Volkswagen: A chain of mistakes and poor mindset led to emissions cheating

The German automaker says while there is no excuse for stepping over legal boundaries, a bad company mindset was at fault.

Volkswagen has placed the emission scandal, which has all but ruined the firm's reputation, at the feet of a poor company mindset and a "chain of mistakes" in company culture.

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On Thursday, the German automaker said a mindset which allowed staff to flout the rules was an important element which contributed to the emissions scandal, resulting in the recall of 11 million vehicles worldwide and rendering Volkswagen's reputation into shreds.

The emissions scandal came to light after researchers discovered acceptable levels of nitrogen oxide (NOx) and environmentally damaging gases were only being emitted by Volkswagen diesel engines in laboratory settings.

When on the road, "defeat device" software removed this restriction, leading to cars spewing out NOx levels far higher than regulations set by countries worldwide permitted.

The company expects to take a financial hit of at least $7.3 billion, although it is likely this is a conservative rate considering how extensive the scandal has become.

A separate investigation into cars which may have been sold with the wrong fuel consumption and CO2 level rates has now also almost concluded. Originally, Volkswagen feared up to 800,000 vehicles were affected, potentially leading to a bill of €2 billion. However, an internal investigation has concluded that only 36,000 vehicles may be impacted, a far smaller headache for the German automaker to deal with.

The Chairman of the Supervisory Board of Volkswagen AG, Hans Dieter Potsch, says the company's realignment is proceeding "according to plan," and a number of changes -- such as strategy realignment, the setup of technical support and repair systems across Europe and personnel shakeups -- are on track.

However, past "deficiencies" allowed employees to circumvent the rules, especially when it came to vehicle tests and certification.

The company says that the defeat device which has caused so much heartbreak was installed to make cars appear to meet legal nitrogen oxide levels within "the required timeframe and budget," in light of meeting stricter requirements in the United States. However, this situation was not a one-off, but rather a "chain of errors which were allowed to happen," according to Potsch.

The chairman admitted:

"This led to the incorporation of software that adjusted nitrogen oxide emission levels according to whether vehicles were on the road or being tested. Later, when an effective technical process was available to reduce NOx emissions, it was not employed to the full extent possible.

On the contrary, the software in question allowed the exhaust gas treatment additive "AdBlue" to be injected in variable amounts such that the NOx values were particularly low when vehicles were in the test bay, but significantly higher when vehicles were on the road."

To prevent this happening again, Volkswagen intends to hand over all future emissions testing to a third-party independent auditor. The automaker hopes this will help restore the trust customers, dealers and governments have lost in the firm.

However, the company has not revealed who might ultimately be considered responsible for the scandal, beyond saying that a "comparatively small number of employees were involved." In total, nine managers believed to have been involved have been suspended.

We won't know the full extent of the damage the defeat devices and cheating has caused until well into 2016 as there is such a vast amount of engineering data Volkswagen needs to analyze and compile into a responsible and accurate report. In total, 450 experts are involved in the investigation, but the equivalent of 50 million books -- 102 terabytes of data -- needs to be scrutinized.

Not only this, but the automaker needs to divide its resources to cope with an onslaught of court cases, government investigations and dealership recalls to fix affected vehicles already on the road.

Volkswagen will provide another extensive update at its general meeting in April.

The company is going to begin recalls at the start of the year, beginning in January and staggered to give Volkswagen time to prepare the required hardware fixes. The firm expects recalls and repairs will take at least the full year, and customers will be informed when it is their car's turn to come in.

"No business transaction justifies overstepping legal and ethical bounds," Potsch said.

"I here and now guarantee that we will pursue our thorough investigation to its conclusion. I vouch for this personally, as does the entire Supervisory Board of Volkswagen AG."

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