tag:theconversation.com,2011:/nz/topics/vw-20828/articlesVW – The Conversation2021-01-14T15:26:16Ztag:theconversation.com,2011:article/1522792021-01-14T15:26:16Z2021-01-14T15:26:16ZPursuing Tesla’s electric cars won’t rev up VW’s share price<figure><img src="https://images.theconversation.com/files/378617/original/file-20210113-19-84yh5r.jpg?ixlib=rb-1.1.0&rect=66%2C11%2C7282%2C4869&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The 2015 diesel scandal resulted in a 40% drop in the company's share price at the time. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/vilnius-lithuania-august-05-2016-electric-465762503">A. Aleksandravicius/Shutterstock</a></span></figcaption></figure><p>Volkswagen’s chairman, Herbert Deiss, has been struggling to bring the company’s stock price back to its <a href="https://fortune.com/2015/09/23/volkswagen-stock-drop/">previous heights</a> since he took over the reins of the German car maker six years ago. The business has been embroiled in <a href="https://www.bloomberg.com/news/articles/2020-11-24/vw-chief-s-tensions-with-board-reemerge-in-clash-over-executives">infighting</a>, <a href="https://www.autocar.co.uk/car-news/industry-news/dieselgate-european-court-justice-deems-vw-defeat-devices-illegal">scandals</a> and board tussles.</p>
<p>Diess was appointed in 2015 at <a href="https://www.researchgate.net/publication/332327135_The_Volkswagen_emissions_scandal_and_its_aftermath#:%7E:text=The%20discovery%20in%202015%20that,share%20price%20in%202%20weeks.">the peak</a> of the <a href="https://theconversation.com/vw-emissions-testing-scandal-shows-that-environmental-governance-is-in-trouble-49250">diesel emissions scandal,</a> when VW was caught using software settings to under-report emissions. He was surprisingly mellow in a recent <a href="https://www.linkedin.com/pulse/how-we-transform-volkswagen-herbert-diess/">LinkedIn post</a> in which he acknowledged that there has been significant resistance within the company that he has yet to resolve. He went on to detail his plans to turn around the fortunes of an increasingly disrupted VW. </p>
<p>There is one thing Deiss is clear on: VW, which continues to be the world’s <a href="https://www.wheels.ca/top-ten/these-are-ten-biggest-automakers-in-the-world/">biggest</a> automaker in terms of cars sold, must catch up with Tesla, an electric-vehicle company, in order to survive. </p>
<figure class="align-center ">
<img alt="VW and Tesla share price" src="https://images.theconversation.com/files/378672/original/file-20210113-23-19r4o9e.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/378672/original/file-20210113-23-19r4o9e.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=283&fit=crop&dpr=1 600w, https://images.theconversation.com/files/378672/original/file-20210113-23-19r4o9e.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=283&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/378672/original/file-20210113-23-19r4o9e.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=283&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/378672/original/file-20210113-23-19r4o9e.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=356&fit=crop&dpr=1 754w, https://images.theconversation.com/files/378672/original/file-20210113-23-19r4o9e.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=356&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/378672/original/file-20210113-23-19r4o9e.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=356&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">VW’s share price has been tanking, its will take some effort to zoom past Tesla.</span>
<span class="attribution"><a class="source" href="https://uk.tradingview.com/chart/SVEQmywt/">TradingView</a></span>
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</figure>
<p>Catching up to Tesla might be a little tricky. Reminiscent of how Apple bolted past Nokia in market value in 2008, Tesla recently <a href="https://www.bbc.co.uk/news/business-53257933">became</a> the world’s most valuable automaker while selling only a fraction of the cars Volkswagen does. Nonetheless, VW’s “catch-up” project has been code-named “Mission T” and has a goal to match Tesla’s technological capabilities by 2024. </p>
<p>Deiss appears to believe that building better, more electric “products” will help him save VW. History, however, has repeatedly shown that building a better product rarely resolves disruption. The graveyard of technically superior products is extensive and includes the likes of BluRay, Windows Mobile and the <a href="https://www.extremetech.com/gaming/298147-pour-one-out-for-the-dreamcast-segas-awesome-quirky-gone-too-soon-console">Sega Dreamcast</a>.</p>
<h2>An alien ecosystem</h2>
<p>Tesla’s competitive advantage does not come from just its technology and agility, as Deiss indicates in his LinkedIn post. Far from it. The company has created a new automotive ecosystem where the rules are dramatically different from what has been the norm. Tesla is the <a href="https://www.forbes.com/sites/greatspeculations/2020/01/21/a-closer-look-at-teslas-supercharger-network/?sh=42814d017193">leader</a> amongst auto makers when it comes to electric charging networks, with faster charging exclusive to its models. This, combined with its increasing influence on the <a href="https://www.ft.com/content/b13f316f-ed85-4c5f-b1cf-61b45814b4ee">supply</a> of lithium ion batteries, means that any follow-on electric car entrants must play by Tesla’s rules as gatekeeper. Such a change in power dynamics rarely ends well for incumbents like VW.</p>
<p>Tesla has bent the cost structure of the industry itself. It has skipped the traditional (and expensive) car dealer network and replaced it with a more modern and cheaper <a href="https://www.tesla.com/en_GB/blog/tesla-approach-distributing-and-servicing-cars">direct-to-consumer</a> sales channel. It also barely spends anything on marketing, which continues to be a <a href="https://adage.com/article/deloitte-digital/automotive-marketing-shifting-gears-a-slowing-market/310392">major expense</a> for automotive companies. Tesla’s brand awareness is linked to the controversial, Twitter-powered presence of its CEO, Elon Musk. He was named <a href="https://www.bbc.co.uk/news/technology-55578403">the richest man in the world</a> on January 7. His rise to the top, albeit for just <a href="https://www.businessinsider.com/elon-musk-net-worth-jeff-bezos-rich-list-worlds-richest-2021-1?r=US&IR=T">four days</a>, was a reminder that the entrepreneur is bigger than the Tesla brand.</p>
<p>Deiss, however, doesn’t appear to recognise any of the above as Tesla’s advantages. As a result, Mission T’s focus is just technology parity – and that is myopic. Unless VW’s next move is about finding a sustainable position in this new automotive ecosystem, its struggles will not go away.</p>
<h2>The spectre of new business models</h2>
<p>The automotive industry has traditionally thrived on cyclical purchases. An average household buys at least one car for a family’s mobility needs. An average household buys a car, uses it for several years and then trades it in. Thanks to emergent mobility models such as car sharing and ride hailing, the <a href="https://www.iaai.com/Articles/ride-hailing-part-1-its-effect-on-vehicle-sales">need to own a car</a>, especially in busy, space constrained cities, has gone down. It is unclear how VW intends to deal with this longer-term decline in demand for new cars. Tesla is embracing this shift head on. In his investor-day presentation, Musk laid out a <a href="https://www.theverge.com/2019/4/22/18510828/tesla-elon-musk-autonomy-day-investor-comments-self-driving-cars-predictions">clear vision</a> of a future where Tesla uses self-driving technology to enable a “robo-taxi” function for its customers. The goal is for Tesla customers to be able to send off their self-driving cars to pick up and drop off other people and make rental income in the process. Musk went as far as to predict that an average Tesla owner could make $30,000 per year by sending their car away as a self-driving taxi when they are not using it.</p>
<figure class="align-center ">
<img alt="Finger pressing a push button to start a self-driving car. Composite image between a hand photography and a 3D background." src="https://images.theconversation.com/files/378779/original/file-20210114-17-e67fig.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/378779/original/file-20210114-17-e67fig.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=432&fit=crop&dpr=1 600w, https://images.theconversation.com/files/378779/original/file-20210114-17-e67fig.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=432&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/378779/original/file-20210114-17-e67fig.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=432&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/378779/original/file-20210114-17-e67fig.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=543&fit=crop&dpr=1 754w, https://images.theconversation.com/files/378779/original/file-20210114-17-e67fig.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=543&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/378779/original/file-20210114-17-e67fig.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=543&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Tesla plans to launch a robotaxi network.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/finger-pressing-push-button-start-selfdriving-643585552">Olivier Le Moal/Shutterstock</a></span>
</figcaption>
</figure>
<p>While it may seem premature given that we are still <a href="https://www.businessinsider.com/self-driving-cars-fully-autonomous-vehicles-future-prediction-timeline-2019-8?r=US&IR=T">several years away</a> from fully autonomous self-driving cars, the fact that Tesla is preparing to adapt for this change in business models is remarkable. And while it is true that VW has rolled out its own nascent autonomous driving unit <a href="https://www.theverge.com/2019/10/28/20936114/vw-self-driving-startup-spinoff-argo-announce#:%7E:text=Volkswagen%20is%20stepping%20up%20its,according%20to%20the%20Financial%20Times.">in 2019</a>, it is unclear how that will help in this shift in business models.</p>
<p>Despite my criticism of Deiss’ approach, it is only fair to recognise that he has one of the hardest jobs in the world. Large scale transformations the size and complexity of what VW needs are both significant and nerve wracking for people leading them – and Deiss is no exception. However, the only way that he can complete his mission to transform VW is to go wider and bolder on the strategic choices he makes for the automaker. Just challenging Tesla on the technology front will not be enough.</p><img src="https://counter.theconversation.com/content/152279/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hamza Mudassir does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Tesla has a lot more going for it than just its electric cars. VW must think wider and bolder to save the business.Hamza Mudassir, Visiting Fellow in Strategy, Cambridge Judge Business SchoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/919492018-02-22T13:00:09Z2018-02-22T13:00:09ZSilicon Valley is winning the race to build the first driverless cars<figure><img src="https://images.theconversation.com/files/207500/original/file-20180222-152348-n7t8rw.png?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Waymo</span></span></figcaption></figure><p>Henry Ford didn’t invent the motor car. The late 1800s saw a flurry of innovation by hundreds of companies battling to deliver on the promise of fast, efficient and reasonably-priced mechanical transportation. Ford later came to dominate the industry thanks to the development of the moving assembly line.</p>
<p>Today the sector is poised for another breakthrough with the advent of cars that drive themselves. But unlike the original wave of automobile innovation, the race for supremacy in autonomous vehicles is concentrated among a few corporate giants. So who is set to dominate this time? </p>
<p><a href="https://indd.adobe.com/view/a0bd4358-a51c-4a90-b300-e727272a6bba">I’ve analysed</a> six companies we think are leading the race to build the first truly driverless car. Three of these – General Motors, Ford and Volkswagen – come from the existing car industry and need to integrate self-driving technology into their existing fleet of mass-produced vehicles. The other three – Tesla, Uber and Waymo (owned by the same company as Google) – are newcomers from the digital technology world of Silicon Valley and have to build a mass manufacturing capability.</p>
<p>While it’s impossible to know all the developments at any given time, we have tracked investments, strategic partnerships and official press releases to learn more about what’s happening behind the scenes. The car industry typically rates self-driving technology <a href="https://autoalliance.org/connected-cars/automated-driving-systems/levels-of-automation/">on a scale</a> from Level 0 (no automation) to Level 5 (full automation). We’ve assessed where each company is now and estimated how far they are from reaching the top level. Here’s how we think each player is performing.</p>
<h1>Volkswagen</h1>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/207502/original/file-20180222-152375-15m1e12.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/207502/original/file-20180222-152375-15m1e12.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=225&fit=crop&dpr=1 600w, https://images.theconversation.com/files/207502/original/file-20180222-152375-15m1e12.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=225&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/207502/original/file-20180222-152375-15m1e12.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=225&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/207502/original/file-20180222-152375-15m1e12.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=283&fit=crop&dpr=1 754w, https://images.theconversation.com/files/207502/original/file-20180222-152375-15m1e12.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=283&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/207502/original/file-20180222-152375-15m1e12.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=283&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Audi A8 traffic jam pilot.</span>
<span class="attribution"><span class="source">Audi</span></span>
</figcaption>
</figure>
<p>Volkswagen <a href="https://www.ft.com/content/b09e7396-21c5-11e6-9d4d-c11776a5124d">has invested</a> in taxi-hailing app Gett and partnered with chip-maker Nvidia to develop an artificial intelligence co-pilot for its cars. In 2018, the VW Group is set to release <a href="https://www.forbes.com/sites/michaeltaylor/2017/09/10/tthe-level-3-audi-a8-will-almost-be-the-most-important-car-in-the-world/">the Audi A8</a>, the first production vehicle that reaches Level 3 on the scale, “conditional driving automation”. This means the car’s computer will handle all driving functions but a human has to be ready to take over if necessary.</p>
<h2>Ford</h2>
<p>Ford already sells cars with a Level 2 autopilot, “partial driving automation”. This means one or more aspects of driving are controlled by a computer based on information about the environment, for example combined cruise control and lane centring. Alongside <a href="https://www.forbes.com/sites/samabuelsamid/2016/08/16/ford-and-baidu-lead-new-150-million-investment-in-lidar-maker-velodyne/#2203481b1de7">other investments</a>, the company has put US$1 billion into Argo AI, an artificial intelligence company for self-driving vehicles. Following a trial to <a href="https://www.wired.com/story/ford-self-driving-pizza-delivery-dominos/">test pizza delivery</a> using autonomous vehicles, Ford is now testing Level 4 cars on <a href="https://www.forbes.com/sites/samabuelsamid/2017/08/29/dominos-takes-high-tech-pizza-delivery-to-level-4-with-ford/">public roads</a>. These feature “high automation”, where the car can drive entirely on its own but not in certain conditions such as when the road surface is poor or the weather is bad.</p>
<h2>General Motors</h2>
<p>GM also sells vehicles with Level 2 automation but, after buying Silicon Valley startup Cruise Automation in 2016, <a href="http://uk.businessinsider.com/gm-cruise-fully-autonomous-electric-car-no-steering-wheel-2018-1">now plans</a> to launch the first mass production-ready Level 5 autonomy vehicle that drives completely on its own by 2019. The Cruise AV will have no steering wheel or pedals to allow a human to take over and be part of a large fleet of <a href="https://www.ft.com/content/cc88fc96-d620-11e7-8c9a-d9c0a5c8d5c9">driverless taxis</a> the company plans to operate in big cities. But crucially the company hasn’t yet <a href="https://www.recode.net/2018/1/12/16880570/general-motors-self-driving-cars-cruise-steering-wheel-nhtsa-fmvss">secured permission</a> to test the car on public roads.</p>
<h2>Waymo (Google)</h2>
<figure> <img src="https://storage.googleapis.com/sdc-prod/v1/press/waymo_first_ride.gif"><figcaption>Level 5 testing.</figcaption></figure>
<p>Founded as a special project in 2009, Waymo separated from Google (though they’re both owned by the same parent firm, Alphabet) in 2016. Though it has never made, sold or operated a car on a commercial basis, Waymo has created test vehicles that have clocked more than <a href="https://waymo.com/ontheroad/">4m miles</a> without human drivers as of November 2017. Waymo tested its Level 5 car, “Firefly”, between 2015 and 2017 but then decided to focus on hardware that could be installed in other manufacturers’ vehicles, starting with the <a href="https://www.cnbc.com/2018/01/29/waymo-orders-thousands-of-pacifica-minivans-in-push-to-open-ride-hailing-service.html">Chrysler Pacifica</a>. </p>
<h2>Uber</h2>
<p>The taxi-hailing app maker Uber has been testing autonomous cars on the streets of Pittsburgh <a href="http://uk.businessinsider.com/uber-self-driving-car-testing-in-pittsburgh-2016-2?r=US&IR=T">since 2016</a>, always with an employee behind the wheel ready to take over in case of a malfunction. After buying the self-driving truck company Otto in 2016 for a <a href="https://www.reuters.com/article/us-uber-tech-volvo-otto-idUSKCN10T1TR">reported US$680m</a>, Uber is now expanding its AI capabilities and plans to test NVDIA’s latest chips in Otto’s vehicles. It has also partnered with Volvo to create a <a href="https://www.ft.com/content/36f071b0-cd64-11e7-b781-794ce08b24dc">self-driving fleet</a> of cars, and with Toyota to co-create a <a href="https://www.recode.net/2018/1/8/16864916/uber-partnership-toyota-ces-volvo-daimler">ride-sharing autonomous vehicle</a>.</p>
<h2>Tesla</h2>
<p>The first major car manufacturer to come from Silicon Valley, Tesla was also the first to introduce Level 2 autopilot <a href="http://www.bbc.co.uk/news/technology-34535604">back in 2015</a>. The following year, it announced that all new Teslas would have the hardware for <a href="https://www.tesla.com/blog/all-tesla-cars-being-produced-now-have-full-self-driving-hardware">full autonomy</a>, meaning once the software is finished it can be deployed on existing cars with an instant upgrade. Some experts have challenged this approach, arguing that the company has merely added surround cameras to its production cars that aren’t as capable as the <a href="https://www.theverge.com/2017/10/24/16504038/tesla-autopilot-self-driving-update-elon-musk">laser-based sensing systems</a> that most other carmakers are using.</p>
<p>But the company has collected data from hundreds of thousands of cars, driving millions of miles across all terrains. So we shouldn’t dismiss the firm’s founder, Elon Musk, when he claims a Level 4 Tesla will drive from <a href="https://www.teslarati.com/tesla-autonomous-coast-to-coast-self-driving-trip/">LA to New York</a> without any human interference within the first half of 2018.</p>
<h2>Winners</h2>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/206746/original/file-20180216-131000-1tlem5l.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/206746/original/file-20180216-131000-1tlem5l.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/206746/original/file-20180216-131000-1tlem5l.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=376&fit=crop&dpr=1 600w, https://images.theconversation.com/files/206746/original/file-20180216-131000-1tlem5l.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=376&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/206746/original/file-20180216-131000-1tlem5l.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=376&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/206746/original/file-20180216-131000-1tlem5l.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=472&fit=crop&dpr=1 754w, https://images.theconversation.com/files/206746/original/file-20180216-131000-1tlem5l.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=472&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/206746/original/file-20180216-131000-1tlem5l.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=472&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Who’s leading the race?</span>
<span class="attribution"><a class="source" href="https://indd.adobe.com/view/a0bd4358-a51c-4a90-b300-e727272a6bba">IMD</a></span>
</figcaption>
</figure>
<p>At the moment, the disruptors like Tesla, Waymo and Uber seem to have the upper hand. While the traditional automakers are focusing on bringing Level 3 and 4 partial automation to market, the new companies are leapfrogging them by moving more directly towards Level 5 full automation. Waymo may have the least experience of dealing with consumers in this sector but it has already clocked up a huge amount of time testing some of the most advanced technology on public roads.</p>
<p>The incumbent carmakers are also focused on the difficult process of integrating new technology and business models into their existing manufacturing operations by buying up small companies. The challengers, on the other hand, are easily partnering with other big players including manufacturers to get the scale and expertise they need more quickly. </p>
