3 Business Lessons From the VW Scandal

Volkswagen had just begun to dig itself out of a public perception hole that its cars were unreliable and expensive to fix throughout the 1990s and early 2000s. The German automaker's latest scandal may bury it for good.

VW was caught cheating on emissions tests, polluting the environment, and trying to cover the whole thing up, the trifecta of business scandals. So what can Volkswagen's implosion teach small business owners?

1. Regulators Are Everywhere: VW's shenanigans weren't exposed by the Environmental Protection Agency, although that's where its harshest penalties may come from. No, it was engineers at West Virginia University, asked by a European environmental organization to gather field data on VW emissions, who first noted the discrepancies between its road tests and VW's reported emissions tests. So while you may think you can fool government inspectors, it may be the regulators that you don't know that get you in the end.
2. Don't Cheat Your Core: The most damaging aspect of "Dieselgate" is the hypocrisy of VW's claims compared to what it was doing. It's one thing to be General Motors and have a faulty ignition switch -- glitches can happen. But when you advertise your TDI engine as "Clean Diesel" and shout its fuel efficiency and low emissions from the rooftops, only to be exposed as emitting 40 times the legal limit of environmentally toxic pollutants, your reputation suffers public damage it may never recover from.
3. You Gotta Pay the Price: In a scandal as heinous as this one, people from the public to your shareholders will want blood. VW is recalling half a million cars in the U.S. alone, 11 million worldwide. It's setting aside over $7 billion for the recall and civil fines. The car maker's U.S. and global CEOs are out and they may not be the only executives fired over the diesel debacle. If you're going to cut corners, prepare to get the axe.

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Related Resources:

• Volkswagen to fire three executives as emissions scandal deepens (Reuters)
• Lessons From Volkswagen's Emissions Fraud Disaster (FindLaw's In-House)
• VW Sets Aside $7.3B for Worldwide Recall (FindLaw's Common Law)
• Colt Goes Bankrupt: 3 Lessons for Small Businesses (FindLaw's Free Enterprise)