Business Wars – Dieselgate | Running on Fumes | Part 2

Podcast: Business Wars (Wondery)
Host: David Brown
Date: October 1, 2025

Episode Overview

This episode of Business Wars delves deep into the unraveling of the Dieselgate scandal at Volkswagen, focusing on the company's internal cover-up, the regulatory investigation, the explosive fallout, and the far-reaching impact on the auto industry and consumer trust. Host David Brown guides listeners through the chain of events set in motion by a small research project that ultimately brought the world's largest carmaker to its knees, offering hard-won lessons about ethics, leadership, and the long-term costs of corporate deception.

Key Discussion Points and Insights

1. The Beginnings: A Research Project Gone Sideways

• [00:02-04:30]

  • West Virginia University researchers, funded by the Clean Transportation group, struggle with makeshift equipment to test real-world emissions from diesel vehicles.
  • Their data shows Volkswagen’s Jetta and Passat emit up to 35 times the legal limit of NOx—findings starkly at odds with pristine lab test results.
  • Initial assumption is their own error, but repeated, varied tests confirm the discrepancy.

  Notable Quote:

  • “There are two kinds of truths. There's lab truth and then there's the real world. Customers don't drive in climate-controlled rooms... In the real world, the Volkswagen emission system was built to fail. And that's the real truth.” — David Brown [04:10]

2. Internal Volkswagen Panic and the Art of Obfuscation

• [06:30-12:20]

  • Volkswagen’s US compliance officer, Oliver Schmidt, is alerted to the damning research and immediately recognizes the gravity: exposure could mean prison.
  • A memo to CEO Martin Winterkorn eerily lays out the facts: the company cannot explain the emissions discrepancies—regulators will likely search for defeat devices.
  • VW engineers are ordered to “cooperate” with US regulators while intentionally withholding the truth, attempting to discredit the West Virginia findings.
  • After persistent questioning and retesting, VW offers a bogus software fix, but CARB (California’s powerful regulator) quickly exposes it as ineffective.

  Notable Quote:

  • “It must first be decided whether we are honest. If we are not honest, everything stays as it is.” — Oliver Schmidt [08:45]

3. Distraction Tactics as the Crisis Brews

• [12:20-16:25]

  • December 2014: Volkswagen tries to shift attention with a flashy SUV prototype launch (the Cross Blue), touting its "clean diesel" engine even as the scandal looms.
  • US sales are slumping, in part because American tastes have shifted to bigger vehicles, but VW attempts to meet the market belatedly.

  Notable Quote:

  • “Meet the market where it is, not where you wish it were... No amount of corporate vision can override what people actually put their money toward.” — David Brown [15:40]

4. Regulatory Clampdown and Corporate Denial

• [17:19-24:00]

  • By summer 2015, VW achieves its ambition to be the world’s #1 automaker—an accomplishment now revealed to be built on fraud.
  • Faced with unrelenting regulator scrutiny, Schmidt prepares a presentation, openly weighing the risk of indictment if the cheating is exposed.
  • VW's strategy remains to admit only partial truths, still hiding the defeat device and coaching executives to stonewall.

  Notable Moment:

  • Schmidt’s conversation with his American counterpart:
    “So there is... Yes, there is a defeat device installed, and we are not at liberty to disclose this today. I decide what we do and do not disclose. Understood?” — Oliver Schmidt and Stuart Johnson [21:00]

5. The Dam Breaks: Whistleblowing and Fallout

• [26:00-33:30]

  • Growing uncomfortable with the deception, Stuart Johnson (VW US) confronts the truth and blows the whistle—directly confessing the use of a defeat device to the EPA and CARB in person.
  • Regulators are furious, and VW execs scramble to destroy evidence and prepare for the inevitable exposure.
  • September 2015: The EPA publicly accuses VW of massive fraud. Immediate consequences include plummeting stock, a halt to US diesel sales, and a public apology.