<p>Tesla is building its own manufacturing capability but also collecting vast amounts of critical data that will enable it to more easily upgrade its cars when ready for full automation. In particular, Waymo’s experience, technology capability and ability to secure solid partnerships puts it at the head of the pack.</p><img src="https://counter.theconversation.com/content/91949/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Wade does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Uber, Tesla and Waymo (Google) are leapfrogging traditional car makers like Ford, VW and General Motors when it comes to self-driving cars.Michael Wade, Professor of Innovation and Strategy, Cisco Chair in Digital Business Transformation, International Institute for Management Development (IMD)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/908922018-01-31T15:42:01Z2018-01-31T15:42:01ZDiesel monkey tests: can harmful corporate research ever be justified?<figure><img src="https://images.theconversation.com/files/204253/original/file-20180131-131744-hrdtsx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/animal-testing-94008682?src=mRaHt26UlMrfSsspmzaWDA-1-78">Shutterstock</a></span></figcaption></figure><p>The <a href="https://www.nytimes.com/2018/01/25/world/europe/volkswagen-diesel-emissions-monkeys.html">recent allegations</a> that researchers funded by the German car industry tested the effects of diesel fumes on humans and monkeys has raised serious questions about research ethics in the corporate world. </p>
<p>These tests were carried out by scientists on behalf of the now-disbanded European Research Group of Environment and Health in the Transport Sector (EUGT), which was funded by Volkswagen, Daimler and BMW. The aim was to observe and record the pollutant effect of emissions from diesel cars using modern exhaust-cleaning technology.</p>
<p>Yet, even if the aim of the research was to show that diesel fumes are less harmful than previously considered, there still exists <a href="http://www.europarl.europa.eu/sides/getDoc.do?type=REPORT&mode=XML&reference=A8-2017-0049&language=EN#title2">substantial evidence</a> that diesel fumes are harmful to health. No one, not even car manufacturers, is claiming that diesel exhaust fumes are entirely harmless.</p>
<p>Ethically sound research brings huge benefits to society, saves lives and advances knowledge. But research always comes at a cost, ranging from resources and time used through to the direct risk of harm for subjects. So, the central ethical question is always: are these costs justified by the potential benefits of the research? When these costs become skewed too far, particularly where people have been exposed to unjustifiable harm, we end up with research scandal.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/human-experiments-the-good-the-bad-and-the-ugly-39876">Human experiments – the good, the bad, and the ugly</a>
</strong>
</em>
</p>
<hr>
<p>In the case of the diesel fume tests, the most pressing question is whether exposing monkeys and humans to harm can be justified against the benefits of the research. When administering substances known to be dangerous, the potential benefits would have to be significant in order justify such exposure. This can happen, for example, in cases where the research is therapeutic. Exposing volunteers to <a href="https://theconversation.com/testing-drugs-on-animals-could-soon-be-a-thing-of-the-past-58183">newly developed drugs</a> that might end up hurting them can be justified on the basis that they might also benefit, or that society more generally will.</p>
<p>But in purely <a href="http://annals.org/aim/article-abstract/2023019/corporate-research-ethics-whose-responsibility?doi=10.7326%2fM14-1669">corporate research</a>, these therapeutic aims are often absent. Instead, they often are replaced with a central aim of advancing profits. This does not necessarily mean there are not secondary social benefits in some cases. With diesel fume emissions, developing and testing technologies to reduce harmful emissions might be considered to have these secondary benefits in terms of improving public health and the environment. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/204276/original/file-20180131-157488-yk1qe5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/204276/original/file-20180131-157488-yk1qe5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/204276/original/file-20180131-157488-yk1qe5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/204276/original/file-20180131-157488-yk1qe5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/204276/original/file-20180131-157488-yk1qe5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/204276/original/file-20180131-157488-yk1qe5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/204276/original/file-20180131-157488-yk1qe5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Humans can volunteer. Animals can’t.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/young-man-testing-breathing-function-by-723861829?src=MJbW5jVcafmD4bWUlTBJ6A-1-4">Shutterstock</a></span>
</figcaption>
</figure>
<p>The amount of risk and the severity of the potential harm are also important factors. Even a significant future benefit might not offset serious harm. And in the case of the diesel tests, there are <a href="http://www.who.int/ipcs/emergencies/diesel.pdf">very real and severe risks</a> associated with exposure to fumes. </p>
<p>Whether the tests exposed subjects to greater levels of fumes than they might otherwise experience (such as walking down the street in daily life) would be important to know in order to assess these levels of potential harm. A greater than normal exposure requires proportionally greater potential benefits. But given what we know about the harm from diesel fumes, it is unlikely that such extra risk could be justified by a modest potential improvement in public health.</p>
<p>Another way of justifying the exposure to risks and harms in research is to appeal to the <a href="https://ec.europa.eu/research/science-society/document_library/pdf_06/textbook-on-ethics-report_en.pdf">consent given by the research subject</a>. If you volunteer and you are properly informed about the risks then why shouldn’t you take part, despite the potential harm? You might see any payment you receive for volunteering as more valuable than being free from the risk. Or you might simply want to altruistically contribute to a greener world.</p>
<p>Yet in cases where potential harm is particularly severe, we might still want to limit people’s freedom to consent. There may be limits that we think we should not cross in society and that to ask someone to expose themselves to significant risks for the sake of research is a step too far. In corporate research, where participants motivated by <a href="http://onlinelibrary.wiley.com/doi/10.1111/1467-8519.00078/pdf">how much reward</a> they are offered rather than potential therapy or social benefit, allowing people to undergo harm may even be seen as <a href="http://onlinelibrary.wiley.com/doi/10.1111/1467-8519.00136/pdf">devaluing them as human beings</a>.</p>
<p>Corporate research is very demanding upon our system of ethical decision-making because of the lack of focus on benefit to individuals or society. When the research involves substances that are known to be severely dangerous, it is extremely difficult to justify exposing people to them, even with all of the ethical arguments about benefiting the greater good and the right to consent. And because animal subjects can’t give consent, the research would have to have even more worthwhile aims to justify exposing them to risk and harm.</p><img src="https://counter.theconversation.com/content/90892/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anthony Wrigley does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Researchers funded by VW, Daimler and BMW are accused of testing diesel fumes on monkeys and humans.Anthony Wrigley, Senior Lecturer in Ethics, Keele UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/839402017-09-15T14:18:16Z2017-09-15T14:18:16ZMerkel and Schulz must face up to Germany’s blind spot on corporate corruption<figure><img src="https://images.theconversation.com/files/186179/original/file-20170915-8121-1eyqrmk.jpg?ixlib=rb-1.1.0&rect=577%2C10%2C2683%2C1775&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/map-germany-through-magnifying-glass-404320606?src=iOMoXbD3TGPOEdZx2to-XQ-1-41">Naruedom Yaempongsa/Shutterstock</a></span></figcaption></figure><p>Angela Merkel appears <a href="http://www.telegraph.co.uk/news/0/german-election-polls-odds-tracker-merkel-seeks-fourth-term1/">odds-on</a> to return to power as Germans go to the polls on September 24, either in coalition with the liberal Free Democrats (FDP) or in a “grand coalition” with the Social Democrats (SPD). The SPD remains the largest challenger to Merkel’s dominance, but it is struggling to lay a glove on a respected opponent. </p>
<p>The one and only <a href="https://www.theguardian.com/world/2017/sep/14/angela-merkel-rejects-martin-schulz-plea-second-tv-election-debate-germany">leaders’ debate</a> pitched Merkel against the SPD’s, Martin Schulz. On much domestic policy there was little to choose between them. Merkel and Schulz were, for example, at pains to suggest that the German car industry needed to do better in the face of the <em>Abgasskandal</em>, as the diesel emissions scandal is known. Quite how far they are going to go to make sure that happens is much less clear.</p>
<p>Yet Germany has a much broader corruption problem. It is, however, largely unaware of it. That might sound odd. But for many Germans, corruption is something that happens elsewhere. You don’t bribe traffic police in Germany and you stringently follow the rules when filling in your tax returns. The majority of Germans never get anywhere near experiencing corruption directly.</p>
<p>That experience is largely borne out in Germany’s performance in international corruption indices. For what they are worth (and some don’t think that they are <a href="https://www.washingtonpost.com/news/monkey-cage/wp/2016/01/27/how-do-you-measure-corruption-transparency-international-does-its-best-and-thats-useful/">worth that much</a>), Germany came joint 10th (out of 176) in Transparency International’s most recent <a href="https://www.transparency.org/research/cpi/">Corruption Perceptions Index</a> and just outside the top 10 in the World Bank’s <a href="http://info.worldbank.org/governance/wgi/index.aspx">World Governance Indicators</a>. The Nordic countries (and New Zealand) might top these tables, but Germany is rarely too far behind.</p>
<h2>Corporate misbehaviour</h2>
<p>Yet one thing that the <em>Abgasskandal</em> has further highlighted is that the behaviour of corporate Germany doesn’t always live up to expectations. The antics of diesel car makers are hardly the first example of German firms bending the rules to breaking point.</p>
<p>The cases of <a href="http://www.theguardian.com/sustainable-business/siemens-solmssen-bribery-corruption">Siemens</a> and <a href="http://www.nytimes.com/2007/02/15/business/worldbusiness/15scandal.html?pagewanted=2&_r=2&ref=fraudsandswindling&">Daimler</a> illustrate that the there have been occasions over the last decade when companies acted in a fashion that belies the excellent reputation of German business. </p>
<p>Industrial group Siemens <a href="http://www.spiegel.de/international/business/new-dimensions-of-corruption-siemens-admits-dubious-payments-of-1-3-billion-a-516127.html">has admitted</a> using a wide-ranging system of bribes to help it achieve its business goals, leading to a <a href="http://www.nytimes.com/2008/12/16/business/worldbusiness/16siemens.html?mcubz=0">US$1.3 billion</a> legal settlement in the US in 2008 and total costs to the company of <a href="https://www.theguardian.com/business/2008/dec/16/regulation-siemens-scandal-bribery">€2.5 billion</a>.</p>
<p>Car company Daimler, meanwhile, paid US$185m <a href="https://www.daimler.com/documents/investors/nachrichten/kapitalmarktmeldungen/daimler-ir-release-en-20100401.pdf">to settle charges</a> that it violated the American Foreign Corrupt Practices Act when trying to win government contracts <a href="https://www.theguardian.com/business/2010/mar/24/daimler-settles-us-bribery-charges">in 22 countries between 1998 and 2008</a>. These aren’t isolated examples.</p>
<h2>Turning the corner?</h2>
<p>German authorities, to their credit, have responded to this and there has been a move to prosecute more miscreants. Many German multinationals have subsequently given serious thought (and resources) to their compliance programmes. Siemens, for example, rolled out an expansive internal <a href="Siemens%20launched%20a%20comprehensive%20training%20and%20education%20programme%20on%20anti-corruption%20practises%20for%20its%20employees">training and education programme</a> and now has a compliance programme that is industry-leading. </p>
<p>That’s all to be commended. These developments have nonetheless still not stopped German companies from transgressing. If compliance programmes were working properly across the board <a href="http://www.euractiv.com/sections/justice-home-affairs/ngo-german-firms-mired-worst-greek-corruption-scandals-wwii-317194">then Rheinmetall</a> wouldn’t have paid €37m <a href="http://uk.reuters.com/article/rheinmetall-greece/rheinmetall-unit-fined-37-mln-euros-in-greek-bribery-probe-idUKFWN0TT04M20141210">to settle</a> a criminal investigation in to bribery whilst selling its anti-aircraft defence system. <a href="http://www.bbc.co.uk/news/business-34324772">Volkswagen</a> wouldn’t have been called out for massaging the emissions figures for the diesel cars that it sold in the US and elsewhere.</p>
<p>The problem for Merkel and Schulz is twofold. Firstly German exporters have been actively encouraged to invest in developing markets. And they have done that very impressively. Some <a href="https://www.destatis.de/EN/FactsFigures/NationalEconomyEnvironment/ForeignTrade/TradingPartners/Current.html">€71 billion of German products</a> went to China alone in 2015. The high-cost, high-quality exports that <a href="https://theconversation.com/the-secret-behind-germanys-thriving-mittelstand-businesses-is-all-in-the-mindset-25452">the small and medium-sized businesses in Germany’s famed Mittelstand</a> have produced are the backbone of the German economy.</p>
<p>Corruption is often a serious problem <a href="http://www.telegraph.co.uk/business/2016/10/26/bribery-a-way-of-life-for-companies-operating-in-emerging-market/">in these emerging markets</a>. Larger German firms have now generally adopted compliance programmes that look to deal with the risks of doing business in such environments. Smaller Mittelstand companies, however, have not experienced the compliance shock that larger companies frequently have. Many of them, as a result, have poorly developed compliance programmes or no programmes at all. As the <a href="http://ec.europa.eu/dgs/home-affairs/what-we-do/policies/organized-crime-and-human-trafficking/corruption/anti-corruption-report/docs/2014_acr_germany_chapter_en.pdf">European Commission</a> noted in 2014:</p>
<blockquote>
<p>When it comes to small and medium sized enterprises, corporate governance programmes and compliance structures are not yet widespread.</p>
</blockquote>
<p>Big German companies have caught the eye for their misdemeanours, but it is the real engine of the German economy – the Mittelstand – that is arguably playing catch up the most.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/185854/original/file-20170913-23134-1pjjg04.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/185854/original/file-20170913-23134-1pjjg04.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/185854/original/file-20170913-23134-1pjjg04.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=423&fit=crop&dpr=1 600w, https://images.theconversation.com/files/185854/original/file-20170913-23134-1pjjg04.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=423&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/185854/original/file-20170913-23134-1pjjg04.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=423&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/185854/original/file-20170913-23134-1pjjg04.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=532&fit=crop&dpr=1 754w, https://images.theconversation.com/files/185854/original/file-20170913-23134-1pjjg04.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=532&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/185854/original/file-20170913-23134-1pjjg04.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=532&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">More scrutiny needed.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/staged-photo-german-police-car-highway-569213167?src=9Fn5bXJHEHa0w9TFSmGPCw-1-26">Rostislav Král</a></span>
</figcaption>
</figure>
<h2>Poachers and Game-Keepers</h2>
<p>The second issue is that German politicians are not neutral arbiters in all of this. In the case of VW, politicians from the state of Lower Saxony, which owns part of the company, <a href="http://www.reuters.com/article/us-volkswagen-emissions-germany-politics/vw-scandal-exposes-cozy-ties-between-industry-and-berlin-idUSKCN0RQ0BU20150926">sit on the board</a>. Politicians in that position have a clear interest in VW doing well just as they have an obligation to check that it doesn’t do so at the expense of others. This isn’t constructive ambiguity. This is a real risk of conflict of interest.</p>
<p>The challenge for the government which emerges from the German election is threefold. Firstly, acknowledge that German business has an anti-corruption problem. Secondly, whoever leads the next government needs to show that they take this problem seriously; bringing in a German version of the American <a href="https://www.justice.gov/criminal-fraud/foreign-corrupt-practices-act">Foreign Corrupt Practices Act</a> or the UK’s <a href="http://www.legislation.gov.uk/ukpga/2010/23/contents">Bribery Act</a> would be a good move in this direction. </p>
<p>Thirdly, there were once good reasons for politicians to sit on both sides of the corporate fence. They no longer hold water. Cozy relationships between business and politicians are, in times of increased suspicion, not good for either side. That is a significant agenda for change. And we are about to see if Merkel or Schulz will have the stomach for it.</p><img src="https://counter.theconversation.com/content/83940/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dan Hough has received funding from the German Academic Exchange Service (DAAD) to enable him to conduct research on Germany's anti-corruption challenges.</span></em></p>Politicians need to get serious about the steady drip of scandals.Daniel Hough, Professor of Politics, University of SussexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/790642017-06-09T13:54:10Z2017-06-09T13:54:10ZHow did the VW camper turn into a £90,000 icon?<figure><img src="https://images.theconversation.com/files/172962/original/file-20170608-32312-boxcnf.jpg?ixlib=rb-1.1.0&rect=61%2C43%2C2281%2C1455&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/fijian_scion/7240459610/in/photolist-c2Pfow-VuhNto-7Kp2bm-8fJebt-7M5FsH-J8R78R-8spcog-5q87xp-dfqfMA-c2Pftd-VxQqVv-ntLwuZ-8kwNWX-ntLE69-qs5DzG-nJta6H-nQiihj-nLxzgP-nsgz4u-nQd4YJ-nDRRfz-nVoaWe-8AmZih-nNjo4W-nJHAHE-ne4oWq-nPphkc-z8f19s-fVfoZ5-nJdKwb-ntHPaY-nt2dLC-nsgzgy-nWjT99-nMWA36-nxShDW-nDWkA5-swrsBn-nhvizo-6fw3tb-nAqUgy-sEWbHJ-nVFj5i-nKyBGC-6j1QCn-nuozXP-ntLEq7-suo31D-nWqwBB-nMj12v">NMK Photography/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>Only a handful of cars have ever managed to be considered both cute and cool at the same time. Fewer still acquire the kind of status that makes them sought-after collectors’ pieces in old age. Volkswagen’s original camper van has been firmly in this category for some time, and its position appeared to be confirmed after auctioneers set a top guide price at a <a href="https://www.thesun.co.uk/motors/3738150/rare-first-generation-of-classic-60s-vw-camper-van-to-sell-for-the-same-price-as-a-brand-new-aston-martin/">record £90,000</a> for a pristine example due for sale.</p>
<p>These days, the VW camper is a ubiquitous feature of festival season or the summer surf scene, but it started life as a direct descendant of that other German classic, the Beetle. It came about only because of a suggestion and accompanying drawings made in 1947 by <a href="http://www.benpon.com/index.php/history">Dutch VW importer Ben Pon</a> which imagined a cargo carrying vehicle or transporter on the chassis of the VW Beetle.</p>
<p>The concept of a small transporter was not new to the world. Europe’s bakers, tradesmen, plumbers, and others had been relying on compact vehicles with around half a ton of load capacity for decades. What was new after the World War II though was the idea of shortening the vehicle as much as possible to make it easier to manoeuvre in European cities, and to maximise cargo space. </p>
<p>VW wasn’t the only manufacturer trying to plug this gap in the market. All delivered an improvement over the long-bonneted, space-inefficient vehicles from before the war, but equally they all still had at least a bit of a “nose” which took up a sizeable portion of the vehicle’s overall length. Even worse, the pug-nosed vehicles built <a href="http://hvanworld.co.uk/">mostly by French companies</a> managed to keep the length in check, but at the expense of driver comfort, pushing their engines in between the front seats to save space.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/173140/original/file-20170609-20857-1qs7hnv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/173140/original/file-20170609-20857-1qs7hnv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/173140/original/file-20170609-20857-1qs7hnv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/173140/original/file-20170609-20857-1qs7hnv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/173140/original/file-20170609-20857-1qs7hnv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/173140/original/file-20170609-20857-1qs7hnv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=504&fit=crop&dpr=1 754w, https://images.theconversation.com/files/173140/original/file-20170609-20857-1qs7hnv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=504&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/173140/original/file-20170609-20857-1qs7hnv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=504&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The pug-nosed Citroen H.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/sidibousaid/33664136625/in/photolist-ThMuYH-FZxkCm-5BYYQp-9BnSj5-6tFs73-3Lm4Fh-4dDyKF-4LbwK1-3xrHAY-6rXwZg-okSw5F-ne8mDT-54aM2a-czNxnf-cZAiRA-cZAkXs-mRiTW-7MV4hB-hUr1xr-8KshQj-cxuXqA-8JXB8z-ecHeH7-j2JWii-a2KLxE-ppKsfE-5oE8FL-ebeSaS-nx1Pna-ebeNpd-e87JRB-7MZ3Em-77TgY8-bsW73S-5oE8CS-egpfSF-77TpH8-oYFE69-77TiYz-CV38Cp-2usb1p-hXV78F-77XdCG-cZAjR7-oYFW3Y-aK5Rjg-ao16i6-56WvW-Sn7yrB-Kwfi3">Simon Harrod/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<h2>Affection</h2>
