What a shock it must have been this week when U.S. government officials delivered a massive smack-down to VW executives who clearly fail to fathom the depth and breadth of their diesel-gate dilemma.

Make no mistake, VW’s problems are not going away quickly or inexpensively, and the company’s leaders are making things worse. Their arrogance, their obvious self-satisfaction and sense of entitlement, their inability to grasp the full extent of this crisis and their public displays of self-righteousness are stunning. This will be devastating to the company going forward.

2016 Beetle convertible: As in other markets, VW Canada has told dealers to stop selling and delivering any new Beetle, Golf, Golf Sportwagon, Jetta, and Passat model equipped with a 2.0 TDI (Diesel) engine until further notice. Also
within the stop sale order are certified pre-owned vehicles from model year 2009 onwards, when
equipped with the same engine.

How is it possible, in fact, that VW’s bosses could apparently assume that regulators at both the California Air Resources Board (CARB) and the U.S. Environmental Protection Agency (EPA) would simply rubber stamp VW’s proposed fixes for seven years of cheating diesel emissions regulations? How could VW submit documents and proposals that CARB described as “incomplete, substantially deficient” and well short of “meeting the legal requirements to return these vehicles” to compliance.

In fact, senior EPA official Chris Grundler, told Automotive News “this is not a political matter. It’s a serious matter; the deficiencies cover a range of areas. I would not characterize it as dotting i’s or crossing t’s.” The EPA and CARB want a proper and comprehensive fix that addresses not just the emissions issues, but also provides comfort, compensation and support for the countless VW owners who were hoodwinked by VW’s cheating ways with more than 600,000 vehicles in the U.S. alone, 11 million worldwide.

2016 Golf Sportwagon

How could VW make such a massive blunder during the very week all eyes were on the auto industry at Detroit’s auto show? For answers look to the German character in general, and, more specifically, to the almost “symbiotic, bordering on incestuous” relationship German car companies enjoy with German governments at all levels.

VW and other German car companies have a much easier ride back in their homeland – where top auto lobbyists are also veterans of Chancellor Angela Merkel’s Christian Democratic Union (CDU); where senior government affairs officials at car companies were former mouthpieces for German chancellors; where government ministers have done ads for German car companies; and where the government of Lower Saxony owns 20 per cent of VW. Back home in Germany, a phone call here, a whisper there, a nod, a glance, a knowing smile – done, problem solved.

2016 Golf

But that won’t be the case in the U.S As the EPA’s Grundler said in a Reuters report, “Given the circumstances and the past history, we’re not going to approve anything until it’s thoroughly tested and we’re convinced that it addressed the non-compliance and it’s good for owners.”

VW will suffer the full regulatory microscope. Then the U.S. Attorney General’s office will step in with its own investigation and penalties. What might that cost VW? When Toyota reached a plea bargain with U.S. prosecutors, the price was massive public humiliation and a fine of $1.2 billion (U.S.) for “concealing and making deceptive statements” about the unintended acceleration of its vehicles.

Toyota, however, has given VW the playbook on how to get past this sort of crisis: admit everything, conceal nothing, express believable contrition, pay the necessary fines, and offer generous compensation to everyone. Complete and heartfelt contrition will to save the company.

But all that goes against the German cultural grain. Germans are typically structured and inflexible thinkers. Now they must look at this problem and seek solutions from all angles. Germans are typically very private. Now VW must be open and transparent. Germans typically do not like others to show them a better way. Now VW must learn from Toyota.

2016 Passat

In the U.S., VW will not receive any special or even friendly treatment from government officials. Worse, the U.S. litigation climate is ruthless and relentless. On that point, former U.S. senator and vice-presidential candidate John Edwards has joined more than 140 plaintiffs’ lawyers competing to lead the coming lawsuit tsunami against VW, notes Reuters.

Edwards has made a fortune as an ambulance chaser and a charming courtroom bulldog. VW does not want to face him in an American court.
“This case has ingredients I’ve spent my life working on,” Edwards told Reuters.

You’re troubles are not just in Germany, VW. Act like it.