https://finance.yahoo.com/news/toyota-apologizes-cheating-vehicle-testing-102117211.html

This is a developing story. I would like you to have a look at one of the stories referenced above for more background.

Japanese automakers engaged in widespread cheating to evade certification requirements for their cars. Americans who drive these kinds of cars (five companies are involved) are directly impacted by whether or not these companies follow the rules.

This is very troubling. I read a half dozen stories on this and the business journalists are pretty close to industry cheerleaders. They are not asking tough question merely parroting the company line. And the company line is ridiculous. Basically, they claim that the government is too strict, there are technical violations, not substantive and nothing is really wrong. Cheating on certain models of cars over many years takes a lot organizational effort.

My BS detector is going off the top of the scale. Something is rotten in Denmark.

You cannot convince me that widespread manipulation of data didn’t have a profit motive. And when five major auto makers admit to systematic wrong doing, someone should sit up and take notice. There are many billions of dollars involved here. The situation suggest maybe we should be having a look at whether or not these companies are manipulating American tests as well. I find it difficult to believe that this wrong doing was limited to only Japanese regulators.

In my experience studying business ethics when confronted with a defiance of regulations over years and thousands of products, there is never just one isolated pattern of wrong doing. If it is that big, it suggests a systematic approach to regulatory deviance. There needs to be a follow up government investigation and there should be one in the United States as well. Probably if we look hard, we’re going to find more wrong doing.

These circumstances strongly indicate upper management failures over a long period of time. There should be a hard look at these companies corporate culture of compliance.

(I would like to note that Toyota had a massive scandal similar in some way 14 years ago. That is further evidence in my mind of a corporate culture problem.)

James Pilant