<p>The VW van – sometimes known as the Type 2 (the Beetle was Type 1) – changed all this by shifting its air-cooled engine to the back altogether, allowing the driver and passenger to enjoy a relatively spacious compartment without much engine noise or engine heat. Driving the Type 2 was, in fact, a surprisingly refined and comparably quiet affair because of this, but also because of the very advanced suspension system VW employed.</p>
<p>This was an independent suspension for all four wheels, adapted from the Beetle. It did away with the crude, rigid axles and leaf springs that made rival vans a punishing experience, and offered road holding and handling that was superior even to some family cars. It might seem a quaintly ramshackle drive by modern comparisons, but the advanced and unconventional technology the van used in the middle of the last century helped build the reputation and customer affection that survives to this day. </p>
<p>Body construction was adaptable, and a large number of different types emerged over time, including delivery vans and micro passenger buses with any number of windows and window configurations. There were pickups, crew cabs with four doors, and, obviously, campers – some with folding roofs or raised roofs.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/173141/original/file-20170609-20829-1tpexoy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/173141/original/file-20170609-20829-1tpexoy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/173141/original/file-20170609-20829-1tpexoy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=429&fit=crop&dpr=1 600w, https://images.theconversation.com/files/173141/original/file-20170609-20829-1tpexoy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=429&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/173141/original/file-20170609-20829-1tpexoy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=429&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/173141/original/file-20170609-20829-1tpexoy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=539&fit=crop&dpr=1 754w, https://images.theconversation.com/files/173141/original/file-20170609-20829-1tpexoy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=539&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/173141/original/file-20170609-20829-1tpexoy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=539&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">In a field of its own.</span>
<span class="attribution"><a class="source" href="https://www.instagram.com/vdubjoss/">Joss Wickson/Instagram</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>This cheap, durable, economical, comfortable vehicle spread all over the world, <a href="https://www.thesamba.com/vw/archives/info/productionfigures.php">gaining a following</a> everywhere it went. Its popularity reached the point where VW decided to produce it in more countries, including Australia, Argentina, and Brazil. Production <a href="https://www.theguardian.com/world/gallery/2013/dec/18/last-volkswagen-camper-vans-made-brazil-in-pictures">continued in Latin America</a> well over four decades after production of the Type 2 had ceased in Germany in 1967.</p>
<h2>Counterculture</h2>
<p>No competitor has ever managed to duplicate the factors that made the VW van such a success, or find the secret sauce behind its charisma and desirability.</p>
<p>One key reason for this may well be coincidence. You see, the VW Type 2, in all its guises, became closely associated with the hippie movement through the 1960s and 1970s, and with the progressive intellectual concepts of the time. An image was built that lasts till today. Mention the word “hippie van”, and no one thinks of a Toyota. The image that comes to mind is a flower-adorned VW camper with big eyes, being driven down a coastal highway in California by counterculture types in flared trousers, playing guitars and nursing impossible hairdos on beaches south of San Francisco.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/172987/original/file-20170608-6975-dhocq4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/172987/original/file-20170608-6975-dhocq4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/172987/original/file-20170608-6975-dhocq4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/172987/original/file-20170608-6975-dhocq4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/172987/original/file-20170608-6975-dhocq4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/172987/original/file-20170608-6975-dhocq4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/172987/original/file-20170608-6975-dhocq4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/172987/original/file-20170608-6975-dhocq4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Peace, love and brand loyalty.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/lulworth-united-kingdom-august-02-german-154668983?src=_ngsWEhHBZ9H_vGuGZ2jUw-1-6">RG-vc/Shutterstock</a></span>
</figcaption>
</figure>
<p>VW really lucked out by having a monopoly at the right time as the sole purveyor of friendly-looking, economical campers that were easily recognisable as non-American just when that counterculture movement struck in the US. Friendly people with flowers in their hair began to drive them, live in them, attend open air festivals in them, and generally made them into the vehicle we all associate with the hippie movement to this day.</p>
<p>That combination of simple, wholesome German design and a dope-fuelled, tree-hugging spirit fulfilled some fundamental needs. Many can afford and run a small, reliable, well-engineered vehicle, especially when you can also live in it. Fuel consumption was low by comparison with US trucks at the time, and the possibilities for personalisation and adaptation allowed a break from conformity.</p>
<p>Driving a Type 2 meant being a rebel, and so it came about that the Type 2 spirit remains very much alive and valued among festival goers, middle-class enthusiasts and collectors alike. Whether endorsing a mainstream hippie image actually honours the real hippie founding spirit is a debate for another time, but it doesn’t matter; the vehicle symbolises the philosophy in one handy package, and that’s that.</p>
<p>VW has never quite managed to rekindle the concept; the Type 2 has been a hard act to follow for its maker as well as its rivals. The <a href="https://www.volkswagen-vans.co.uk/range/transporter-t6?utm_source=google&utm_medium=cpc&utm_campaign=vwcv_transporter_model_exact&utm_term=_vw_t6_&mkwid=ssm9ca3Ja%7Cpcrid%7C163889321931%7Cpkw%7Cvw%20t6%7Cpmt%7Ce%7Cpdv%7Cc%7C&gclid=CJHQ35fgsNQCFc0K0wodUQsDeg&mkwid=ssm9ca3Ja_163889321931_vw%20t6_e_c&mtid=vdvv2y1xd0&slid=&product_id=">current version</a> is a refined, quality vehicle but frankly rather dull. Perhaps, though, the next VW to capture the imagination of enthusiasts with £90,000 to spare could come from the new frontier of automotive tech, just as the Type 2 did in its time. No one can fail to see the powerful echoes of the original VW camper in the company’s plans for the ID Buzz – a familiar looking, timely, electric, <a href="https://www.dezeen.com/2017/01/11/volkswagen-self-driving-electric-vw-microbus-id-buzz-design-transport/">self-driving van</a> launched earlier this year.</p><img src="https://counter.theconversation.com/content/79064/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris Ebbert does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Auctioneers have put a record price tag on the ultimate symbol of 60s counterculture and vintage nostalgia.Chris Ebbert, Senior Lecturer in Product Design, Nottingham Trent UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/669512016-10-14T19:09:30Z2016-10-14T19:09:30ZWill Samsung forget its safety lessons as it moves beyond the Note 7 debacle?<figure><img src="https://images.theconversation.com/files/141592/original/image-20161013-31310-pchemh.jpg?ixlib=rb-1.1.0&rect=210%2C10%2C800%2C456&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/135518748@N08/27458903223/in/photolist-HeEURS-GsE9Pz-JvedyC-JzcNNi-HQs4gV-HQs4TX-vFMxxu-uws54G-MVuLSd-N3Beay-LkFpJq-JY44Zu-JR1Xg4-JR1VB2-KJxFcf-JR1C3p-KMochr-KEyEcB-JR1AP2-KmeJBd-JQLXHq-KEx396-JQYNRx-KJvJQS-KmeGgS-JQLUFJ-KJvGsf-JQLTX9-KJvFbs-JQYLqv-KJvEps-Kjijay-Jt93SF-GXRhoJ-GXRfJS-Ho6GDF-Ho6Esg-GsFjiH-Gsy1DE-Ho6qe6-GXQULL-Hh3bg4-GsEWUa-Hh32jr-HeFqM3-Hh1SrZ-GXPoqN-GsD3rB-Hk7RQJ-Hh1yvt">portal gda/Flickr</a></span></figcaption></figure><p>The massive recall of Samsung Note 7 smartphones, accompanied <a href="https://www.ft.com/content/58d215d4-8f69-11e6-a72e-b428cb934b78">by a halt to production</a> after reported battery fires is the latest in another year of breaking corporate scandals. The South Korean firm isn’t the first to experience safety problems as happened in this case – and it is a feature of corporate behaviour to let focus on this issue come and go in favour of other priorities.</p>
<p>The quagmire that Samsung finds itself in is of a different character to many other high-profile cases including Volkswagen’s <a href="https://theconversation.com/how-volkswagen-got-caught-cheating-emissions-tests-by-a-clean-air-ngo-47951">emission-cheating device</a> or the <a href="https://theconversation.com/how-wells-fargo-encouraged-employees-to-commit-fraud-66615">Wells Fargo fake account scandal</a>. For a start there appears to be nothing deliberate about Samsung’s faulty phone problem. And judging by appearance, its reactions to the ballooning scandal have been sincere, including its <a href="http://www.bbc.co.uk/news/business-37253742">previous decision to recall 2.5m Samsung Note 7 devices</a>. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/141595/original/image-20161013-31336-oj2wsg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/141595/original/image-20161013-31336-oj2wsg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/141595/original/image-20161013-31336-oj2wsg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=281&fit=crop&dpr=1 600w, https://images.theconversation.com/files/141595/original/image-20161013-31336-oj2wsg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=281&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/141595/original/image-20161013-31336-oj2wsg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=281&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/141595/original/image-20161013-31336-oj2wsg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=353&fit=crop&dpr=1 754w, https://images.theconversation.com/files/141595/original/image-20161013-31336-oj2wsg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=353&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/141595/original/image-20161013-31336-oj2wsg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=353&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Tarnished image.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/mynameispaul/2319745226/in/photolist-qJdgxB-qG65Cb-qrXt1Z-qJnPAF-qJnLTg-qG62Td-8rwYp4-4r1kip-4r5qDm-4r5qsE-4wZirm">Paul/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>Rather than irresponsibility, Samsung appears likely to have underestimated some crucial safety issues. The company has reportedly worked very hard to implement cutting-edge technological features such as an <a href="https://news.samsung.com/global/everything-you-need-to-know-about-the-galaxy-note7s-iris-scanner">iris scanner</a> for improved security. </p>
<p>If it does turn out to be the case that the company temporarily took its eye off the ball on safety issues, it wouldn’t be alone. As it happens, large business organisations have a tendency to gradually <a href="http://amj.aom.org/content/53/3/451.abstract">“forget” safety routines or protocols</a> that have been put in place for accident prevention or safety improvement in favour of an increased focus on innovation or cost efficiency. </p>
<h2>Brand damage</h2>
<p>Whatever the outcome of Samsung’s investigations, the company now has to deal with the media commotion this scandal has attracted. This incident has not had especially dire consequences compared to other scandals – in VW’s case, for instance, the <a href="http/theconversation.com/the-not-so-invisible-damage-from-vw-diesel-cheat-100-million-in-health-costs-48296">health implications are on a grander scale</a>. In Samsung’s case, damage and injury are not to the fore, but there are two main characteristics. The first is the sheer scale of the recall: some estimates reckon <a href="http://www.reuters.com/article/us-samsung-elec-smartphones-costs-idUSKCN12B0FX">Samsung could end up losing around US$17 billion because of the recall</a>. </p>
<p>The nature of the Samsung case also has an impact in terms of perceptions and visibility. Damage <a href="https://www.cnet.com/news/why-is-samsung-galaxy-note-7-exploding-overheating/">has been limited</a>, but some effects have been extremely visible – and for many, scary. Several airlines, airports, and aviation bodies warned against or even <a href="http://whatson.ae/dubai/2016/09/the-samsung-galaxy-note-7-has-been-banned-on-board-uae-airlines/">banned the devices</a>, or insist they are turned off for the duration of the flight. There was <a href="http://www.nytimes.com/2016/10/06/business/southwest-samsung.html">one evacuation prior to take-off on a Southwest Airlines flight</a> due to smoke in the passenger section, emanating from a Samsung Note 7 device. Making people fear for their lives is guaranteed to provoke negative attention to a brand however effective and honest a company’s response might be.</p>
<p>What should Samsung do? Seeing as public attention is still very much on this issue, dealing with it robustly is important. A full recall has already been made, which is a signal to stakeholders that the company is taking the issue seriously. One video apology has already been made. Likely more will be needed, along with a promise to prevent such incidents from recurring. Some form of compensation may be in order.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/k8P3_2kMums?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
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<p>An apology certainly does not hurt when a company is clearly culpable. It may encourage the public to forgive – and possibly forget – faster. It was essentially with such manoeuvres that <a href="http://mobile.nytimes.com/2002/03/23/your-money/tylenol-made-a-hero-of-johnson-johnson-the-recall-that-started.html">Johnson & Johnson dealt with the far more serious Tylenol scandal in 1982</a>, in which cyanide-laced painkiller capsules left seven people dead. The company and the product were back on their feet in a matter of months. If Samsung successfully manages the PR, <a href="http://amr.aom.org/content/early/2015/09/08/amr.2014.0208.short">the public will likely forget the issue relatively quickly</a>, and the company’s long-term reputational damage will be negligible at worst.</p>
<h2>Break the pattern</h2>
<p>All of this, of course, depends on preventing similar problems from occurring in the future. For this, that tendency for safety routines to fall short of the required standard needs to be definitively addressed, and efforts made to make those routines stick – long term. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/141594/original/image-20161013-31310-19003xv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/141594/original/image-20161013-31310-19003xv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/141594/original/image-20161013-31310-19003xv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=486&fit=crop&dpr=1 600w, https://images.theconversation.com/files/141594/original/image-20161013-31310-19003xv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=486&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/141594/original/image-20161013-31310-19003xv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=486&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/141594/original/image-20161013-31310-19003xv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=611&fit=crop&dpr=1 754w, https://images.theconversation.com/files/141594/original/image-20161013-31310-19003xv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=611&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/141594/original/image-20161013-31310-19003xv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=611&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The 1986 Challenger disaster.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-245968618/stock-photo-space-shuttle-challenger-disaster-space-shuttle-exhaust-plumes-entwined-around-a-ball-of-gas-after-a-few-seconds-after-the-explosion-caused-by-ruptured-o-rings-jan-28-1986.html?src=5CjH1PHkxutQH6QBlJmEjQ-1-1">Everett Historical/Shutterstock</a></span>
</figcaption>
</figure>
<p>This will not be easy. As time passes, organisations tend to oscillate back towards more innovation and efficiency and away from a safety-focused approach. They can forget the lessons they learned from these episodes, as observed in a recent longitudinal <a href="http://pubsonline.informs.org/doi/abs/10.1287/orsc.2015.1010">study of 146 pharmaceutical firms in the US</a>. Such a process was painfully experienced by US space agency NASA with the disintegration of the <a href="http://www.space.com/19436-columbia-disaster.html">Columbia shuttle</a> in 2003, after the tragic <a href="http://www.history.com/topics/challenger-disaster">Challenger shuttle accident</a> of 1986. While initially focusing on safety after the Challenger accident, efficiency slowly gained priority over the years. There was <a href="https://www.nasa.gov/columbia/home/CAIB_Vol1.html">a reduction in the number of safety personnel</a> and <a href="https://books.google.co.uk/books?hl=fi&lr=&id=wIfAU5exEPQC&oi=fnd&pg=PA33&dq=vaughan+columbia+2005&ots=DPy1ibuJxf&sig=f6-iCbaVekjtcQIuvtw6VurUUIY&redir_esc=y#v=onepage&q=vaughan%20columbia%202005&f=false">a general depreciation of organisational knowledge</a>, and a similar accident eventually followed. To avoid this type of reversion, Samsung will need to safeguard its safety routines from now on and embed the memory of the faults that lead to this incident. </p>
<p>This could be achieved through integrating safety training into recruitment and career development processes, by introducing safeguards against safety routines being overridden – and could even, in a brave and humble company, include an annual commemoration of the debacle as a lasting and powerful warning.</p><img src="https://counter.theconversation.com/content/66951/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jukka Rintamäki receives funding from the European Commission as part of the Marie Skłodowska-Curie actions (MSCA). The funding is related to his continuing work on collective remembering and forgetting of corporate irresponsibility.</span></em></p>How can companies brought low by scandal or failure remember the lessons they should be learning?Jukka Rintamäki, Marie Curie Research Fellow, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/647962016-09-02T01:45:02Z2016-09-02T01:45:02ZACCC takes VW to court – but will it help consumers?<figure><img src="https://images.theconversation.com/files/136374/original/image-20160902-1061-wxhq50.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The ACCC is taking VW to court. </span> <span class="attribution"><span class="source">VW image from www.shutterstock.com</span></span></figcaption></figure><p>Yesterday the Australian Competition and Consumer Commission (ACCC) announced that it has <a href="https://www.accc.gov.au/media-release/accc-takes-action-against-volkswagen-over-diesel-emission-claims">instituted proceedings against Volkswagen (VW)</a>. The ACCC is pursuing VW for allegedly misleading consumers (in contravention of Australian Consumer Law) around emissions from its diesel cars. </p>
<p>In 2015, VW admitted it had installed software in certain diesel-engine cars that ensured the cars met <a href="http://www.euronews.com/2015/09/22/volkswagen-admits-it-totally-screwed-up-as-emissions-rigging-scandal-spreads">US standards</a> for nitrogen oxide emissions in testing, but turned off in real road driving conditions. This meant that the diesel engines were dirtier than consumers realised. The affected cars were sold globally, including in Australia. </p>
<p>It has been reported that in the United States, <a href="http://www.smh.com.au/business/world-business/vw-to-offer-to-buy-back-500000-us-cars-20160420-gobddy.html">VW has agreed to buy back cars</a> affected by the emissions scandal. </p>
<p>In Australia, affected <a href="https://www.choice.com.au/transport/cars/general/articles/vw-pollution-cheating-scandal">consumers have been offered corrective software</a>, although just what that software will achieve and how well it will do that is disputed. </p>
<p><a href="http://www.abc.net.au/news/2016-09-01/volkswagen-emissions-scandal-taken-to-court-by-accc/7804352">The ABC reports</a> VW as saying that “the ACCC’s action did not provide any practical benefit to consumers”. VW says this is because “the best outcome for customers whose vehicle is affected is to have the voluntary recall service updates installed.”</p>
<h2>What’s in it for VW owners?</h2>
<p>The ACCC proceedings may appear to offer little direct benefit for disgruntled VW owners who have purchased cars without the features that were represented to them. However, contrary to VW’s suggestion, those consumers might want more by way of redress than the installation of new software to correct the original problem. </p>
<p>The attractions of low-emission diesel engines that were kinder to the environment may well have been central to affected consumers’ decision to purchase the VW car models in question. Without those benefits consumers might have purchased a different car. </p>
<p>Such consumers may be disgruntled by finding their VW is not what they had expected and they may also be facing a reduced resale value of their affected car. They may therefore want compensation for loss of value, lost opportunities and even disappointment and distress.</p>
<p>The <a href="https://www.accc.gov.au/media-release/accc-takes-action-against-volkswagen-over-diesel-emission-claims">ACCC is seeking</a> “declarations, pecuniary penalties, corrective advertising, findings of fact and costs” against VW.</p>
