Wu Guangqiang

    jw368@163.com

    GERMAN products have long enjoyed a reputation for high quality and reliability in China and other parts of the world. But consumers’ admiration of rigorous and precise German companies and confidence in German products were shattered overnight when Volkswagen’s appalling “clean diesel” scandal came to light.

    On Sept. 18, the U.S. Environmental Protection Agency (the EPA) accused Volkswagen of installing elaborate software in 482,000 “clean diesel” vehicles sold in the U.S. since 2009 so the cars’ pollution controls would only work when undergoing emission tests. When not being tested, the vehicles freely emitted hazardous, smog-forming compounds.

    The flagrant fraud was soon discovered outside the U.S. market as well. On Sept. 23, Volkswagen admitted that some 11 million “clean diesel” cars sold worldwide contained software that fooled regulators, with most of the cars likely located in Europe.

    According to reports, the cars in question have never been sold in China, but Volkswagen and other German carmakers will definitely see their products suffer a decline in sales because the scandal has tarnished the image of German products as a whole.

    Volkswagen will pay a hefty price for its cheating. Volkswagen’s CEO Martin Winterkorn announced his resignation on Sept. 23. The EPA could end up levying fines as high as US$18 billion. The U.S. Department of Justice is also contemplating criminal charges. Some other countries may also take legal action against Volkswagen. Meanwhile, VW’s stock price has been plummeting, with the company losing one-third of its market cap in the first week after the scandal was exposed.

    It’s no exaggeration to say that the scandal is a devastating disaster for the entire German manufacturing sector.

    The shameful event reminds me of a remark by Warren Buffet: “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”

    There had been a popular belief in China that only Chinese businesses had a tendency to cheat while foreign companies, Western ones in particular, were generally honest and reliable. A couple of years ago, a widespread story about the existence of spare parts well-sealed in oily paper for the Qingdao underground conduit network built by German companies mystified “German quality” to a higher level.

    There is some truth to the belief, but credibility and reliability have more to do with the levels of a nation’s legal constitution and market supervision than with national character or culture.

    The Enron scandal of October 2001, which led to the bankruptcy of the American energy giant, confirmed one thing: the cheating gene exists in the blood of some dishonest merchants, regardless of nationality or race, while the fact that food exported from the Chinese mainland to Hong Kong and Macao during the past few decades that were nearly 100 percent safe demonstrated that under stringent oversight, even the sliest Chinese businessperson will behave well.

    We can draw some lessons from the Volkswagen scandal.

    Never give full credibility to the “moral blood” of businesspeople, though morality is of great importance. Under profit pressure or other life-threatening challenges, even a moral model may take chances by doing something fraudulent.

    It may be justifiably deduced that a larger-than-expected number of companies worldwide are cheating consumers, one way or another, taking advantage of market dominance and sophisticated technology. The exposure of Volkswagen’s scandal was somewhat accidental, and the nature of the scandal wasn’t crystal clear until Volkswagen confessed. In other words, even the toughest inspection can’t possibly eliminate elaborate cheating.

    That said, strict oversight and severe punishment for the violators would certainly reduce deception. In the case of Hong Kong and Macao food supplies by the mainland, since any violation will result in an immediate revocation of their export certificate, no company would risk ruining their own business.

    Volkswagen was caught by a nongovernmental, independent inspector. This shows it is necessary for China to establish similar agencies, which could help make China’s market supervision more effective and reliable.

    (The author is an English tutor and freelance writer.)