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From an employment standpoint, the company has succeeded. Volkswagen said it employed nearly 600,000 people last year to produce about 10 million vehicles. By comparison, No. 2 Toyota employed 340,000 to produce just under nine million vehicles.

maximizing employment shouldn’t be a primary goal of a board, whose purpose is to monitor management for a company’s investors and ensure the long-term health and profitability of a company.

The Volkswagen board has been especially slow to move on environmental issues, investing less in electric and hybrid engine technology than industry leaders.

“There’s an attitude among the German public that it’s very unfair for the U.S. to target the auto industry over emissions,” Professor Roth said. “If you have electric cars and a coal-fired plant producing the electricity, you gain nothing.”

The former Volkswagen executive said Volkswagen’s engineer-driven culture takes the notion even further. He said the engineers felt that the politicians were guilty of rank hypocrisy, especially in the United States, also grumbling that electric cars make no sense as long as power plants are burning fossil fuels.

That Volkswagen is nonetheless obliged to obey applicable environmental laws, he said, is a notion likely to fall on deaf ears in Wolfsburg, especially compared to demands to be No. 1 in sales.

Considering the damage to Volkswagen from the still-unfolding scandal, its attitudes and approach to governance may have to change. Volkswagen faces a staggering number of investigations and lawsuits. Volkswagen said it set aside $7.3 billion, which doesn’t seem nearly enough; legal fees are likely to run into the billions, and the Environmental Protection Agency alone could fine the company up to $18 billion

Volkswagen shares were trading at about €160, or $180, last Friday before the Environmental Protection Agency announced its investigation. They have dropped about 30 percent in the days after the news broke, wiping out over $26 billion in shareholder value

Given the serious financial and reputational damage, the long-term survival of Volkswagen is a real question

“If the reason they are fun to drive is that they are spewing up to 40 times the amount of pollutants they are supposed to be, I just find it outrageous, frankly,”

“Of course, owners who bought these diesel vehicles in part because of any environmental benefits may have moral objections to driving them, and they may feel they have no other option but to keep their cars parked for the time being,” Ms. Caldwell said. “And then there are owners who just feel flat-out deceived and will want their money back.

GM’s view contrasts with other auto-making giants, including Toyota Motor Corp. TM 0.93% and Ford Motor Co. F -0.32% , which are working on full electrics but also expanding their U.S. hybrid offerings

Last week, Continental AG, one of the world’s biggest car-parts makers, said it would cut investment in conventional engine parts because of a faster-than-expected fall in demand—yet another sign the industry is accelerating the shift to electric vehicles.

Today, auto companies generally lose money on each electric car they sell, mostly because of the high cost of lithium-ion batteries. Concerns about the battery range, along with a lack of places to plug in, also deter buyers from considering electric vehicles. Those factors make going straight to all-electric cars a risky strategy

Hybrids, which were popularized by Toyota’s Prius last decade as a social statement, accounted for about 3% of U.S. sales in 2018, according to research firm LMC Automotive. Sales of plug-in electric vehicles were around 1% of the total market—mostly thanks to the success of Tesla Inc.’s offerings.

pouring investment into both hybrids and electrics strains car-company finances, Morgan Stanley analyst Adam Jonas said. “It’s time to pick a path and commit to it,”

VW and GM are focused on all-electric cars largely because of China, where new regulations require car companies to sell a minimum number of zero-emissions vehicles to avoid financial penalties.

VW plans to use its electric-car expansion in China to build scale and drive down prices faster in the U.S., said Scott Keogh, VW’s U.S. chief.

Auto companies are spending $225 billion to develop more than 200 new plug-in vehicles through 2023, a figure that doesn’t include hybrids

For now, both hybrids and electric cars are more expensive to produce than comparable gas-powered vehicles. A hybrid system can add roughly $2,000 to a vehicle’s cost, while a fully electric version costs an additional $6,000 to $10,000,

Toyota’s sales chief for North America, said that with U.S. electric-vehicle sales expected to lag behind Europe and China, the company needs a nearer-term remedy. “That’s why we feel so confident in hybrids

If that comparison sounds overwrought, consider the words of Denny Gioia, a management professor at Penn State who, in the early 1970s, was the coordinator of product recalls at Ford. At the time, the Ford Pinto was showing a tendency to explode when hit from behind, incinerating passengers. Twice, Gioia and his team elected not to recall the car—a fact that, when revealed to his M.B.A. students, goes off like a bomb. “Before I went to Ford I would have argued strongly that Ford had an ethical obligation to recall,” he wrote in the Journal of Business Ethics some 17 years after he’d left the company. “I now argue and teach that Ford had an ethical obligation to recall. But, while I was there, I perceived no strong obligation to recall and I remember no strong ethical overtones to the case whatsoever.”