<p>Penalties awarded for breaches of the Australian Consumer Law may be considerable, amounting to A$1.1 million for each contravention. However, any penalties that the court determines VW will have to pay for its alleged misleading conduct will be imposed as a punishment for contraventions of the law, not to compensate affected consumers. </p>
<p>It is interesting that the ACCC does not appear to be relying on its powers itself to seek compensation for disgruntled consumers, or to seek a refund and damages on behalf of consumers for possible failures by VW to comply with the <a href="https://theconversation.com/explainer-can-i-get-a-refund-for-my-emissions-cheating-volkswagen-48815">consumer guarantee regime</a> in the Australian Consumer Law.</p>
<p>This may be for the practical reason that it would be difficult for the ACCC in this kind of action to show the required levels of causation and loss on the part of individual consumers that would be required in seeking redress on their behalf. </p>
<p>Nonetheless, the ACCC action is not entirely without benefit to consumers, albeit in a more indirect manner. The action sends a strong reminder to businesses operating in Australia about the need for “fair play” in the Australian market. </p>
<p>Moreover, any findings of fact or declarations may be made by a court in response to the ACCC action may be useful in establishing the alleged baseline wrong in <a href="http://www.abc.net.au/news/2016-09-01/volkswagen-emissions-scandal-taken-to-court-by-accc/7804352">private litigation by VW-owning consumers</a>, including under the class action filed in the Federal Court by law firm Maurice Blackburn <a href="http://www.abc.net.au/news/2016-06-08/volkswagen-accused-of-ignoring-australian-car-owners/7494290">seeking financial redress</a> for a group of affected consumers.</p><img src="https://counter.theconversation.com/content/64796/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jeannie Marie Paterson receives funding from the Australian Research Council. </span></em></p>The ACCC has launched proceedings against VW for allegedly misleading consumers. But consumers won’t be directly compensated from the case.Jeannie Marie Paterson, Associate Professor, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/569682016-04-04T14:38:16Z2016-04-04T14:38:16ZHow Dyson can offer a challenge to Tesla and the electric car giants<figure><img src="https://images.theconversation.com/files/116817/original/image-20160330-28462-1k12zus.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Shockwaves. Momentum is with electric cars.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/seegioo/4233306675/in/photolist-7s5NA8-ghtft-fwrceq-jBQca8-23Xh2H-sFggKR-cNPJyG-i9ZA37-6HKJ5o-ce24FS-ee4q6b-cAyvPE-rnQeE7-pbWqdh-ei2sp6-8LrNgx-8d9TXi-fkxMWj-onHR6k-9NGKrb-dU5Ysv-9NJybd-9LE1CS-cRg1dY-aE9yox-nxCxU6-5yd8Zx-9NH9LR-s2u89Q-9NFVNX-cVkC2s-gDLhsp-9U2LUQ-tB95ry-9NEwpU-8xrZEg-9NJAiA-9famxT-9YwTwP-bKzuZi-o3gDix-ce64Ds-daiUtY-8v9Sdt-oySm2C-4KrpK8-dkxmea-8v9Sfk-nSMyVE-bV2iLV">Sergio Monsalve</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span></figcaption></figure><p>British vacuum cleaner manufacturer Dyson may be steering into a brand new market. News that the company owned by inventor and entrepreneur, James Dyson, has received UK government research funds <a href="http://www.theguardian.com/environment/2016/mar/23/dyson-developing-electric-car-government-documents">for electric vehicle research</a> sparked excitement shortly before electric car pioneer Elon Musk launched the latest, <a href="http://www.latimes.com/business/autos/la-fi-hy-tesla-model-3-20160331-htmlstory.html">lower-priced model of his Tesla</a> range. The two men are at different ends of the development spectrum, but they face the same stiff challenges against the traditional incumbents.</p>
<p>Details around the British venture are sparse – an earlier reference to the development of an actual vehicle was <a href="http://www.independent.co.uk/life-style/gadgets-and-tech/news/dyson-is-making-an-electric-car-government-funding-documents-reveal-a6950591.html">apparently removed</a> from the final document which revealed the funding. But it is clear that the transition from internal combustion engines to electric vehicles will involve the development of a series of services and products – a value chain – which will require the involvement of new players in existing automotive supply networks.</p>
<p>Clearly a firm like Dyson has considerable expertise in relevant areas such as electric motors, charging protocols, storage batteries, energy management software and other relevant technologies to electric vehicles. There are echoes here of China’s main <a href="http://www.byd.com">electric car and bus producer, BYD</a>, which had been primarily a producer of batteries for devices such as laptops and mobile phones. Vehicles were a sideline to this activity – admittedly increasingly important – alongside other new areas such as photovoltaics. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/116826/original/image-20160330-28455-18uor24.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/116826/original/image-20160330-28455-18uor24.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/116826/original/image-20160330-28455-18uor24.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/116826/original/image-20160330-28455-18uor24.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/116826/original/image-20160330-28455-18uor24.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/116826/original/image-20160330-28455-18uor24.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/116826/original/image-20160330-28455-18uor24.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/116826/original/image-20160330-28455-18uor24.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The next Musk? James Dyson.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/conservatives/3984486210/in/photolist-9TxVYA-9TxWdC-9Tv4Qa-9Tv762-9TxVfY-9Tv9Rk-9Tv8Ma-9TxX8j-9TxUmW-dW3kpe-dW3kjZ-9TxW75-dW3kUF-dW8Wf3-dW3kdB-dW3kZn-ahjTEp-756wW7-4b2sUW-aUVW2a-aUVUZi-aUWgwi-aUVWE6-aUW6jr-aUVSPH-aUW3HZ-AqFtpz-aUWdZX-fm2nD7-aUVVxe-AZ36iU-77Vmjb-aUWaTk-avrkTo-b3cDa8-7329x-fm2pby-fm2nGA-e6sir2-8RhLbC-BLVrTQ-wzAAGp-E6HCVF-wzAY1g-B19DBj-AonwMd-e6xWA1-8S51oq-299NS9-vNyXUg">Conservatives/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<h2>Shocks to the system</h2>
<p>The move towards electric vehicles is disruptive in many respects and attracts new entrants with, so far, varying degrees of success. While Tesla still seems to be <a href="http://qz.com/648506/after-the-tesla-model-3-launches-this-week-the-world-will-know-if-elon-musk-called-the-electric-car-future-correctly/">going from strength to strength</a> – thanks in no small measure to considerable resources and its charismatic boss – others, <a href="http://www.fisker-automotive.be/">such as Fisker</a>, have been less successful. </p>
<p>Set up by Henrik Fisker, a car designer with an impressive track record in the mainstream internal combustion car industry and in receipt of US government support, it nevertheless <a href="http://www.reuters.com/article/us-fisker-wanxiang-sale-idUSBREA1H1LM20140218">slipped into receivership</a> only to be rescued by Chinese interests to be <a href="http://www.karmaautomotive.com">reborn as Karma Automotive</a>. On the less glamorous supplier side there are also various new entrants from the worlds of information and communications technology and from electronics who are making tentative steps to become automotive suppliers in this newly emerging value chain. </p>
<p>The diversified <a href="http://www.bollore.com/en-us/activities/electricity-storage-and-solutions/electric-vehicles-solutions">French group Bolloré</a> runs shared schemes such as Autolib in Paris. Household names Apple and Google are at an early stage in their electric vehicle development – albeit with more ambitious plans in the pipeline.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/uCezICQNgJU?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Google self-driving car project.</span></figcaption>
</figure>
<p>Innovation and transition academics often assume that technological revolutions are largely driven by new entrants. Such a belief is often implicit in their work. But University of Sussex professor <a href="https://www.project-syndicate.org/commentary/green-innovation-public-funding-by-mariana-mazzucato-2016-03">Mariana Mazzucato has shown</a> that many of the truly innovative activities, which allow genuinely new technologies to be developed and then established are in fact due to visionary policy makers pushing resources in the right direction. Note that the US government <a href="http://www.reuters.com/article/us-autos-gm-treasury-idUSBREA3T0MR20140430">not only supported General Motors</a>, but also Tesla, Fisker and ABC Battery Systems.</p>
<h2>Charged up</h2>
<p>Private players can only enter markets once there is money to be made, which is rarely in the development phase. Also, it should be noted that much of the emerging electric car value chain is still in the hands of the big players from the established, petrol engine world, Tesla’s efforts notwithstanding. The world’s biggest battery electric vehicle producer is <a href="http://evobsession.com/world-electrified-vehicle-sales-2013/">Renault-Nissan</a>, while other significant players include those masters of traditional engine design, BMW, as well as GM, Ford and the <a href="http://www.volkswagen.co.uk/technology/electric-vehicles">Volkswagen Group VAG</a>. Developments at the latter are receiving an <a href="https://theconversation.com/how-volkswagen-got-caught-cheating-emissions-tests-by-a-clean-air-ngo-47951">extra boost since “dieselgate”</a>. </p>
<p>Few now remember that electric cars are not an entirely new technology – to the mainstream carmakers anyway. VW offered the Golf CitySTROMer to paying customers in the 1980s, while BMW showed a number of small electric vehicles, such as the E1, in the 1990s. Peugeot made its own versions in the 1940s, while Japanese minicar and minitruck producer Daihatsu was the word’s largest producer at one stage. Other electric vehicle niches have long existed, for instance the French and Italian quadricycle producers <a href="http://www.aixam.com">Aixam-Mega</a>, <a href="http://www.automobiles-ligier.com">Ligier</a>, <a href="http://www.casalini.eu">Casalini</a> and <a href="http://www.tazzari-zero.com">Tazzari</a>. These products, along with those from <a href="http://www.mahindrareva.com">Reva in India</a> also helped kickstart market penetration in places such as London. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/116827/original/image-20160330-28455-xtujq5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/116827/original/image-20160330-28455-xtujq5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/116827/original/image-20160330-28455-xtujq5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/116827/original/image-20160330-28455-xtujq5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/116827/original/image-20160330-28455-xtujq5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/116827/original/image-20160330-28455-xtujq5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/116827/original/image-20160330-28455-xtujq5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/116827/original/image-20160330-28455-xtujq5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Somewhere in a parallel universe …</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/dgeezer/16736052183/in/photolist-ruUDeR-ot3hUY-owZu-bBZvn1-oKfWZi-fDKuGU-bBZuF3-ot369V-3hsKtj-s8ojig-JUbCr-2itqnw-e9HBZu-24F2N-6Y8jTt-idTXya-idTRBG-idUoCs-idUgab-e8YFaE-idU26G-idUfBC-idUoXV-idU4md-ajR67n-idUeof-idUc46-idUhDT-idUfNS-eCGYg-idUsyo-idUje7-idTZZd-idUdjb-idU9Fb-idU6uQ-idUDan-9Y7Du9-idU5sm-2itsAY-idUfaN-9vMTQD-idUrHL-idTMZR-idTSda-idUihM-idUonB-idUk1C-idUbWF-9tDbsP">diamond geezer/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>Much of the electric vehicle therefore probably exists already. The inertia and dependencies in the existing automotive “regime” are often underestimated, but <a href="http://www.researchgate.net/publication/256859600_Transition_failure_Understanding_continuity_in_the_automotive_industry">they are very real</a>. If Dyson manages to conjure a valuable addition to the market, then it will face issues such as the lack of a distribution network which present real barriers to new entrants – hence Tesla’s direct sales model. And the economies of scale inherent in mass car production, and the resulting cost penalty for anything produced at a smaller scale, are difficult to overcome. </p>
<p>For this reason, moves to turn basic technologies such as battery packs, motors and controllers into commodities that can be shared by a wide range of assemblers offer real hope to many would-be electric vehicle producers; it is in this kind of area that companies like Dyson could play a role as developer and supplier of key components and sub-assemblies to be used as modules by smaller independent assemblers around the world.</p>
<p>Emerging from all this is the realisation that the core competence of established mass car producers is not so much “metal-bashing” and internal combustion engine development, but rather systems integration; a skill set equally useful for the mass production of electric vehicles. This therefore puts the existing players at a distinct advantage over any newcomers until they can present a genuinely innovative business model in areas where the big boys cannot or will not follow them.</p><img src="https://counter.theconversation.com/content/56968/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Nieuwenhuis does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The vacuum cleaner maker faces the same challenges as Elon Musk against the big auto players – so maybe it’s time to try a different road.Paul Nieuwenhuis, Senior Lecturer and Co-Director, Electric Vehicle Centre of Excellence (EVCE), Cardiff UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/501502015-11-26T10:48:37Z2015-11-26T10:48:37ZDon’t let the VW emissions scandal destroy your faith in the car industry<figure><img src="https://images.theconversation.com/files/100762/original/image-20151104-29065-1oipdva.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">from www.shutterstock.com</span></span></figcaption></figure><p>The <a href="https://theconversation.com/how-volkswagen-got-caught-cheating-emissions-tests-by-a-clean-air-ngo-47951">Volkswagen emissions scandal</a> has shattered trust in the automotive industry the world over. After news broke that VW had knowingly circumvented US emissions regulations, shares in a number of car companies <a href="http://www.theguardian.com/business/2015/sep/21/volkswagen-emissions-scandal-sends-shares-in-global-carmakers-reeling">took a hit</a>, while <a href="http://fortune.com/2015/09/26/heres-how-regulators-around-the-world-have-reacted-to-the-vw-emissions-scandal/">other regulators</a> launched investigations of their own, finding <a href="http://www.bbc.co.uk/news/business-34857404">similar breaches</a>. </p>
<p>It has been hugely damaging to consumer confidence. In fact, it seems that a majority of consumers are <a href="http://www.rac.co.uk/press-centre#/pressreleases/motorists-not-put-off-diesel-by-vw-emissions-scandal-1260714">now sceptical</a> about the environmental claims made by any car manufacturer – whether they cheated the tests or not. </p>
<p>But as VW continues to <a href="http://uk.reuters.com/article/2015/10/28/uk-volkswagen-results-idUKKCN0SM0QA20151028">suffer the consequences</a> of its deception, there’s no reason to tar the whole industry with the same brush. In fact, doing so could lead to the introduction of regulations that are too tough, too soon – and this would risk stalling progress on emissions altogether. </p>
<h2>Lab vs life</h2>
<p>The fact is, all vehicles perform much better in laboratory tests than in real life. This means that there has always been a difference between a vehicle’s emissions levels in the lab – which are used to ensure that legal requirements are met – and those it produces during day to day use. <a href="http://www.theicct.org/sites/default/files/publications/ICCT_LaboratoryToRoad_2015_Report_English.pdf">The data</a> which points to these discrepancies has been in the public domain for many years. </p>
<p>Part of the problem is that it’s very difficult to mimic real life conditions in the lab. The type approval test we use today was designed three decades ago by the EU in consultation with the industry, to deliver a precise benchmark for vehicle emissions system performance. </p>
<p>But back then, the technology used to test vehicles could not fully and accurately represent the dynamics of driving. Real driving is much more aggressive and varied than testing technologies could then account for reliably. The tests must measure exhaust emissions in a robust and repeatable manner. And while the tools we use for testing have developed enormously over the years, the challenge to be ever more dynamic and accurate still persists.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/103302/original/image-20151126-28268-784jer.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/103302/original/image-20151126-28268-784jer.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/103302/original/image-20151126-28268-784jer.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/103302/original/image-20151126-28268-784jer.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/103302/original/image-20151126-28268-784jer.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/103302/original/image-20151126-28268-784jer.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/103302/original/image-20151126-28268-784jer.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Put to the test.</span>
<span class="attribution"><span class="source">University of Bath</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>So, regulatory tests were never intended to be a predictor of real world behaviour. Rather, they are an incredibly useful tool for ranking and comparing technologies, vehicles or manufacturers, and have proven very effective at driving technological change. For example, tests which revealed the effectiveness of the diesel particulate filter – a device which removes soot from exhaust fumes – led to their uptake right across Europe by the late-2000s. </p>
<p>Progress like this comes about by maintaining a delicate balance between the realities of the car industry, and the environmental and public health aims of the regulators. </p>
<h2>A most demanding business</h2>
<p>As a result of this process, the EU Technical Committee for Motor Vehicles recently <a href="http://europa.eu/rapid/press-release_IP-15-5945_en.htm?locale=en">agreed to</a> introduce recently developed <a href="http://www.ricardo.com/en-GB/News--Media/Press-releases/News-releases1/2015/Real-Driving-Emissions-provides-pathway-to-cleaner-diesels--Ricardo-research/">real driving emissions (RDE) tests</a> for diesel cars. This is part of the latest set of
regulations – <a href="https://circabc.europa.eu/sd/a/751657be-f83b-49d8-9454-f53f4ecd30af/1515125-RDE%20act.pdf">called EU6</a> – which marks the largest ever revision to emissions standards. </p>
<p>The RDE requirements will introduce on-road emissions measurements for the first time, with initial real world emissions limits set 2.1 times higher than the lab-based limits. This should make it impossible for any company to subvert the process in the way it seems VW has. And it means that discrepancies between lab and real driving performance will be clearly reported. Even so, the measures were still <a href="http://www.theguardian.com/environment/2015/oct/28/eu-emissions-limits-nox-car-manufacturers">less severe</a> than some were expecting. </p>
<p>Yet meeting them will still present a significant hurdle for the industry. Car makers operate in one of the most demanding of all business environments, and automotive engineers have to resolve the complex trade-offs that are inevitable between legal requirements, customer preference, innovation, cost and fuel efficiency.</p>
<p>It’s crucial that the targets set by regulators are achievable, under these circumstances. If they are not, it would seriously damage the commercial viability of car companies. And this would lead to an economic and social fallout too huge to consider: I am from Coventry – the home of the British motor industry – and old enough to have seen the damage caused by <a href="http://www.coventry.ac.uk/Global/05%20Research%20section%20assets/Research/SURGE/Working%20papers/SURGE%20WPS%20Working%20Paper%206.pdf">the loss</a> of so many of the great companies that once built cars in the city.</p>
<h2>The next step</h2>
<p>Over the past 25 years, regulations in the EU <a href="http://www.smmt.co.uk/industry-topics/environment/intro/european-engine-emission-standards/">have evolved</a> to see real world emissions from petrol and diesel engines fall dramatically – in many cases by a factor of around 100. </p>
<p>One important exception to this trend is the level of nitrogen oxides (NOx) in emissions from diesel passenger cars. NOx – the most intractable of all emissions for diesel engines – was at the centre of the emissions scandal. But until <a href="http://www.euro.who.int/__data/assets/pdf_file/0004/193108/REVIHAAP-Final-technical-report-final-version.pdf?ua=1">very recently</a>, it was also the pollutant with the least robust evidence of negative health impacts. For this reason, it was not a high priority target for regulators, compared with particulates, unburnt hydrocarbons and deadly carbon monoxide emissions. </p>
<p>But today, the effective elimination of these other emissions from modern passenger cars, and the attention warranted by VW’s behaviour, has cleared the way to focus on the NOx issue. The introduction of EU6 and RDE requirements will undoubtedly promote the adoption of technologies that work well in the real world. In fact, several diesel cars currently on sale in Europe already meet the future regulations.</p>
<p>Automotive engineers can now focus on what is really important for the customer, rather than meeting an outdated approval test. Addressing NOx emissions, improving air quality and reducing CO₂ will be the order of the day. So, despite the VW scandal continuing to unfold, consumers have more cause for optimism than suspicion.</p><img src="https://counter.theconversation.com/content/50150/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris Brace receives funding from Innovate UK, Advanced Propulsion Centre and the automotive industry to conduct research into clean and efficient vehicle propulsion.