  Notable Quote:

  • “Transparency may feel risky in the moment, but secrecy is almost always more expensive in the end.” — David Brown [36:50]
  • “By duping the regulators, Volkswagen turned over half a million American drivers into unwitting accomplices in an unprecedented assault on our country’s environment.” — David Brown [37:37]

6. Legal and Financial Reckoning

• [33:33-41:00]

  • VW sets aside $7.3 billion for recall costs but faces penalties and settlements exceeding $30 billion.
  • CEO Martin Winterkorn resigns; upper management insists they were unaware, but regulators and Congress are skeptical.
  • Massive raids, global lawsuits, and criminal charges follow. In the US, compliance lead Oliver Schmidt is arrested and sentenced to prison.

  Memorable Exchange:

  • “Do you really believe that senior level corporate managers... had no knowledge for years and years?”
    “I agree. It’s very hard to believe.” — Congressional hearing, VW US CEO Michael Horn [35:40]

7. Aftershocks for VW and the Auto Industry

• [41:00-44:30]

  • Volkswagen launches a cultural overhaul: new leadership, whistleblower hotline, compliance officers, and a pivot toward electric vehicles and sustainability.
  • More carmakers’ diesel claims are questioned; studies reveal widespread issues across the industry—suggesting VW’s sins were only the tip of the iceberg.
  • Ironically, American customers end up forgiving VW—US sales rebound not because of “clean diesel” or green initiatives but due to the popularity of new SUVs.

  Notable Observation:

  • “Ten years later, Volkswagen is still going strong... The emissions scandal stands as a cautionary tale about the cost of bad management. But the company’s remarkable recovery suggests that with the right PR strategy, a global brand can weather just about any scandal.” — David Brown [44:10]

Memorable Quotes & Key Moments with Timestamps

• “There are two kinds of truths. There’s lab truth and then there’s the real world.” — David Brown [04:10]
• “It must first be decided whether we are honest. If we are not honest, everything stays as it is.” — Oliver Schmidt [08:45]
• “Meet the market where it is, not where you wish it were.” — David Brown [15:40]
• (On the faked fix) “Their explanation looks credible enough to him, but... his engineers get a look at the binder, they inform him that it's a load of crap.” — David Brown [24:10]
• “Transparency may feel risky in the moment, but secrecy is almost always more expensive in the end.” — David Brown [36:50]
• “By duping the regulators, Volkswagen turned over half a million American drivers into unwitting accomplices in an unprecedented assault on our country’s environment.” — David Brown [37:37]
• “Ten years later, Volkswagen is still going strong... The emissions scandal stands as a cautionary tale about the cost of bad management.” — David Brown [44:10]

Chapter Highlights with Timestamps

• [00:02-04:30] – West Virginia researchers discover shocking emissions discrepancies in VW diesels
• [06:30-12:20] – VW’s internal panic and stonewall tactics with US regulators
• [12:20-16:25] – Distraction PR: unveiling the Cross Blue and missing the American market shift
• [17:19-24:00] – Volkswagen’s sales triumph—built on a lie; high-stakes compliance discussions
• [26:00-33:30] – The whistleblower moment and the rapid regulatory and financial collapse
• [33:33-41:00] – Legal reckoning: massive settlements, executive resignations, and arrests
• [41:00-44:30] – Volkswagen’s attempted redemption and the lasting impact on the industry

Key Themes and Lessons

• The dangers of prioritizing short-term wins over long-term integrity
• The limits of secrecy in the digital, globalized age
• How corporate culture and top-down decision-making can foster systemic wrongdoing
• The pivotal roles of whistleblowers and independent regulators in uncovering fraud
• That even monumental scandals can be survived—if brands address root causes and adapt

Closing Impression

This episode provides a gripping, nuanced account of how a seemingly invincible company was nearly undone by its own culture of deception—and how, paradoxically, business success can both encourage and conceal wrongdoing. It’s a story not just about Volkswagen, but about the temptations and dangers businesses of all sizes face when pressured to deliver results at any cost.