3Avoidable Failure

“I feel misused by my own company.”

—Oliver Schmidt, Volkswagen engineer1

“Until I know what my boss thinks, I don't want to tell you.”

—Regulator, Federal Reserve Bank of New York (FRBNY)2

In May 2015, the Volkswagen Group had every reason to feel proud.3 It had sold over 10 million vehicles the previous year, thereby laying claim to the title of world's largest automaker. One of the largest employers in Germany, the company was credited with helping the country recover from the global financial crisis of 2008. Ironically, as it would turn out, its Jetta TDI Clean Diesel won the Green Car of the Year at the 2008 Los Angeles Auto Show. A firm with a 78-year history in Germany, made famous by the iconic Beetle of the 1960s, and with a pristine reputation for engineering prowess, Volkswagen's star shone bright enough to be blinding.

As the saying goes, pride cometh before the fall. Merely months later, Volkswagen (VW), the world's largest automotive company, was facing unimaginable scandal. The clean diesel engines that had anchored its impressive US sales were discovered to have been –essentially – a hoax. German officials raided the company headquarters in Wolfsburg, searching for incriminating evidence. Criminal investigations were opened by the United States and the European Union to figure out who knew what, when, and how. The company halted sales, reported its first quarterly loss in 15 years, and witnessed a third of its market value vanish. CEO ...

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