He is the immediate past chair of the Automobile Division of the Institution of Mechanical Engineers.</span></em></p>Cooperation between regulators and the car industry has led to a huge reduction in dangerous emissions – and we can expect further progress.Chris Brace, Professor of Automotive Propulsion, University of BathLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/493512015-11-02T09:54:38Z2015-11-02T09:54:38ZHow VW took the corporate ethics industry to the brink<p>The Volkswagen emissions scandal may have fatally undermined the credibility of claims that corporations care about being benign and useful participants in society. When a company can top the list of car firms in the Dow Jones Sustainability Index one week and then be caught using sophisticated <a href="http://www.telegraph.co.uk/finance/newsbysector/industry/11896546/Corporate-Social-Responsibility-has-become-a-racket-and-a-dangerous-one.html">software to avoid compliance with environmental regulation</a> the next, we have to question if the concept of corporate social responsibility (CSR) has any meaning at all.</p>
<p>The VW scandal follows close on the heels of the publication of Lord Browne’s book, Connect. The former CEO of BP now questions the worth of CSR, saying it has become a prop that companies can use to put people’s legitimate concerns “into a side pocket”. The whole idea of CSR “should be dead” he concluded in a recent <a href="http://www.bbc.co.uk/news/business-34195308">BBC interview</a>.</p>
<p>So, does the VW scandal prove Lord Browne right? Should we dismantle the myriad of programmes that have been implemented since the 1990s to encourage firms to improve their environmental and social practices, and admit that CSR is a failed experiment?</p>
<h2>Accountability</h2>
<p>The results of <a href="http://www.abdn.ac.uk/research/borderlesspolitics/about/">our research project</a>, which examined how transnational corporations have engaged with CSR over the last 20 years, suggest that CSR, for all its very real weaknesses, might just be worth saving, and certainly worth improving.</p>
<p>By analysing company CSR reports from the 1990s to the present, we found that firms have become more transparent about their environmental, labour and human rights practices and impacts. Companies are also more likely than in the past to disclose measurable future goals in these areas and have their reports verified by independent auditors. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/100153/original/image-20151029-15342-9nnl4v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/100153/original/image-20151029-15342-9nnl4v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/100153/original/image-20151029-15342-9nnl4v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=491&fit=crop&dpr=1 600w, https://images.theconversation.com/files/100153/original/image-20151029-15342-9nnl4v.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=491&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/100153/original/image-20151029-15342-9nnl4v.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=491&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/100153/original/image-20151029-15342-9nnl4v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=617&fit=crop&dpr=1 754w, https://images.theconversation.com/files/100153/original/image-20151029-15342-9nnl4v.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=617&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/100153/original/image-20151029-15342-9nnl4v.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=617&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The classic CSR report imagery. Smiling faces; aspirational text.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/whydesignworks/4248462497/in/photolist-7tqtTp-7tqtUi-7tusi7-7tqtS6-4uNxPQ-iuEEAa-xYaug3-xYaufG-xYaueE-9Muahg-ddVhKg-ddVdqP-a7p3Gx-a7p3U2-a7rUk9-a7s77f-kd3h6e-7uyceR-7j5V9P-jcn3Yh">Nicole Curran</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>These improvements in transparency and accountability are uneven; they vary across companies, countries and issue areas. Reporting on environmental sustainability is more advanced than reporting on labour and <a href="http://www.sbcscot.com/businesses-happier-to-show-green-credentials-than-social-conscience/">human rights</a>. Still, this evidence suggests that large companies are increasingly engaging with the notions of best practice that have been promoted by the wider CSR movement and prominent codes of practice. These findings reinforce periodic surveys by <a href="https://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/corporate-responsibility/Documents/corporate-responsibility-reporting-survey-2013-exec-summary.pdf">KPMG</a> that show over 90% of the largest transnational corporations now publish a CSR report and an increasing number apply the UN-endorsed <a href="http://database.globalreporting.org/">Global Reporting Intiative</a> guidelines to structure these disclosures. </p>
<h2>Action</h2>
<p>Reports are one thing, of course, real world behaviour is another. So does positive progress in the former feed through to the latter? Are companies actually improving how they manage their environmental and social impacts? If the VW scandal shows how far companies’ CSR rhetoric can deviate from practice, it also shows how corporate misconduct can defy easy solutions. </p>
<p>Better government regulation is clearly part of the answer, but doesn’t cover all the bases. VW, after all, was caught violating legally binding, not just voluntary, commitments. The difficulty of working out how viable a company’s performance data might be, applies to government as well as to voluntary regulation. </p>
<p>The VW scandal also highlights some of the often unrecognised strengths of the CSR movement. First, the dramatic fall of VW’s share prices over the past few weeks sends a clear message to corporate leaders about the dangers of lying about their green and social credentials. Critics of corporate social responsibility rightly worry about the undeserved reputational gains that companies can accrue through “green-washing”. <a href="http://www.theguardian.com/environment/2008/nov/20/fossilfuels-energy">BP faced sharp criticism</a> for running a campaign in the early 2000s that sought to rebrand the company as “Beyond Petroleum” while still investing heavily in oil.</p>
<p>But these critics often fail to consider the negative consequences that a breach in this false trust can have. Those who live by fraudulent CSR credentials can also be severely undermined by them. </p>
<p>It is also worth noting that the scandal <a href="http://www.economist.com/news/briefing/21667918-systematic-fraud-worlds-biggest-carmaker-threatens-engulf-entire-industry-and">was first uncovered by a nonprofit organisation</a>, the International Council on Clean Transportation (ICCT), which conducts research to improve the environmental performance of the transport sector. The ICCT is one of <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2006.00582.x/pdf">many NGOs that exist</a> in part thanks to the rise of the CSR movement since the 1990s. Such non-state organisations check whether companies meet their stated environmental and social commitments. The fact that regulators in Europe <a href="http://www.ft.com/cms/s/0/d0d7ba40-6394-11e5-9846-de406ccb37f2.html#axzz3p2WoSGvY">ignored previous warnings</a> about the emissions from VW diesel models emphasises the importance of greater corporate transparency and NGO monitoring.</p>
<h2>Building a new CSR</h2>
<p>Ultimately, though, the VW scandal highlights that both government regulation and voluntary CSR programmes will be ineffective if corporate managers do not foster shared assumptions about ethical conduct. Although it is important to keep companies honest by monitoring their behaviour, it is not possible for governments or NGOs to oversee the actions of transnational corporations at all times. To a certain extent, we have to trust that most companies have instilled an ethos that encourages their employees to comply with the law and wider social expectations. CSR is one tool – along with better regulation and protection of whistle-blowers – that can help build such an ethos.</p>
<p>The whole idea of corporate social responsibility needs to be improved, not abandoned. In particular, there are three things that policymakers and civil society can do to make CSR more effective.</p>
<p>First, do away with the unhelpful distinction between binding and voluntary corporate regulation. The future lies in better co-regulation. For example, regulators in the <a href="http://www.legislation.gov.uk/uksi/2013/1970/pdfs/uksi_20131970_en.pdf">UK</a> and the <a href="http://ec.europa.eu/finance/company-reporting/non-financial_reporting/index_en.htm">EU</a> recently adopted policies that increase the information companies have to disclose about their environmental, labour and human rights practices in their annual financial reports. This information can help NGOs and investors better monitor CSR performance and properly reward improvement. </p>
<p>Next, we should strengthen NGOs’ ability to <a href="https://theconversation.com/how-volkswagen-got-caught-cheating-emissions-tests-by-a-clean-air-ngo-47951">hold transnational corporations to account</a>. NGOs can help uncover corporate malfeasance and use carrots to improve company behaviour through collaborative projects and CSR certification. The scope and credibility of these efforts depend on sufficient resources. </p>
<p>And lastly, governments should send corporations consistent messages about their responsibilities. It has been <a href="http://www.economist.com/news/leaders/21666226-volkswagens-falsification-pollution-tests-opens-door-very-different-car">widely reported</a> that governments in several countries turn a blind eye to the fact that car manufacturers frequently fudge the laboratory tests on which their published fuel efficiency standards are based. It seems likely that this lax regulatory environment contributed to an atmosphere in which VW’s malfeasance was seen as more acceptable. </p>
<p>Such reforms could strengthen the CSR movement in the future. It is an experiment whose outcomes are far from guaranteed, but one that we think is worth continuing.</p><img src="https://counter.theconversation.com/content/49351/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kelly Kollman receives funding from the Economic and Social Research Council.</span></em></p><p class="fine-print"><em><span>Alvise Favotto receives funding from the Economic and Social Research Council. He is affiliated with the World Wildlife Fund. </span></em></p>How to make companies take seriously their responsibilities to the rest of us.Kelly Kollman, Senior Lecturer, Politics, University of GlasgowAlvise Favotto, University Teacher in Accounting and Finance, University of GlasgowLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/489072015-10-22T13:13:00Z2015-10-22T13:13:00ZHow to build a car company after the VW emissions scandal<figure><img src="https://images.theconversation.com/files/99063/original/image-20151020-32225-18uza3u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Awaiting a new model. Car firms struggle to adapt.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/macwagen/2266404921/in/photolist-4sgVdV-aYNzAa-5RvpJT-d2RtAf-9yp384-8bkCFC-bEWMvz-rGJE-uqg2Nk-6XeFk-rKcCxi-um5H1-9gF6tX-4Uqk56-fKTKZ-vZxVBp-g6XT1o-6bCGNv-bo8Dvm-5GT98w-uigR9-yEqNZc-CB69i-i6Seyb-6N3uLw-7vfi9o-aEg96-ytQFiB-8h7HWs-ykfLwf-8hMEyT-6ijTA6-eb9qN-g7HtX-tFFdwG-dTMKnM-4oGvFe-cvBsN9-gKc2Cd-4VDQbk-6a9yqd-amGYFg-427uS-4tNsmH-fSUGkY-vTiC5-bjD1Ac-51PCt6-9v4wyQ-xj7uM2">Dan Buczynski</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span></figcaption></figure><p>Misconduct in the auto sector has had quite a history. German group Volkswagen may find itself in the midst of the storm right now, but the application of <a href="http://www2.epa.gov/sites/production/files/2014-06/documents/defeat.pdf">defeat devices</a> actually dates back to the early 1970s. Now that the industry is caught in the headlights, it may be the ideal moment to chart a course to a change in corporate culture.</p>
<p>So how do we build a car company that gets it right? Well, at its heart, this is a question of priorities. It is important that the CEO and top management team understand the need to shift their attention away from forcing an ill-formed business model to market through the regulatory system by hook or by crook. Instead, they should be willing to adapt their technology and strategy to glide through unblemished. </p>
<h2>Top management team dynamics</h2>
<p>Changing corporate culture in response to a public outcry requires top managers with experience in public-facing jobs. Think marketing, sales and customer service. <a href="http://www.jstor.org/stable/2392472?seq=1#page_scan_tab_contents">These managers</a> are known to be more vigilant and serve a broader range of stakeholders. Currently, top managers are more concerned with efficiency, echoing their background in functional jobs such as operations, finance and accounting. </p>
<p>Firms that appoint this kind of manager to the executive suite tend to be better equipped to <a href="http://pubsonline.informs.org/doi/abs/10.1287/orsc.1060.0192">read the environment</a> they are operating in and are more effective in devising suitable responses when corporate strategy and environmental requirements misalign. </p>
<p>Top management must also avoid a common trap in many industries. The career horizon of the CEO and top management team members will be crucial as they consider how best to design and formulate long-term strategy. The natural career path of managers, especially in pronounced hierarchical organisations which are typical in the auto sector, tends to give us executive teams where most are older than 55. The average age of the <a href="http://www.volkswagenag.com/content/vwcorp/info_center/en/publications/2015/03/Y_2014_e.bin.html/binarystorageitem/file/GB+2014_e.pdf">top managers at VW was 59 in 2014</a>. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/99317/original/image-20151022-8031-1mwenj7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/99317/original/image-20151022-8031-1mwenj7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/99317/original/image-20151022-8031-1mwenj7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/99317/original/image-20151022-8031-1mwenj7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/99317/original/image-20151022-8031-1mwenj7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/99317/original/image-20151022-8031-1mwenj7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=504&fit=crop&dpr=1 754w, https://images.theconversation.com/files/99317/original/image-20151022-8031-1mwenj7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=504&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/99317/original/image-20151022-8031-1mwenj7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=504&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Getting younger execs in to chew things over can boost performance.</span>
<span class="attribution"><span class="source">from www.shutterstock.com</span></span>
</figcaption>
</figure>
<p>This means you have teams largely comprised of executives nearing the end of their natural career, a position which in some circumstances can encourage greater concern with short-term accounting goals than with decisions that safeguard the more <a href="http://onlinelibrary.wiley.com/doi/10.1002/hrm.21730/abstract">distant future</a> of the organisation. This makes it more likely that less support will be made available for designing technologies that see the firm fit for the future.</p>
<h2>Middle lane</h2>
<p>The next step to building a more flexible car company is to look down the chain towards the middle managers. These are the people who can bring local expertise and knowledge about technological development that can only become diluted as strategy decisions are moved up into the boardroom. It is these people who will be instrumental in directing a new field of vision at auto firms. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/99022/original/image-20151020-32235-y5hge8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/99022/original/image-20151020-32235-y5hge8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/99022/original/image-20151020-32235-y5hge8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=277&fit=crop&dpr=1 600w, https://images.theconversation.com/files/99022/original/image-20151020-32235-y5hge8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=277&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/99022/original/image-20151020-32235-y5hge8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=277&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/99022/original/image-20151020-32235-y5hge8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=348&fit=crop&dpr=1 754w, https://images.theconversation.com/files/99022/original/image-20151020-32235-y5hge8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=348&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/99022/original/image-20151020-32235-y5hge8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=348&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Future car firms need to prioritise innovation… and not in test cheats.</span>
<span class="attribution"><a class="source" href="http://anthonybalducci.blogspot.co.uk/2014/01/the-flying-cars-of-television.html">Anthony Balducci/Jack Kirby</a></span>
</figcaption>
</figure>
<p>Middle managers are better able to <a href="http://europepmc.org/abstract/med/11550632">enact</a> the radical change that is needed in the automotive sector. They are <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2007.00681.x/abstract?userIsAuthenticated=false&deniedAccessCustomisedMessage=">central</a> to the firms’ informal social network. They can embed new ethical standards that focus on advances in technology that genuinely create a desired result. </p>
<h2>Communication</h2>
<p>The final piece of the jigsaw is a simple one. We can’t promote every middle manager to executive level, but we can make sure they have a permanent and robust way of being heard by top managers. <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1540-6520.2005.00104.x/abstract?userIsAuthenticated=false&deniedAccessCustomisedMessage=">Investment in that interface</a> between the top management team and the middle managers of our new car firm will be essential if we are to avoid a common flaw seen in heavily consolidated and hierarchical organisations. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/99321/original/image-20151022-8010-1xrif5k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/99321/original/image-20151022-8010-1xrif5k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/99321/original/image-20151022-8010-1xrif5k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=435&fit=crop&dpr=1 600w, https://images.theconversation.com/files/99321/original/image-20151022-8010-1xrif5k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=435&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/99321/original/image-20151022-8010-1xrif5k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=435&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/99321/original/image-20151022-8010-1xrif5k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=547&fit=crop&dpr=1 754w, https://images.theconversation.com/files/99321/original/image-20151022-8010-1xrif5k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=547&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/99321/original/image-20151022-8010-1xrif5k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=547&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Too tied up to call. Companies suffer when communications break down.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/furryscalyman/1034889957/in/photolist-2zs5Ji-qAbb-kvBpFe-xRe5SS-nwMJDC-mFZUJV-zgX6Vf-8eJv5k-8eMNZY-e5qJiT-oxibA-7hENJ-9P2NjK-iAT49i-vM88W6-4dDD3w-cVN18S-ba67YV-5xzXva-4dX9HG-7hPF-icCgF-4Ajvkf-88gAcM-qxghm-g6qxa-5Qe2RB-thtvPj-64xxgi-nPPEAa-88gA3t-uCffUb-f5p52P-8vS1w5-3fUPUm-xRvkLh-arAkrt-cA1TLd-tECQ3-dmCsuW-n37EXH-5wQAgd-kiUoZU-kx3AFf-6685bY-8LLvSU-bWyZhR-sDjsR-rtN4bx-x9ujd">Matt Reinbold</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>When VW sought to explain how the emissions cheating scandal had taken root, <a href="http://www.nytimes.com/2015/09/24/business/international/volkswagen-chief-martin-winterkorn-resigns-amid-emissions-scandal.html">it claimed</a> that top management was not aware of fraudulent practices. This defence is proof that no effective liaison existed with its middle managers, undermining the whole management structure. Effective communication will increase control, facilitate timely information exchange and keep top managers closely informed on the operational side of activities. Simultaneously, it will allow middle managers to champion initiatives and secure support and legitimacy in early stages of research and development. </p>
<p>This blueprint for managing a car firm might seem simple, but changing company culture is notoriously hard to achieve, especially in an industry where some firms have historically committed to tactics that go against rather than work with institutional standards. </p>