Executives are bombarded with information. To ease the cognitive load, they rely on a set of unwritten scripts imported from the organization around them. You could even define corporate culture as a collection of scripts.

back to Volkswagen. You cannot unconsciously install a “defeat device” into hundreds of thousands of cars. You need to be sneaky, and thus deliberate.

The most troubling thing, says Vaughan, is the way scripts “expand like an elastic waistband” to accommodate more and more divergence.

Embarrassed and unable to overturn the script they themselves had built in the preceding years, Morton-Thiokol’s brass buckled. The “no launch” recommendation was reversed to “launch.”

“It’s like losing your virginity,” a NASA teleconference participant later told Vaughan. “Once you’ve done it, you can’t go back.” If you try, you face a credibility spiral: Were you lying then or are you lying now?

Scripts are undoubtedly efficient. Managers don’t have to muddle through each new problem afresh, Gioia wrote, because “the mode of handling such problems has already been worked out in advance.” But therein lies the danger. Scripts can be flawed, and grow more so over time, yet they discourage active analysis

the final decision to deceive was, on an individual level, rational—the logical end to a long sequence.

This sequence of events fits a pattern that appears and reappears in corporate-misconduct cases, beginning with the fantastic commitments made from on high.

All of which placed personnel in a position of extreme strain.

We know what strain does to people. Even without it, they tend to underestimate the probability of future bad events. Put them under emotional stress, some research suggests, and this tendency gets amplified. People will favor decisions that preempt short-term social discomfort even at the cost of heightened long-term risk. Faced with the immediate certainty of a boss’s wrath or the distant possibility of blowback from a faceless agency, many will focus mostly on the former.

What James Burke, Johnson & Johnson’s CEO, did was anticipate the possible results of these pressures, well before they built up. He shared Henry James’s “imagination of disaster.” And it’s why he introduced, if you will, a set of counterscripts. It was a conscious effort to tinker with the unconscious criteria by which decisions at his company were made. The result was an incremental descent into integrity, a slide toward soundness, and the normalization of referencing “Our Credo” in situations that might otherwise have seemed devoid of ethical content.

This reaction isn’t excusable. But it is predictable.

What we know of Ferdinand Piëch, Volkswagen’s chairman before the scandal, is that he was no James Burke. At a 2008 corruption trial that sent one VW executive to jail, Piëch referred to alleged widespread use of VW funds on prostitutes as mere “irregularities,” and chided a lawyer for mispronouncing Lamborghini. (“Those who can’t afford one should say it properly” were his precise words.) This was around the time the emissions cheating began.

“Culture starts at the top,” a businessman recently said in an interview with the Association of Certified Fraud Examiners. “But it doesn’t start at the top with pretty statements. Employees will see through empty rhetoric and will emulate the nature of top-management decision making … A robust ‘code of conduct’ can be emasculated by one action of the CEO or CFO.”

It is a position that China has not been shy to weaponize.

“It is not about individual companies, but rather security standards,” the chancellor said in November. “It is about the certification we will carry out. That should be our guiding benchmark.”

rebellion is brewing in Germany’s foreign policy and intelligence community — scared of American threats to limit intelligence sharing — and even among some of the chancellor’s own lawmakers, who want to submit a proposal to Parliament with tougher security criteria that would, in effect, keep Huawei out.

“Car companies gather loads of personal data from the drivers of their cars, and they face an enormous risk of an angry public outraged to find their data used by the Chinese Communist Party,” said Mr. Grenell, the United States ambassador.

German automakers like Volkswagen, Daimler and BMW have continued to record sales gains in China and to take share from rivals like Ford, even as the overall market has slumped.

