Volkswagen (English Version)

© Robert I. Bell 2015

THE VOLKSWAGEN GREEN REDEMPTION FUND

Volkswagen needs redemption—fast. The company faces a possible $18 Billion US government fine plus payouts to other governments and lawsuits seemingly everywhere. By now everyone knows the company admitted to inserting software in over 11 million diesel cars to automatically deceive on emissions tests.

An ethical and governance problem? Sure, but the root cause is covered-up technological disappointment.   Elon Musk of Tesla described it this way, as quoted in Le Monde 27-28 September 2015: « J’imagine que Volkswagen était sous une énorme pression et s’est retrouvé coincé par ce qui est effectivement possible. Après cela, la tricherie est la seule option …  le diesel atteint ses limites …  le seul moyen de réduire les émissions, c’est de changer de technologie. »   [My translation : “I imagine that Volkswagen was under an enormous pressure and found itself wedged by what is effectively possible. After that, fraud is the only option… diesel has attained its limits…the only means to reduce emissions is to change the technology.”]

I have documented in two books many similar examples of cover-ups of other disappointing technologies—in Pentagon weapons, NASA projects, medicines, medical devices, and European high tech projects. I have found that top management realizes too late they have committed too much into a technology that doesn’t meet specifications. Almost always they charge ahead, crushing anyone who tells the truth and gets in the way.

Top management almost inevitably denies knowing anything about any wrongdoing, as has been the case with Volkswagen. “I agree it’s very hard to believe,” the most senior US Volkswagen executive testified to the US Congress, adding, “Personally, I struggle too.”

Government regulators usually catch on too late, often because of conflicts of interest or incompetence.

So how does Volkswagen get redemption?

Not by creating an e-car cheaper than Elon Musk’s.  There already are cheaper ones; many brands have announced ranges comparable to Tesla’s within two years. Not by launching an ad campaign. Why should anyone believe that they are not being once again deceived? To redeem themselves, Volkswagen actually has to do something to shift attention from their dirty past to a clean future.

Many observers think e-cars are that clean future. Volkswagen’s redemption just might be found in addressing e-cars’ main limitation; there is no convenient charging infrastructure.

Volkswagen could get redemption by voluntarily filling up a fund to build it.  Other car companies—maybe quite a few—may turn out to need redemption too. They could chip in to the same dedicated fund—what I have called a Green Redemption Fund.

I first proposed the concept of a Green Redemption Fund in 2010 in a keynote speech at the G20 in Korea. The idea is simply that big money investors (I suggested religions) lock up funds for a long time for investment in green infrastructure, with all profits reinvested. Redemption implies guilt—for global warming, air pollution, damage to the planet, etc. And Volkswagen has admitted guilt.

Although Volkswagen, and other Green Redemption Fund investors, might actually own the assets in the fund, they won’t be able to pull money out for some fixed number of years—say 20, even 40. The self-sacrifice gives them two chances at redemption. First, the cash value of the assets goes to the next generation, the one everyone talks about saving from global warming. Second, Volkswagen builds an infrastructure that they themselves can’t use—until they make e-cars too. What about the $18 Billion fine? If Volkswagen immediately launches the Green Redemption Fund, to create its plug-in network, they can then throw themselves on the mercy of public opinion. Then if the US government is merciless, the government becomes the culprit. Volkswagen, as a “redeemed underdog,” could sell a lot of cars, spectacularly leveraging their $18 Billion.

Volkswagen’s $18 Billion Green Redemption Fund contribution could certainly build a national charging network. According to a September 2015 report from the US government’s Idaho National Laboratory, the fastest chargers, DC Fast Chargers, give a forty mile range in ten minutes. Their average cost is $23,662, although some cost twice that much. So $18 Billion could pay for a lot of fast charging stations—conceivably some 800,000, in parking lots, supermarkets, gas stations, etc.

Volkswagen’s possible fines in other countries could also be put in a Green Redemption Fund to build a national charging network in those countries.

A Green Redemption Fund could not only save Volkswagen but more importantly help to save all of us from air pollution and global warming.

Robert I. Bell, a frequent speaker at business and green conferences in Europe, is a Professor of Management and former Chair of the Department of Finance and Business Management, Brooklyn College. His most recent book is The Green Bubble, New York, 2008.