<p>The VW scandal has given us an opportunity though. The auto industry is globally important, and as it finds itself under increased scrutiny, it should allow management culture to be reshaped to shift the direction of strategy and harness talent throughout its ranks.</p><img src="https://counter.theconversation.com/content/48907/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sebastiaan van Doorn receives funding from the British Academy for a project on CEO life cycles.</span></em></p>Volkswagen’s example offers up a useful lesson in managing a troublesome hierarchy.Sebastiaan van Doorn, Assistant professor of Enterprise, Warwick Business School, University of WarwickLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/487682015-10-16T10:05:06Z2015-10-16T10:05:06ZVW emissions scandal: was it the customers’ fault all along?<p>When Paul Willis, the UK managing director of Volkswagen, gave evidence to the transport select committee, he was <a href="http://www.telegraph.co.uk/finance/newsbysector/industry/11926772/Watch-live-Volkswagen-emissions-scandal-UK-boss-Paul-Willis-appears-before-transport-select-committee.html">quick to apologise</a> to the more than 1m of his customers affected by the emissions scandal that has <a href="https://theconversation.com/uk/topics/volkswagen">engulfed the German car firm</a>. He was never likely to lay any blame at their door, of course, but over the past few weeks of gradual revelations, an interesting strand has begun to emerge: how little was expected of customers. </p>
<p>It would appear that one of the reasons VW opted to avoid installing the full suite of technologies ideally needed to meet California, US, and <a href="http://www.rac.co.uk/community/blog/rac-blog/january-2012/euro-6-and-diesel-vehicles">indeed Euro 6 regulations</a> is that it feared that you and I would prove resistant to the demands this placed on us. </p>
<p>In order to deliver diesel engines which meet the demands of those emissions standards, then in most applications the best option would be to fit a <a href="http://www.autonews.com/article/20150930/OEM11/150929774/illegal-vw-diesel-emission-systems-may-require-2-solutions?cciid=email-autonews-daily">selective catalytic reduction (SCR) system</a>. In fact, <a href="http://www.wsj.com/articles/vw-to-cut-investment-by-1-billion-a-year-1444728786">the latest reports</a> suggest this is exactly what VW will now do in the US and Europe. The trouble is, these systems are not an entirely hassle-free solution. </p>
<h2>Service history</h2>
<p>I have spoken to industry journalists who wondered why different diesel truck engine technologies were being used in the US and Europe in 2003 shortly before new emissions targets were introduced in the US. They were told at press conferences that manufacturers feared the average American truck driver would not be capable of adding the required urea solution to keep such SCR systems operational and that therefore this technology was best avoided. </p>
<p>This was despite the fact that their European counterparts had proved perfectly capable of doing so – and as, subsequently, have those same US truck drivers. There has been resistance however, as you can <a href="http://www.trucknetuk.com/phpBB/viewtopic.php?f=2&t=32163&start=60">witness on professional forums</a>, and you can see how the idea would develop that the average consumer would simply not be able to, or want to, handle this same task. That is without <a href="http://www.thetruthaboutcars.com/2010/01/the-truth-about-clean-diesels-adblue-is-freaking-expensive/">factoring in the increased running costs to drivers</a>. </p>
<p>It is worth pointing out here that although the urea liquid is less benign than windscreen washer fluid, the procedures are pretty much the same for both. If you didn’t want to lay this task on the driver, then the other option was to include it as part of a regular service. This would work fine, were it not for the fact that in normal use the urea tank <a href="http://duramaxhub.com/lml.html">lasted around 5,000 miles</a>, while the service intervals had, over the years, been extended to 10,000 miles. That lengthy gap between services had evolved into a key selling point for auto companies. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/98061/original/image-20151012-17839-1bfj7i0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/98061/original/image-20151012-17839-1bfj7i0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/98061/original/image-20151012-17839-1bfj7i0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=373&fit=crop&dpr=1 600w, https://images.theconversation.com/files/98061/original/image-20151012-17839-1bfj7i0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=373&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/98061/original/image-20151012-17839-1bfj7i0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=373&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/98061/original/image-20151012-17839-1bfj7i0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=469&fit=crop&dpr=1 754w, https://images.theconversation.com/files/98061/original/image-20151012-17839-1bfj7i0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=469&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/98061/original/image-20151012-17839-1bfj7i0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=469&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Under the bonnet.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/hisgett/5726530803/in/photolist-9J2Y6H-fKTTqn-hYqXpF-fFuGjx-iuS49e-e3CR24-66rwcH-c3n9xo-8BLabf-hCxrzp-fLiHbL-fKsdxx-fL26ex-bEYJpi-fGPgAW-a84G18-a84F3V-K3hk5-fL26Nc-c7veEU-e4Ruey-haVgZx-4UEdj-ea5PLH-9fW42z-r7iT6A-dB387s-hCw9k9-9Fr5Ym-hCvShB-hCxozr-EUh4m-4AM1UJ-568Z9H-hCw4Sb-4AM269-4AGKXn-9jtoSw-kvvKk-hCw6oY-hCw3Lo-hCwkou-eXxjPA-66rwgt-eXkY2n-568pei-56b5y3-56bVfu-5pAg5T-569gxc">Tony Hisgett</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>There was also a more prosaic problem. At times, urea could be over-delivered into the exhaust system, producing an off-putting ammonia smell. In short, do people want to buy a car that occasionally smells like a public toilet?</p>
<p>These may be valid concerns. On the face of it, this final point, as well as the urea topping-up procedure could be addressed through customer education, and in fact catalysts or catalyst washes that process such excess urea are on their way to market. One way of tackling the broader problem is to introduce a very quick interim service for urea top-up which could even be carried out by a roving mechanic at the owner’s home or place of work; it is, after all, <a href="http://www.halfords.com/wcsstore/libraries/document/AdBluebooklet.pdf">a five-minute job</a>. This could be used to enhance customer loyalty, dealer loyalty and overall customer care. </p>
<p>Car makers’ doubts about their customers’ abilities and patience are not entirely baseless. Petrol/diesel mis-fuelling is a daily occurrence, while users have also been found trying to put diesel in the urea tank. Similarly the diesel particulate filter is causing problems on many cars due to <a href="http://www.theaa.com/motoring_advice/fuels-and-environment/diesel-particulate-filters.html">inner city usage patterns by diesel car owners</a> which don’t suit the technology. Which brings us to the wider issue of the relationship between car manufacturers and their customers. </p>
<h2>Humble consumers</h2>
<p>In the early days of motoring, there were close links between car makers and their customers. Car buyers were often skilled or interested in the engineering of their cars, or employed people who were. <a href="http://www.upenn.edu/pennpress/book/14136.html">Kathleen Franz has described</a> how early motorists often provided an input into the design of cars, suggesting and even patenting improvements to cars that were regularly adopted by manufacturers. </p>
<p>By the 1930s this had started to change. It may be that with the wider availability of motorisation, drivers had become less skilled, but a more likely scenario, presented by Franz, is that car manufacturers themselves began to resent this amateur interference in what was by then a highly professional industry, with the design function in particular a new and still novel area of professionalism in the industry, spearheaded by General Motor’s “Art and Color Section” <a href="https://books.google.co.uk/books?id=7cCAASTW6IQC&pg=PA45&lpg=PA45&dq=%22Art+and+Color+Section%22+under+the+legendary+Harley+Earl&source=bl&ots=vvUZ-UdNpO&sig=EEsVIZcecw-qWV6QNbV9PwBFXKQ&hl=en&sa=X&ved=0CC0Q6AEwAmoVChMIuJnihMi8yAIVC7cUCh2miA4F#v=onepage&q=%22Art%20and%20Color%20Section%22%20under%20the%20legendary%20Harley%20Earl&f=false">under the legendary Harley Earl</a>. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/98063/original/image-20151012-17839-19qkbcp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/98063/original/image-20151012-17839-19qkbcp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/98063/original/image-20151012-17839-19qkbcp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=435&fit=crop&dpr=1 600w, https://images.theconversation.com/files/98063/original/image-20151012-17839-19qkbcp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=435&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/98063/original/image-20151012-17839-19qkbcp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=435&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/98063/original/image-20151012-17839-19qkbcp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=546&fit=crop&dpr=1 754w, https://images.theconversation.com/files/98063/original/image-20151012-17839-19qkbcp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=546&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/98063/original/image-20151012-17839-19qkbcp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=546&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Simpler times. When customers drove innovation.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/33037982@N04/5670822844/in/photolist-apThXW-8mhpnv-mjjjL8-wHzWSz-9D7s4E-mQ3JKR-mQ5632-mQ4BgT-mQacHh-mQfuEy-mQ6phs-mQ51VW-mQaBAY-mQdYrD-mQ7exX-mQ58qP-nymNGU-8wfCcG-tiCqFU-ctW58G-cNNsq5-hrKo9m-345ccz-hrKgHV-7rPf53-rW1o6q-6ugb6H-aw3pKy-8RSRus-aQHhpP-boXx6h-psX8Dh-9osRe1-aw3oTU-bofeZT-p59rTZ-7TfD8M-bLin8F-ctW4pf-aQHgMt-9VwtUP-pA25ET-piNcsS-aw3paS-ntaE2W-4BA2tN-oA5GhL-9VzjLN-4BA2WC-fV225j">Leonora Enking</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>The model was increasingly one of the professionalisation of design, whereby the professionals would determine what was good for the customer, who then gratefully and humbly received the products of these professionals’ creativity and skill. With this started a process of alienation that prevented car buyers building too close a relationship with the product, such that its subsequent replacement with a newer and better car was never too painful – the industry is, after all still driven by a new car sales model. </p>
<p>At the same time, the car buyer gradually lost either the skill or the interest in looking after the car and caring for it. Many motorists nowadays do not open the bonnet, nor would they know what to do if they did. This process of industry-induced alienation has led, ultimately, to a situation whereby manufacturers do not trust customers to top up a new liquid in their cars and whereby customers expect their cars to deliver performance, fuel consumption and emissions performance, however they drive it or look after it.</p><img src="https://counter.theconversation.com/content/48768/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Nieuwenhuis does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Volkswagen and others may have been hamstrung by a low opinion of indifferent car buyers.Paul Nieuwenhuis, Senior Lecturer and Co-Director, Electric Vehicle Centre of Excellence (EVCE), Cardiff UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/484852015-10-09T12:17:43Z2015-10-09T12:17:43ZToxic innovation: Volkswagen is the tip of a destructive iceberg<figure><img src="https://images.theconversation.com/files/97230/original/image-20151005-28758-1mdc36b.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Consumer baiting?</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/randar/16336930506/in/photolist-qTD3gC-2JbRxL-cCQpK-5VPmxB-5VTHoW-hVqqr7-9jFQB9-9jCH84-nUC4oD-5B5Vsn-edPwS3-acwDQd-qYS1ev-acLEzH-gU5FNc-7pSC9o-bEE7VG-ehsAnr-7v3ksR-aczjZY-9ddJyz-9JEh3t-f8qahR-79rLwQ-8tWc48-3LUCsR-4oDnEF-8Fwajc-HjUZY-69YDJA-6PcCgn-9gAZiu-8o4poH-aNF4nx-6FzMvq-a82qv-ESsCA-arvKDZ-h3BPdJ-nwqnF6-wRsyXN-471EuR-b4Ujr-8MBDdG-9ocJu-5n4z1z-dXsMVL-7pGAEL-3Z8RL5-p6zdq1">Tom Simpson</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span></figcaption></figure><p>The <a href="https://theconversation.com/how-volkswagen-got-caught-cheating-emissions-tests-by-a-clean-air-ngo-47951">recent case of “cheating” at Volkswagen</a> is still reverberating around the globe and threatens to reveal <a href="http://www.theguardian.com/business/2015/sep/21/volkswagen-emissions-scandal-sends-shares-in-global-carmakers-reeling">similar antics in other corporations</a>. </p>
<p>Innovation takes new ideas and creatively applies them in the real world in ways <a href="http://www.innovation-portal.info/books/">which create value</a>. But what if value is created for some in the short term but the impact for others is negative? The VW story points towards innovation that is toxic – either to customers, the offending organisation itself, or in the end, to both. </p>
<p>Toxic innovation develops and changes products, services or <a href="https://rationalmadness.wordpress.com/2013/02/26/toxic-business-consciousness/">backroom business processes</a> that harm customers. It can be deliberate and born of greed; it can be the result of benign but misguided intent; it can be an utterly unforseen and indirect effect. Ultimately, it can damage or destroy the organisation behind it. </p>
<h2>Clumsy companies</h2>
<p>The VW case is just one among other innovation stories where the same skills that produce genuinely successful products are put to the service of narrow financial goals that result in damaging impacts. Not all of these impacts are deliberate or conscious or known in advance. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/97235/original/image-20151005-28786-4z4b8v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/97235/original/image-20151005-28786-4z4b8v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/97235/original/image-20151005-28786-4z4b8v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/97235/original/image-20151005-28786-4z4b8v.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/97235/original/image-20151005-28786-4z4b8v.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/97235/original/image-20151005-28786-4z4b8v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/97235/original/image-20151005-28786-4z4b8v.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/97235/original/image-20151005-28786-4z4b8v.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Seen better days.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/pnglife/1159161786/in/photolist-2Lr1q3-dBBvJm-nC27U3-GB9ex-pVyFy8-m3Q6M7-bNrzJc-nUo6w9-peiMji-nTBM7x-nTBLwp-6S6YKT-6S6Ye8-w1DxgM-wEUDeW-wVd37E-wEURRu-wEURN5-wWMt59-wWMm95-wWMpD1-w1vgHj-wEUNcW-6kVr2-wXwB6g-aEZMt-pRVj4v-asL9Xo-aeocFJ-6K4ZT-y9jR9-y9jNW-aekr2z-aEZQD-99MpRx-qTLJ5v-bccvr-hP4kuv-aEXV7-bccmN-aEY6c-6FZZSM-2fAVQy-aeku1V-Kmsj9-aEXYw-KmwCM-99Mks6-99Qtgf-aEYaA">Nomad Tales</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>This phenomenon is often based on an endemic <a href="https://rationalmadness.wordpress.com/2013/02/26/toxic-business-consciousness/">troubled business culture</a>. When banks were recently outed for rigging the LIBOR interbank lending rate, this kind of rotten culture was uncovered as well. The LIBOR rigging process itself was <a href="http://www.bloomberg.com/graphics/2015-how-to-rig-libor-interactive/">remarkably innovative and involved plenty of creative activity</a>. It was also illegal and its impact on banks and the world economy is still felt today.</p>
<p>VW’s <a href="http://www.bbc.co.uk/news/business-34324772">environmental “cheat”</a> – deploying software that could trick emissions tests – allowed the car to pollute and no one to be any the wiser. It appears <a href="http://uk.reuters.com/article/2015/09/28/uk-volkswagen-emissions-idUKKCN0RR0KV20150928">VW was warned not to do this</a>, but the extent to which this deception <a href="http://www.npr.org/sections/thetwo-way/2015/10/01/445025925/volkswagen-latest-u-s-sales-stall-german-prosecutors-veer-from-criminal-probe">was known in the higher echelons of the company</a> is yet to be discovered. </p>
<p>So a potentially innovative bit of in-car software became toxic – for the environment in terms of emissions and ultimately in terms of poisoning the Volkswagen brand. What the case has also thrown up is that it is the <a href="http://www.bbc.co.uk/news/business-34340301">emissions tests themselves</a> that would benefit from some real (and non-toxic) innovation.</p>
<h2>Designed to fail</h2>
<p>Another example can be found in the concept of “<a href="http://blogs.blouinnews.com/blouinbeattechnology/2015/09/02/planned-obsolescence-and-the-environment/">planned obsolescence</a>”. Part of all good innovation involves testing products and knowing in advance how and when they will begin to, and ultimately totally fail. That’s vital for safety, for maintenance and product replacement. So, when companies began to be accused of knowingly engineering products to fail or <a href="http://www.wsj.com/articles/we-need-the-right-to-repair-our-gadgets-1441737868">deliberately making them harder to repair</a>, then it doesn’t feel like their ingenuity is devoted to us lowly consumers. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/97232/original/image-20151005-28744-vq5qat.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/97232/original/image-20151005-28744-vq5qat.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/97232/original/image-20151005-28744-vq5qat.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/97232/original/image-20151005-28744-vq5qat.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/97232/original/image-20151005-28744-vq5qat.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/97232/original/image-20151005-28744-vq5qat.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/97232/original/image-20151005-28744-vq5qat.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/97232/original/image-20151005-28744-vq5qat.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/dahlstroms/3635587255/in/photolist-6xgkqT-954fBB-957WXQ-957y8y-957dW7-957s8w-954jov-957SdU-954gPV-954TvH-953duZ-957ghf-fwqbHd-957jhL-957oim-954iX2-qLE1UK-957nqo-fwaWM4-fwqbU7-954y7B-954jR6-954wq6-954THc-954m5X-953fXk-957qEG-956kqS-956gLm-95372k-957pUE-957fpo-956jAo-956fK5-954Xe8-957wyN-957nzb-957JBA-954rwe-954aMt-953uJX-fwqbXj-956dLs-957ng9-9548ek-953cGr-fw7A4K-957Spf-qujy3E-957PsS">Håkan Dahlström</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>We saw the impact of this idea recently <a href="http://www.zdnet.com/article/does-apple-throttle-older-iphones-to-nudge-you-into-buying-a-new-one/">when a Harvard study raised questions</a> over whether an operating system update by Apple was slowing down iPhones at a time when product upgrades became available. Now, new software often loads new features which in turn demand more resources and can cause systems to slow, in fact it is a major part of the technology sector’s appeal that companies are constantly seeking to attract customers towards enhanced products. Customers who felt the iOS9 update was <a href="http://www.theguardian.com/technology/2015/sep/24/iphone-slow-ios-9-update-iphone-4s-iphone-5-iphone-5s">slowing down their older phone</a> may have been wrong, but the suspicion alone can be enough to damage trust in a brand. </p>
<p>There is certainly <a href="http://www.techrepublic.com/blog/cracking-open/five-ways-manufacturers-make-devices-hard-to-repair/">growing evidence</a> that consumer electronics firms are focusing their innovation efforts on making it harder to repair products. If it ever does emerge that clever design by smartphone manufacturers is used to hobble older phones and bully us by stealth us into upgrading, the scandal could at least partly match that which has befallen VW.</p>
<h2>Innovation or intrusion?</h2>
<p>Facebook saw <a href="http://www.bbc.co.uk/news/world-us-canada-34383655">4% wiped off its share price</a> when its platform went down for several hours (and not for the first time). One reason cited for this was engineers engaging in incremental, small-scale innovation which crashed the whole network. This was unintended but the result was a lot of damage to Facebook’s reputation as an always-on social media platform. </p>
<p>Perhaps more significantly, its attempts to change a core part of its platform, the “timeline”, and introduce a supposed innovation known as the Year in Review, resulted in significant negative impact on its brand. Users <a href="http://meyerweb.com/eric/thoughts/2014/12/24/inadvertent-algorithmic-cruelty/">started seeing photos</a> they would rather have forgotten suddenly appearing under their noses. A phrase – “inadvertent algorithimic cruelty” – was even coined to describe this, and the firm was forced to <a href="http://www.theguardian.com/technology/2014/dec/29/facebook-apologises-over-cruel-year-in-review-clips">issue an apology</a>. </p>
