VW’s case makes it clear (again) that moral and ethical standards applied to scientific and economic arguments do not raise the moral or ethical standing of anyone.

Raising Standards, Lowering Tolerance

Oct. 13, 2015
Regulators and consumers want corporations to fulfill their ethical dreams, and they will be disappointed "… we are entitled…" Corporate scandals and public relations Will penalties work?

Apparently, the scandal surrounding Volkswagen AG’s diesel emissions deception has caused some upset among owners of such vehicles, and the outrage may add to VW’s costs. It admits to programming the emission control systems to sense when a vehicle was being tested for nitrogen oxide emissions, and in response to reduce engine torque, thus NOx emissions; under normal conditions, the vehicles had no effective emissions controls, and so demonstrated increased acceleration, torque, and fuel economy.

VW owners had been enjoying the excellent performances of their Passats and Jettas, and likewise the sense that their driving choices were having a rather benign impact on the global environment.  “The expectation is that we are entitled to some damages that have resulted from the fact we paid more for these cars than we really should have, under the expectation that they are clean, under the expectation that they would have an excellent resale value, which has been called into question now,” according to one environmental law expert.

So, in addition to penalties estimated at up to $18 billion just for violating U.S. EPA regulations, and the cost of recalling and fixing up to 11 million diesel-powered vehicles, VW may have to settle with some aggrieved customers who want to make the automaker pay for destroying their dream of a savvy investment with a clean conscience.

Corporate scandals are nothing new, of course. In the 1980s there was an outbreak of stock market swindles, a perennial problem. In the 1990s a series of greedy and indifferent corporate executives, living high and spending ostentatiously on the investors’ tabs made us mindful of the temptations of wealth and power.

Lately, from Toyota floor mats and General Motors’ ignition switches to faulty airbags in vehicles built by several OEMs, corporations’ misdeeds are more closely impacting their customers, the audience for whom they are intended. And in VW’s case, the outraged buyers suggest their honor has been violated.

It makes sense to me that it should come to this, at least in the automotive market. The manufacturers have strained against tightening emissions regulations since the 1970s, arguing that changing designs to reduce carbon and NOx emissions made vehicles less safe to operate and more expensive to produce. They also knew that more environmentally compliant vehicles were not as appealing to car buyers — they did not accelerate well, could not carry much, were not as comfortable, etc.

But, regulators persisted, with the nominal consent of elected officials and their constituents, and the regulations grew more stringent. So, even as they strived to comply with tighter emissions regulations, automakers worked to convince car buyers that their purchase would bring more than style and performance. It would show they are smart and responsible, too.

It’s clear now that at least one automaker understood it could not meet the high environmental standards, so it took other measures to ensure the goal was met.

Suppose the moral imperative had not been introduced to the scientific challenge of reducing carbon and NOx emissions. Environmental standards remain, after all, a rather regional priority for North Americans and Europeans. In other circumstances, would we not at least admire the ingenuity of VW’s engineers for developing the means to outwit the testing procedures?

More than that, would the proponents of the most stringent vehicle emissions standards be able to document the specific damages caused by VW’s non-compliant diesel engines? Are not those effects as hard to define as the damage to the psyche of disappointed car buyers?

Continuing then, will penalties collected from VW be used to remediate the alleged environmental damages? Is it not more likely that the automaker’s billions will be sluiced into the federal entity that placed itself in a judgmental role between the car builders and the car buyers?

It seems for now that Volkswagen knowingly violated the law, and for that it should pay the penalty. It’s also clear, and not for the first time, that applying moral and ethical standards to scientific and economic arguments does not raise the moral or ethical standing of anyone involved. Quite the opposite.