An arrest earlier this week in the Dieselgate scandal brings with it validation that upper Volkswagen Group management were indeed aware the company was fraudulently reporting inflated emissions results. At the time the management group claimed the scandal was the work of a few rogue engineers acting on their own. But, as I wrote at the time, that seemed nonsensical because of how reporting structures work in large engineering organizations.
The arrest of Oliver Schmidt (pictured above), former General Manager in charge of VW’s Environmental and Engineering Office, occurred in Florida. He’d been vacationing there, and was arrested when he attempted to return to Germany. According to a Reuters report just released, Schmidt and other VW Group employees told upper management about the emissions cheating device, and warned management of possible indictments and other problems.
The Dieselgate scandal came to light in September 2015 when the EPA and CARB announced an investigation against the Volkswagen Group. At that time they had solid proof VW had fraudulently inserted “defeat device” algorithms into TDI Engine control algorithms. Such engines detect the car was undergoing emissions tests, and modified engine performance characteristics to artificially inflate emissions results. Based on extremely good emissions results, governments around the world lauded the Volkswagen Group TDI cars as a green car miracle, they earned many “green car of the year” sort of awards, preferential status in green car listings, various government subsidies especially in the form of tax breaks given to car purchasers, and so on.
The problem was that these cars normal behavior was not at all green – but instead pretty dirty, emitting a high amount of NOx pollution. But, hey, the cars had that Funkengruven thing going on and were very popular.
Since September 2015 the investigation and problems for VW has kept growing. I found myself unable to stomach continued coverage of this story so I stopped writing about it. But there’s one issue I’d written about at the time for which the FBI has now unveiled evidence. That VW’s upper management HAD to know about the fraud, and that it wasn’t the isolated work of rogue engineers.
VW Group Executive Team involvement
The FBI Complaint leading to Schmidt’s arrest, going by the Reuters report, says Schmidt and others notified the VW Group executive team in July 2015. A presentation on the “defeat device” was given on-or-around July 27, 2015, or a bit more than a month before EPA regulators were notified.
The presentation said that U.S. regulators (EPA and CARB) were not aware of the “defeat device”. The executive group did not authorize disclosure of the device, but instead ordered its continued concealment. One issue VW faced at the time was gaining EPA approval to sell 2016 model year cars.
The VW Group began to be aware their TDI engines would not meet the emissions targets back in 2006. Between ever-tightening emissions regulations and VW’s aim to green its image, a top goal for the TDI engines was a huge emissions boost while maintaining the performance levels to continue delivering high performance fun to customers. In other reporting some time ago it was learned the defeat device fraud began at that time, because of the inability to deliver both excellent emissions ratings and high performance .
From the beginning of the dieselgate scandal, the Volkswagen Group executive team asserted that the top executives knew nothing. Instead the fraud was all the work of a few rogue engineers. Reading those assertions, I knew that could not be the case based on my experiences as an Engineer in a large Engineering organization.
I reasoned that the management-chain-effect meant there had to be knowledge of the defeat device among a larger set of people than a small group of rogue employees. If nothing else, the high priority given to improving emissions in this engine design meant that all levels of the management chain had to be aware the TDI Engine team were struggling to meet the emissions target. Why? It has to do with management chain reporting practices.
In any engineering project, the actual work is typically done by the engineers, of course. The managers are required to present status reports on a regular basis, often monthly or quarterly. The management chain will want to be kept aware of status, progress on goals, and any unsolvable problems.
That latter point will have, therefore, raised a red flag along the TDI Engine management chain starting in 2006. Given that the affected TDI Engine cars began shipping in 2009, there were three years of the same issue showing up in progress reports delivered up the management chain. Three years is a long time for a problem to go unsolved, and therefore the engineering team had to have been under pressure to deliver a solution. I’ve been the recipient of such pressure, and know whereof I speak.
A solid engineering organization like Volkswagen/Audi/Porsche/etc simply does not ship product that fails to meet the goals. At least not without good reason.
What isn’t clear from this bit of reasoning is how high the knowledge reached in the management chain. Did it reach all the way to the executive group? That’s unknown.
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