by the first week of October, VW stated that 11 million of its diesel cars worldwide have such software and will need to be recalled.

All-to-predictably, VW senior management have denied and continue to deny all knowledge of the offending, rather suspending and investigating four engineers. That said, one slightly unusual aspect of this case was the quick decision of the company’s CEO, Martin Winterkorn, to resign on 23 September – if this is a rare example of the head of an offending corporation taking some personal responsibility, it is worth also noting that, having departed whilst still denying knowledge or complicity, he is reported to be in line for €3.2m severance pay-off as well as a €1m (£740,000) annual pension. However, evidence continues to emerge and circulate about senior level knowledge of a systematic fraud: reports have stated that VW technicians had warned about illegal emissions practices in 2011, and that the parts-supplier, Bosch, had written to VW  in 2007 about the possible illegal use of Bosch-supplied software technology.

Further, and again as is generally the case with such ‘scandals’, evidence continues to emerge that VW is not a rogue company – in fact there have long been claims that the systematic falsification of emission-tests is standard practice across the industry, on the basis of a series of widely-known techniques. Moreover, it is not the first time that VW has engaged in cheating emissions tests: 'As far back as 1973, VW had been fitting defeat devices to cars. The company was pursued by the EPA and eventually settled out of court with a fine of $120,000 (£78,500).'

As I write, and no doubt for months and weeks to come, further revelations will emerge. But experience of recent corporate scandals should provide a guide to the future. VW is the second-largest car maker in the world, after Toyota, with almost 600,000 employees. It is part of a global oligopoly in which five car manufacturers produce over half of the world’s cars. Given its dominance in an oligopolistic market, it is likely that damage to share price and sales will be relatively short-lived, with little or no long-term damage to VW reputation nor sales. That said, what damage there is to the company will not be borne by shareholders – their returns will recover, while limited liability insulates them from any legal or financial responsibilities in any criminal or civil cases. Similarly, most of the senior management will be protected – though one or two bad apples may be given up. By contrast, workers will pay the price as the company gathers funds to recover the costs of the recalls, compensation and any fines – early on, VW warned its workers that recovery from the scandal 'won’t be painless', which foreshadowed an announcement less than four weeks after the ‘scandal’ broke that the company planned to cut investment by €1bn a year. And of course there is the inestimable damage to peoples’ health already inflicted, that will never be causally linked to the 11m VW cars on the world’s roads, emitting life-shortening NOx and diesel particulates, under intentionally-false pretences.

And there’s the rub. The consequences of falsified emissions testing, dismissed in 2014 by the company as a 'technical' issue, is a form of killing, via industrial-scale exposure to diesel pollution. Here, we are in the classic corporate-crime realm of estimates, but the numbers are daunting:

'Particulates are harmful to the lungs, particularly to those most vulnerable to breathing difficulties, such as people with asthma, the very old and the very young. Nitrogen oxides can generate ozone, which also intensifies breathing difficulties. It is estimated, by the European Environment Agency, that air pollution contributes to at least 400,000 premature deaths a year in the region.'

The WHO has recently called air pollution the 'single biggest environmental health risk', linking 'indoor and outdoor air pollution to around 7 million deaths a year – more than double previous estimates'. Of course, not all, even the majority, of these are linked to diesel emissions; but hundreds of thousands, perhaps millions, are, and VW has just added to these deaths whilst marketing its diesel cars as ‘green’ and contributing to environmental protection. Some chutzpah, to be sure, but hardly peculiar in the corporate world of greenwash.

Indignant governments have already, and will continue, to stand up to condemn and call VW to account, rhetorically at least. But therein lies another aspect of the corporate production of crime and harm – it generally proceeds with state collusion, even facilitation. Governments had championed the development of diesel cars, often via subsidies and tax breaks; then-Chancellor Gordon Brown unveiled such support in the UK back in in 2001. In the same spirit, the European Investment Bank has granted loans worth around 4.6bn euros (£3.4bn) to Volkswagen since 1990. More generally, many western governments had offered significant financial support to car firms as part of their post-2008 drive towards economic recovery; for example, the US and UK provided various forms of assistance to the automobile industry, ‘including subsidies to firms and direct involvement in industry restructuring plans’, as well as varieties of car-scrapping schemes to increase sales. At the same time, albeit below the radar, European governments – notably France, Germany and the UK – had long lobbied the European Union to retain loopholes in emissions-tests. At the same time, regulators of such tests are often closely tied to industry – in the UK, Vehicle Certification Agency receives the bulk of its funding from the motor vehicle industry, through a fully marketised testing regime. In short, VW is a typical case of corporate harm production. And as a typical case, it is necessary to look beyond the surface level of ritual condemnation, to discern the hand of the state at work to maintain and support the criminality of the ‘free’, autonomous corporation.

This article was originally published from the Department of Social Policy and Criminology at the Open University.