<h2>Not so Sunny Delight</h2>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/97236/original/image-20151005-28732-tnyvma.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/97236/original/image-20151005-28732-tnyvma.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/97236/original/image-20151005-28732-tnyvma.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/97236/original/image-20151005-28732-tnyvma.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/97236/original/image-20151005-28732-tnyvma.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/97236/original/image-20151005-28732-tnyvma.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/97236/original/image-20151005-28732-tnyvma.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/97236/original/image-20151005-28732-tnyvma.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Showing some bottle.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/the_toursit/6873933559/in/photolist-btqGXR-CUVUm-Dd2Nr-5JuQxa-dKnu4S-rdccAf-mN9rPN-CUVTd-8bRiqi-57ejyX-4rSwxW-6UZuVy-5nvvoL-fzvxsH-fzKRB3-5nre8F-4uErMw-5nrexp-5nvvvQ-Czkfd-pMXZvK-pc6t1W-rRhsN8-pTc6hp-xt5qpE-6geTcA-dS68Yj-4HiB6W-cNUx5W-e2dYas-4vhoWv-94xiiR-6ki4NZ-33UurF-9QEpPd-ceSzom-xcdHU-4xZdru-ri2uU1-cUY7W-uvQ6P-4s6cfN-qKhaMc-oFNSfz-7WNwv7-BzFfB-87hAP-fod4D-qsYb2a-69ovgJ">Gerald Angeles</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>Facebook’s clunky attempt to spice up its offering might have been a failure of technology, but perhaps the most damaging innovations happen in marketing. </p>
<p>Kids’ drink Sunny Delight was marketed to parents as a healthy fresh orange juice product. It turned into a <a href="http://arnoldonethicalmarketing.brandrepublic.com/2015/10/02/the-power-of-trust/">brand disaster</a> when parents discovered it <a href="http://metro.co.uk/2015/09/25/12-unhealthy-90s-foods-from-our-childhood-ranked-from-best-to-worst-5397871/">was actually artificially coloured sugar water</a> – and sales crashed.</p>
<p>The back room designers of this product had engaged in all kinds of product innovation activity to fool consumers into believing this drink was healthy and full of orange juice goodness. From pictures of oranges on the bright and optimistic packaging, to colour and taste – what we really had was a cheat product.</p>
<p>In short, VW is only the most current and most prominent example of toxic innovation. If corporations want to keep the trust of their consumers they will have to design toxic innovation out of their broader innovation activity. Sadly, stories are emerging in increasing frequency in which companies are applying the same skills they use to brings us wonderful products and services, to cheating, deceiving or in simply trying to be clumsily smart. The result is damage for everyone along the supply chain. </p>
<p>As the Volkswagen case shows, these attempts – or at least the ones we find out about – are a massively false economy. Innovation is always more successful in the long run when it is conscious, connected to real customer benefit, and generates trust and confidence.</p><img src="https://counter.theconversation.com/content/48485/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Levy owns shares in CATS3000 Ltd. </span></em></p>Why do companies devote so much energy to ingenuity that causes harm?Paul Levy, Senior Researcher in Innovation Management, University of BrightonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/484422015-10-06T04:06:59Z2015-10-06T04:06:59ZVolkswagen scandal puts capitalism’s model of self-regulation to the test<figure><img src="https://images.theconversation.com/files/97225/original/image-20151005-1062-94x6fd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The tainted VW Group may drag the rest of the car manufacturing industry into the mud. </span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The world is still in shock after the announcement that the Volkswagen Group <a href="https://theconversation.com/how-volkswagen-got-caught-cheating-emissions-tests-by-a-clean-air-ngo-47951">manipulated emission tests</a> for its diesel engines. The VW Group includes car makes far beyond Volkswagen, for instance Audi, Bentley, Seat and Skoda.</p>
<p>The problem of manipulating emission tests goes to the heart of a capitalistic system. In a capitalistic system, the general view is that government should ensure a level playing field and participants should play according to the rules.</p>
<p>The case of the VW Group shows that this noble goal has failed dismally. The undesired outcome was not an unforeseen or unfortunate error; it was the result of deliberate deceit.</p>
<p>It seems that the VW Group developed engine management software that detected when the vehicles were subject to emission tests, rather than normal road use, and adjusted exhaust emissions to lower levels.</p>
<p>In short: the exhaust emissions were lower under test conditions than under normal use. Sounds simple, but with major economic implications.</p>
<h2>Wide implications</h2>
<p>The immediate question is whether other car manufacturers are guilty of the same practice. Given the level of competition among car manufacturers and the quest to be the best, it is not impossible that this scandal runs wider in the <a href="https://theconversation.com/volkswagen-scandal-will-send-costly-ripples-through-auto-industry-48142">industry</a>.</p>
<p>It is not yet clear in which other countries and jurisdictions the VW Group used this equipment. But its use in even just one country is shocking and completely unacceptable. Equipment of this nature to foil government regulation should simply not exist.</p>
<p>Governments generally have three functions. First, they must ensure freedom for the people in their jurisdiction. Different governments have different interpretations of this requirement. One extreme example is of a country where the interpretation of this freedom results in civil war.</p>
<p>Secondly, governments must provide order. This is generally associated with the safety of citizens.</p>
<p>Thirdly, governments must take care of welfare. One example is that governments should take the necessary steps to prevent externalities (negative outcomes from economic activity) in the interest of the country’s population.</p>
<p>An example is the prevention of pollution through regulation, which includes the limitation of exhaust emissions. In many countries, for instance South Africa, buyers of new cars pay an emissions tax, calculated on the exhaust emissions of the particular vehicle. </p>
<h2>Remedies for cheated consumers</h2>
<p>In countries where such a tax is applied, the respective governments will have every right to recoup the underpayment of these taxes from VW, or any manufacturer guilty of similar practices, who fitted their vehicles with the equipment that distorts emissions readings. The net effect of the equipment’s use would have been an under-reported of taxes due to government. Buyers of the vehicles cannot be held responsible for this misrepresentation.</p>
<p>It also raises the question whether the owners of these vehicles can hold the VW Group legally liable if the second hand value of their vehicles deteriorates as a result of the faulty emissions testing.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/97257/original/image-20151005-28732-qyx1xb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/97257/original/image-20151005-28732-qyx1xb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/97257/original/image-20151005-28732-qyx1xb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/97257/original/image-20151005-28732-qyx1xb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/97257/original/image-20151005-28732-qyx1xb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=499&fit=crop&dpr=1 754w, https://images.theconversation.com/files/97257/original/image-20151005-28732-qyx1xb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=499&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/97257/original/image-20151005-28732-qyx1xb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=499&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Greenpeace activists hold banners outside VW. The group’s emissions scandal has rocked Germany’s business and political establishment.</span>
<span class="attribution"><span class="source">Reuters/Fabian Bimme</span></span>
</figcaption>
</figure>
<p>Governments have to reassess whether they can trust large companies in future to apply regulation. The world is still battling to recover fully from the consequences of the 2007/08 world financial crisis, when banks did not apply the letter and the spirit of regulation.</p>
<p>The 2007/08 <a href="http://global.britannica.com/topic/Financial-Crisis-of-2008-The-1484264">financial crisis</a> started as the so-called “sub-prime crisis”, when the risk of lending to people with dubious credit records was not fully reflected in lending transactions. As more information became available, it seems that the financial crisis was the result of “sub-crime prices”, rather than a “sub-prime crisis” problem. It is really necessary to assess whether there was conduct bordering on criminal intent in structuring transactions in the quest for short-term financial gain, profits and bonuses.</p>
<p>VW’s current problem has the potential to become as big as the 2007/08 financial crisis if it can be shown that other vehicle manufacturers followed similar approaches. As was the case with the financial crisis, concerted effort by vehicle manufacturers will shake the capitalist system to its core.</p>
<p>The only difference is that regulators will not be as forgiving as in the case of the banking crisis. Banks raises deposits from the public on the basis of confidence and trust and are therefore treated with particular care. It is not necessary to retain the same level of trust in the manufacturing industry.</p>
<p>But even if the problem is simply contained to the VW Group, it nevertheless raises the question whether self-regulation by companies is indeed possible once the government has framed the necessary regulatory framework.</p>
<h2>The end of self-regulation?</h2>
<p>The VW Group experience gives governments every right to increase their supervisory role beyond regulation and to involve themselves to a much larger degree in economic activity. If companies cannot behave themselves, governments must ensure they do.</p>
<p>The conduct of the VW Group, following on the financial crisis of 2007/08, has in it all the elements of ending capitalism as we know it today. Governments will rightfully argue for a much larger role in economic activity. </p>
<p>The bottom ends of the V and W in the name of the VW Group might be the thin edge of the wedge ending the current capitalist economic model based, inter alia, on self-regulation.</p><img src="https://counter.theconversation.com/content/48442/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jannie Rossouw does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The VW emissions scandal gives governments every right to increase their supervisory role beyond regulation and to involve themselves to a much larger degree in economic activity.Jannie Rossouw, Head of School of Economic & Business Sciences, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/481722015-09-30T05:05:27Z2015-09-30T05:05:27ZAustralia’s weaker emissions standards allow car makers to ‘dump’ polluting cars<figure><img src="https://images.theconversation.com/files/96714/original/image-20150930-19561-jv8wbs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Australia's lower standards for car exhaust mean overseas car-makers can sell more-polluting cars. </span> <span class="attribution"><span class="source">Exhaust image from www.shutterstock.com</span></span></figcaption></figure><p>In the wake of the <a href="https://theconversation.com/au/topics/volkswagen">emissions scandal</a> that has engulfed Volkswagen in the United States and Europe, it’s worth asking: how do Australia’s standards stack up? The awful truth: we’re literally years behind Europe and the US.</p>
<p>VW has been caught out for installing devices to <a href="https://theconversation.com/how-volkswagen-got-caught-cheating-emissions-tests-by-a-clean-air-ngo-47951">game emissions tests</a> in the United States, after an environmental group found discrepancies between on-road emissions of nitrogen oxides and testing conditions.</p>
<p>Emissions standards are important to improve air quality and reduce the effects of air pollution. Diesel exhausts of nitrogen oxides (NO<sub>x</sub>) and particulate pollutions are a <a href="https://theconversation.com/diesel-fumes-and-your-health-vw-cover-up-shows-we-need-to-te">major health concern</a>.</p>
<p>Australia has adopted international standards, which have been developed by the United Nations and referred to as “Euro standards”. The Euro standards regulate the emission standards of nitrogen oxides (NO<sub>x</sub>), hydrocarbons, carbon monoxide, particulate numbers and particulate materials. (Cars also produce greenhouse gases, which contribute to climate change, but these are usually regulated in a different way.)</p>
<p>All new vehicles manufactured or sold in the country must comply with the standards, which are tested by running the vehicle or engine in a standardised test cycle.</p>
<h2>The story overseas</h2>
<p>Euro standards apply to the air pollutants, while separate regulatory emission standards apply to CO<sub>2</sub> emissions.</p>
<p>The <a href="http://www.airclim.org/sites/default/files/documents/Factsheet-emission-standards.pdf">Euro standards</a> vary depending on whether the vehicle uses petrol or diesel, as well as the class of the vehicle. For instance, the Euro 5 standard reduced the amount of particulate matter for diesel vehicles from the previous standards by 80% (from 25 milligrams per km to 5 mg/km) and by 28% for NO<sub>x</sub> emissions (from 250 mg/km to 180 mg/km). The adoption of Euro 5 standards has forced the use of diesel particulate filters for <a href="http://www.theicct.org/sites/default/files/publications/ICCT_EuroVI_briefing_20150304.pdf">light–duty diesel vehicles</a>.</p>
<p>The <a href="http://www.airclim.org/sites/default/files/documents/Factsheet-emission-standards.pdf">Euro 6</a> standard will reduce NO<sub>x</sub> emissions by a further 55%, and narrow the gap to the petrol engine emissions standard of 60 mg/km.</p>
<p>The International Council on Clean Transportation <a href="http://www.theicct.org/sites/default/files/publications/ICCT_EuroVI_briefing_20150304.pdf">states</a> that: </p>
<blockquote>
<p>Euro 6 limits bring overall emissions of diesel and petrol vehicles close to parity, provided that vehicles of both fuel types conform to standards in real-world driving conditions.</p>
</blockquote>
<p>In the European Union (EU), the Euro 5 standard applied to the sale of all new vehicles from January 2011 until September 2015. From September 2015, all <a href="http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:l28186">new vehicles</a> sold in the EU must be Euro 6-compliant.</p>
<p>In the United States the <a href="http://www3.epa.gov/otaq/standards.htm">standards</a> (referred to as the Tier 2 program) are more stringent than Euro 6, with the fleet average NO<sub>x</sub> close to 40 mg/km for both diesel and petrol engines. The Tier 2 program sets out the standards for tailpipe emissions for all passenger vehicles including sports utility vehicles (SUVs, minivans, and pick up trucks). Tier 2 will be replaced by stricter <a href="http://www3.epa.gov/otaq/tier3.htm">Tier 3 standards</a> at the beginning of 2017.</p>
<p>CO<sub>2</sub> emission standards are regulated in the EU and US. In 2009 the European Union introduced <a href="http://www.theicct.org/sites/default/files/publications/ICCTupdate_EU-95gram_jan2014.pdf">regulatory CO<sub>2</sub> emission targets</a> of 130g of CO<sub>2</sub>/km by 2015 from new passenger vehicles sold by all car manufacturers combined.</p>
<p>In the United States, the federal <a href="http://www.nhtsa.gov/fuel-economy">Corporate Average Fuel Economy</a> is equivalent to 160g of CO<sub>2</sub>/km, by 2016.</p>
<h2>Australia needs to catch up</h2>
<p>Australian emission standards lag well behind EU and US standards.</p>
<p>Australia has no regulatory CO<sub>2</sub> emission standards to reduce emissions of greenhouse gas emissions from fossil fuels and its impact on climate change. This <a href="https://theconversation.com/could-australia-become-a-dumping-ground-for-high-emission-vehicles-38299">allows car manufacturers and importers to dump</a> their high CO<sub>2</sub> emitting vehicles because there are no restrictions. </p>
<p>The government has signalled that vehicle efficiency will form part of policies to meet <a href="https://www.environment.gov.au/climate-change/publications/factsheet-australias-2030-climate-change-target">Australia’s future climate target</a>. </p>
<p>Australia’s current air pollutant standards are Euro 4, which were fully implemented by July 2010. The <a href="https://www.comlaw.gov.au/Details/F2012C00284">Euro 5 standards</a> will not apply until November 1, 2016 and the <a href="https://infrastructure.gov.au/roads/environment/files/Emission_Standards_for_Petrol_Cars_1972_2018.pdf">Euro 6 standards</a> will take effect from April/July 2017 and April/July 2018 for all models.</p>
<p>Failure to impose the current international standards means importers of new vehicles can dump high-polluting Euro 4 compliant vehicles into Australia, which cannot be sold in their own country. For instance the <a href="http://www.theguardian.com/business/2015/sep/26/volkswagen-emissions-scandal-switzerland-bans-sale-of-some-models">Swiss authorities</a> have banned the sale of almost 180,000 Volkswagen diesel vehicles, because the company has fraudulently falsified the vehicles’ diesel emission standards, which are no longer Euro 5 compliant. However, such VW vehicles may be Euro 4 compliant and can be sold in Australia.</p>
<p>It is unlikely Australia will meet the most current international emission standards until the cessation of local manufacturing motor vehicle industry towards the end of 2017. Not all local vehicles are Euro 5 compliant, which makes it an <a href="http://www.motoring.com.au/news/2015/holden/gm-committed-to-holden-in-australia-52161">expensive proposition</a> to keep all vehicles in production.</p>
<p>Furthermore the Gillard government <a href="http://www.finance.gov.au/vehicle-leasing-and-fleet-management/fleet-guidance-and-related-material.html">supported</a> the struggling industry by amending the Commonwealth Fleet Vehicle Selection Policy in 2012, and mandated a 100% Australian-made passenger motor vehicle fleet for all commonwealth agencies. That is, the <a href="http://www.pc.gov.au/inquiries/completed/automotive/report/automotive.pdf">regulation required</a> government buyers to select passenger and light commercial vehicles manufactured in Australia unless it could be “demonstrated that no suitable vehicle is available”.</p>
<p>The <a href="http://www.finance.gov.au/vehicle-leasing-and-fleet-management/fleet-guidance-and-related-material.html">regulation</a> stated that “environmental considerations” are not a consideration for choosing an alternative vehicle. The purpose of the fleet procurement policy is to provide support to the Australian car industry. However there is limited scope for government support through fleet purchases, which are mostly from the Commonwealth, Victoria and South Australian governments. Further, all governments accounted for 41,925 sales in 2014, representing only 3.8% of <a href="http://www.ntc.gov.au/Media/Reports/(28DF073D-71D6-40BB-8FC4-C358C475A2B3).pdf">total vehicle sales</a>.</p>
<p>Clearly government intervention is required to upgrade the emission standards for air pollutants and prevent car manufacturers or importers from dumping high-polluting vehicles in Australia.</p>
<hr>
<p><em>Anna will be on hand for an Author Q&A between 11am and noon AEST on Thursday, October 1, 2015. Post your questions in the comments section below.</em></p><img src="https://counter.theconversation.com/content/48172/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anna Mortimore does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Australia is literally years behind European and US vehicle emissions standards, allowing car-makers to sell more polluting cars.Anna Mortimore, Lecturer, Griffith Business School, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/481862015-09-25T12:56:57Z2015-09-25T12:56:57ZVolkswagen crisis: brand that invented modern advertising is dented<figure><img src="https://images.theconversation.com/files/96211/original/image-20150925-17708-1gcnncx.png?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Classic VW ad from 1962</span> </figcaption></figure><p>I’ve always assumed it was simple for companies to realise that the most important asset they have is trust. Without it, there’s not a lot you can do to build a sustainable business. That <a href="http://www.bbc.co.uk/news/business-34311819">Volkswagen appears to have forgotten</a> this unshakeable rule is remarkable considering the car maker’s history. </p>
<p>It is no exaggeration to say that Volkswagen changed the way that we talk to consumers. Together with <a href="https://www.ddb.com">creative agency DDB</a> from the late 1950s and through the 1960s, they produced some enduringly wonderful adverts. That golden era laid the foundations for a partnership that has endured until the present day and continued to produce a number of great ads along the way. </p>
<p>When VW launched into the US shortly after World War II, it was selling one mass-market car: the Type 1 Beetle. It faced a unique problem. Not only was its car European, which was not seen as a good thing back then, it was coming from America’s wartime enemy. </p>
<p>The company’s first couple of attempts to market the car in the US were unsuccessful, so VW established a network of dealers. This saw a <a href="http://www.merrellpublishers.com/?9781858946344">dramatic rise</a> in sales – from around 2,000 cars in 1953 to more than 150,000 by 1958. VW didn’t do any advertising at all because it felt that the standard advertising of the late 1950s was not how it wanted to talk to its customers.</p>
<p>That all changed when a German called Carl Hahn arrived to head up VW’s US division in 1959. He saw that the best way to increase sales was to build the brand through advertising. By his own estimate <a href="http://www.merrellpublishers.com/?9781858946344">he met with</a> more than 4,000 admen over a three-month period, but he was far from impressed. He saw an industry that was infatuated with research, think tanks and brainstorming (sound familiar?), but producing lousy advertising. </p>
<p>Here are a couple of examples of the sort of adverts that were running at the time in the US, the first for Silva Thin cigarettes and the second for Ford cars:</p>
<p><strong>Silva Thins</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/96196/original/image-20150925-16045-1hhlj8v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/96196/original/image-20150925-16045-1hhlj8v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/96196/original/image-20150925-16045-1hhlj8v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=831&fit=crop&dpr=1 600w, https://images.theconversation.com/files/96196/original/image-20150925-16045-1hhlj8v.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=831&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/96196/original/image-20150925-16045-1hhlj8v.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=831&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/96196/original/image-20150925-16045-1hhlj8v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1045&fit=crop&dpr=1 754w, https://images.theconversation.com/files/96196/original/image-20150925-16045-1hhlj8v.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1045&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/96196/original/image-20150925-16045-1hhlj8v.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1045&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<p><strong>Ford cars</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/96198/original/image-20150925-16073-716c3d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/96198/original/image-20150925-16073-716c3d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/96198/original/image-20150925-16073-716c3d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=381&fit=crop&dpr=1 600w, https://images.theconversation.com/files/96198/original/image-20150925-16073-716c3d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=381&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/96198/original/image-20150925-16073-716c3d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=381&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/96198/original/image-20150925-16073-716c3d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=478&fit=crop&dpr=1 754w, https://images.theconversation.com/files/96198/original/image-20150925-16073-716c3d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=478&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/96198/original/image-20150925-16073-716c3d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=478&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>As you can see, advertising in that era wasn’t terribly sophisticated. It tended to be boastful and show off, and didn’t talk to people in a manner that resonated with their own lives. </p>
<p>While Hahn had been despairing at the calibre of admen that he had been meeting, fortune played its hand. One of the VW distributors knew of DDB and told him he should meet with them. DDB, originally known as Doyle Dane Bernbach, was a New-York-based agency that was already forging a reputation as a maverick – producing outstanding creative work for companies such as Polaroid, Levy’s Rye Bread and El Al Airline. Hahn was impressed by the agency’s confidence and the quality of its work – as well as the fact that it didn’t show him any speculative VW work. DDB’s thinking was that it wouldn’t be representative because it wouldn’t include the client’s input. </p>
<p>With the agency appointed, DDB put together the account team: art director Helmut Krone and copywriter Julian Koenig. Along with input from co-owner Bill Bernbach, they changed the face of the advertising world. They introduced realistic photographs rather than idealistic retouched ones. They got rid of aspirational settings and females draped across car bodywork and even started talking to the reader in a friendly manner. The ads were simple, striking and slightly self-deprecating. And they were light years away from any other car advertising at the time. Here are a couple of examples:</p>
<p><strong>Makes your house look bigger (1964)</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/96202/original/image-20150925-17699-t882rb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/96202/original/image-20150925-17699-t882rb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/96202/original/image-20150925-17699-t882rb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=796&fit=crop&dpr=1 600w, https://images.theconversation.com/files/96202/original/image-20150925-17699-t882rb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=796&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/96202/original/image-20150925-17699-t882rb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=796&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/96202/original/image-20150925-17699-t882rb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1000&fit=crop&dpr=1 754w, https://images.theconversation.com/files/96202/original/image-20150925-17699-t882rb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1000&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/96202/original/image-20150925-17699-t882rb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1000&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p><strong>Wilt Chamberlain (1966)</strong></p>
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<a href="https://images.theconversation.com/files/96203/original/image-20150925-17729-rmngoj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/96203/original/image-20150925-17729-rmngoj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/96203/original/image-20150925-17729-rmngoj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=835&fit=crop&dpr=1 600w, https://images.theconversation.com/files/96203/original/image-20150925-17729-rmngoj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=835&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/96203/original/image-20150925-17729-rmngoj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=835&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/96203/original/image-20150925-17729-rmngoj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1050&fit=crop&dpr=1 754w, https://images.theconversation.com/files/96203/original/image-20150925-17729-rmngoj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1050&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/96203/original/image-20150925-17729-rmngoj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1050&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>This tone of voice that DDB developed is as important as the clean, modern layouts that the campaign gave us. It started a revolution in how we talk to consumers (though a huge number of companies have never learned). In what is my favourite quote of the genre, Helmut Krone summed it up as follows:</p>
<blockquote>
<p>A little admission gains a great acceptance.</p>
</blockquote>
<p>In short, if you’re honest consumers will trust you. They know you’ll give it to them straight, whatever the news. </p>
<h2>Television talking</h2>
<p>VW/DDB also brought their quirky self-deprecation and simplicity to TV screens. Here’s a lovely example from 1964:</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/ABcckOTVqao?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
</figure>
<p>Because the ad’s not crammed from start to finish with waffle, you really pay attention when they ask the hook question: </p>
<blockquote>
<p>Have you ever wondered how the man who drives the snow plough drives to the snow plough?</p>
</blockquote>
<p>And the answer:</p>
<blockquote>
<p>This one drives a Volkswagen. So you can stop wondering.</p>
</blockquote>
<p>In a 60-second advert there’s just over ten seconds of voice. That, again, was hugely unusual. Most adverts worked on the principle of repeating the message as often as they could. Which often has the unwanted effect of making your audience think you think they’re stupid.</p>
<p>Quite possibly, the creative work that VW and DDB produced is the most important in the history of advertising. <a href="http://articles.latimes.com/2014/jan/31/autos/la-fi-hy-volkswagen-beetle-65-years-20140130">It drove</a> VW Beetle sales in the US to a record 570,000 a year in 1970, and set the tone both for modern advertising and another 50 years of VW advertising from the same agency – you can see the consistency in style from the two ads below from 1998 (left) and 2003 (right). </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/96205/original/image-20150925-17694-154019g.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/96205/original/image-20150925-17694-154019g.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=384&fit=crop&dpr=1 600w, https://images.theconversation.com/files/96205/original/image-20150925-17694-154019g.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=384&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/96205/original/image-20150925-17694-154019g.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=384&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/96205/original/image-20150925-17694-154019g.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=482&fit=crop&dpr=1 754w, https://images.theconversation.com/files/96205/original/image-20150925-17694-154019g.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=482&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/96205/original/image-20150925-17694-154019g.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=482&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p>Having spent decades building up the trust between consumer and car maker that has ensured VW’s survival well into the 21st century, no doubt Helmut Krone and his colleagues will be spinning in their graves at the current crisis. Once you’ve lied and been found out, it’s incredibly difficult to regain that trust. Pity the creative team that has to try and help put it right.</p><img src="https://counter.theconversation.com/content/48186/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris owns a company called We Are Ideas</span></em></p>The scandal around the German car maker is all the more galling for a company that created arguably the best advertising in history.Chris Muir, Lecturer in Creative Advertising, Edinburgh Napier UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/481232015-09-25T05:28:38Z2015-09-25T05:28:38ZWhy the Volkswagen share price slump goes beyond market logic<p>It has been an extraordinary week for Volkswagen managers and investors alike as markets <a href="http://fortune.com/2015/09/23/volkswagen-stock-drop/">issued their punishment</a> for the company’s admission of emissions test cheating. Standard financial economics theory states that trading trends are based on rational investors’ expectations of future cashflows, discounted back to wherever the stock had got to at that point. But has the VW share price reaction followed that rationale?</p>
<p>In the immediate aftermath of the news, when details were spare and traders at their most skittish, there was a sharp 25% wiped off of the VW share valuation. There has been a further drift downwards since: to date, approximately 30% has been wiped off of the share valuation. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/96078/original/image-20150924-17074-1o09lg7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/96078/original/image-20150924-17074-1o09lg7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/96078/original/image-20150924-17074-1o09lg7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=275&fit=crop&dpr=1 600w, https://images.theconversation.com/files/96078/original/image-20150924-17074-1o09lg7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=275&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/96078/original/image-20150924-17074-1o09lg7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=275&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/96078/original/image-20150924-17074-1o09lg7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=346&fit=crop&dpr=1 754w, https://images.theconversation.com/files/96078/original/image-20150924-17074-1o09lg7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=346&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/96078/original/image-20150924-17074-1o09lg7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=346&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The share price slump.</span>
<span class="attribution"><a class="source" href="https://uk.finance.yahoo.com/q/bc?s=VOW.DE&t=5d&l=on&z=l&q=l&c=">Yahoo Finance</a></span>
</figcaption>
</figure>
<p>But is this a pure assessment of economic fundamentals, or are there extra factors at play here? Behavioural economists may ask: how much of the negative reaction is based on emotions, such as disgust, despair, abhorrence, at such unethical behaviour? It has long been recognised that investors have complex motivations behind their stock purchase decisions.</p>
<h2>Confidence is a preference</h2>
<p>Investors are heterogeneous in their behaviour and preferences. Some are primarily focused on the pure economic fundamentals of companies. However, a growing proportion of investors focus on issues beyond the pure economics. They might look at issues such as <a href="http://link.springer.com/article/10.1007/s10551-007-9401-9#page-1">a company’s ethical behaviour</a>, social impact, corporate social responsibility policies or its environmental behaviour. They might also consider the treatment of its other stakeholders (customers, employees, the surrounding community, the planet!). </p>
<p>A key issue for many investors is the confidence that they have in the trustworthiness of the company management. Thus, there is much evidence that many investors (<a href="http://www.sciencedirect.com/science/article/pii/S1053535701001032">sometimes termed ethical investors</a>, “green” investors, social investors) are prepared to pay a price premium (and are thus prepared to take a hit on returns) for shares in companies that are committed to acting in a socially responsible, ethical, fair, environmentally and stakeholder-friendly, and trustworthy manner. One recent report suggests <a href="http://www.investopedia.com/university/ethical-investing/ethical-investing2.asp">massive growth in ethical investing</a> in the US alone, and the sector’s success means that some of its priorities have started to bleed into mainstream investing.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/96075/original/image-20150924-17100-jje4vq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/96075/original/image-20150924-17100-jje4vq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/96075/original/image-20150924-17100-jje4vq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/96075/original/image-20150924-17100-jje4vq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/96075/original/image-20150924-17100-jje4vq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/96075/original/image-20150924-17100-jje4vq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/96075/original/image-20150924-17100-jje4vq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/96075/original/image-20150924-17100-jje4vq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A world of stakeholders.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/ricardo/3035228108/in/photolist-5Cdkz7-4Wdzti-Hrxm6-6oHRLQ-6pR7Tq-Afy4X-6rmSqc-dNWtc5-dagTsX-rYNaiD-7vgsev-7hEDyp-E1wvy-5drWst-qcBr6Q-9wKyGd-dGdmPb-6sczpL-5XTyMK-nyT1qD-j3LVA-toMj7-4rF17Y-5dwhw5-24sTze-dJJQ4W-6GzycS-fe8rQd-3GvRBy-tunVF-z33fy-8gzSTq-6Dsj4m-85hX3Y-5YFMWT-24sTDF-airid3-dLU66a-5oPwQ9-787XhH-dMiBYN-371X8q-4GyeEA-sRsn6-e3oar-4kEKd1-9eEHe-qwW5g4-aCna2-6rmSuK">ricardo</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>On the other hand, companies who appear to act in the contrary manner (tending towards the unethical and untrustworthy, and with little regard for stakeholders, the environment, and the wider community) face the danger of extreme negative investor reaction, as VW has found to its cost. <a href="http://www.sciencedirect.com/science/article/pii/026323739500050X">Evidence shows that trust is easy to destroy</a>, but much harder to re-build. </p>
<h2>Reputational cost</h2>
<p><a href="http://www.economist.com/news/business-and-finance/21665452-18-billion-fine-not-carmakers-only-worry-why-volkswagens-share-price-has-fallen-so">It has been argued</a> that the sharp negative stock reaction to VW’s unethical behaviour far exceeds the potential economic effects on its future cashflows. In other words, the negative reaction dwarfs the expected litigation costs. However, the situation is more complex than just examining the immediate negative costs. Such behaviour also damages both investor and consumer trust in VW’s future integrity, and that means markets must factor in reputation costs to the share price discounted cashflow formula. </p>
<p>So, both litigation and reputation costs can be considered as economic factors in the price reaction of VW shares. It is interesting to consider whether, in addition to these factors, a large element of the 33% fall in share value is due to negative behavioural and emotional feelings towards the company (investor and consumer disgust and abhorrence at such unethical behaviour). </p>
<p>You might imagine the stock market trader as a calculating, implacable beast, buying and selling based on logic alone. However, a <a href="http://www.morexpertise.com/download.php?id=144">recent development in scholarly research</a>, emotional finance, conceptualises how unconscious emotions may affect investor attitudes towards a stock. This approach focuses on the “love” that investors have when initially investing in a favourite and trusted company There then comes a tipping point (such as VW’s unethical behaviour) where like a jilted lover, an investor switches sharply to hate of the company shares, sparking mass-selling, and massive share price reductions beyond the fundamentals.</p>
<h2>Shareholder value</h2>
<p>The economist, Milton Friedman, <a href="http://www.forbes.com/sites/stevedenning/2013/06/26/the-origin-of-the-worlds-dumbest-idea-milton-friedman/">once famously argued</a> that the only ethical and moral responsibility a company has is to its shareholders. He reckoned that the board should act to maximise shareholder wealth, even if that is at the expense of other stakeholders, and the planet. </p>
<p>VW may have even believed that it was following this mantra when it engaged in the emissions testing manipulation. It has been argued that the company was facing extreme competition from other car manufacturers, and emission -testing was extremely tough, so they may have believed that this justified their behaviour in terms of maintaining market share, and upholding shareholder value. </p>
<p>However, as we have witnessed this week, the financial markets have passed their crushing judgement on the emissions fiasco, and the slump in share value probably combines economic and emotional factors, as investors demonstrate their shock at the behaviour on show. </p>
<p>It is a useful reminder that for shareholder value to retain any relevance, you must imagine that the shareholder will still own the stock when the chickens come home to roost – or when a clean air NGO <a href="https://theconversation.com/how-volkswagen-got-caught-cheating-emissions-tests-by-a-clean-air-ngo-47951">calls you out on some dodgy software</a>. A failure to understand that simple fact has left VW facing a long battle to restore investor trust and confidence in its integrity.</p><img src="https://counter.theconversation.com/content/48123/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Fairchild does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The market reaction to the VW emissions scandal is just like that of a jilted lover.Richard Fairchild, Senior Lecturer in Corporate Finance, University of BathLicensed as Creative Commons – attribution, no derivatives.