Today Volkswagen earns almost half its sales revenue in China and has 14 percent of the Chinese car market.

“If we were to pull out” of China, Herbert Diess, the chief executive of Volkswagen, told the Wolfsburger Nachrichten newspaper in December, “a day later 10,000 of our 20,000 development engineers in Germany would be out of work.”

Some executives like Mr. Haeusgen are embracing transformation, testing new strategies and markets. Other businesses, however, are wary of abandoning a model that for decades enabled Germany to thrive but defied change.

Hawe’s handling of international affairs is not just a concern for its 2,700 employees. The economies of some German towns depend on it.

In Kaufbeuren, a brightly painted Bavarian town nestled below the Alps, Hawe is a top employer. In the tiny village of Sachsenkam, 60 miles to the west, Hawe provides 250 jobs — the next largest employer is the local brewery, with a staff of 17.

“It’s like we were successful for too long,” said Stefan Bosse, the mayor of Kaufbeuren, who is keen to attract other businesses to diversify the employers his town relies on. “Now, gradually, we see: ‘Uh oh — this is not a given. This can also be endangered.’

The archetypal Mittelstand company is based in a rural German town, making a piece of equipment few have heard of, but that is crucial for goods worldwide — like a screw needed for every airplane or passenger car.

The government, too, has a poor record in shedding outdated practices — like its labyrinth, paperwork-based bureaucracy. In 2017, it vowed by 2022 to digitalize its 575 most used services, like company registrations. A year past that deadline, said Mr. Bianchi, only 22 percent of those services are online.

“The German business model, particularly Mittelstand, is being extremely good at doing one thing: Slowly but steadily perfecting one product,” said Mathias Bianchi, spokesman for the German Mittelstand Association. “Because that worked so well for years, they had no need to adapt to changes. But now, they need to adjust to the new economic reality.”

Even as the tech revolution and climate change added strain in recent decades, Germany’s model plodded profitably along.

But the pillars it relied on to do that — cheap Russian natural gas and the Chinese market — are collapsing.

Staking out a socioeconomic transformation for the country, pledged by Chancellor Olaf Scholz’s coalition government, has become a source of national anxiety.

Like its population, Germany’s business owners and entrepreneurs are aging — the average Mittelstand association member is 55.

Some are resistant to adapting to new technologies and cling to a loyalty-based system that created lifetime employees — and customers

How Hawe and other midsize German companies navigate these new global forces will be critical to the country’s future prosperity. Though Germany’s 20th century success as the economic powerhouse of Europe is often seen through its biggest brands — like Volkswagen, Mercedes and Siemens — it is small and medium enterprises that are the backbone of its economy.

Such failures makes businesses wary of transformation plans the government says will be costly now, but will make Germany a diversified, digitized and climate neutral economy.

Over half the companies polled did not want to expand in Germany, and a quarter were considering relocating.

Marita Riesner, inspecting parts, said her heating costs spiked to 740 euros ($803) a month from 120 euros ($130). She and her neighbors are growing vegetable gardens to ease the pain of inflation as the country dips into recession.

“I was a very positive thinker before,” she said. “But these days, I’m sweating it. It seems a lot is going wrong.”

Should geopolitical events disrupt business with China, Mr. Haeusgen said, the consequences could eliminate more than half of Hawe’s jobs in Kaufbeuren. Currently, he said, 20 percent of Hawe’s business comes from China.

Some business groups raised alarm in recent years over Germany’s vast exposure to China — before the risks were taken seriously by former chancellor Angela Merkel’s government, which had heavily encouraged German-Chinese trade.

Today, some policymakers privately worry that an event like a Chinese attack on Taiwan would be an inescapable disaster for Germany’s economy. The government is now pushing “de-risking” by finding alternatives to trade with China.

But major brands like Volkswagen and BASF insist that China, as the world’s second-largest economy, is too important a market to give up. Such German-based multinationals are responsible for a 20 percent rise in foreign direct investment in China this year.

German officials say their strategy will maintain ties to China, but will counterbalance that by strengthening relationships with other nations, like India or Vietnam

The Mittelstand is doing the same: Hawe is investing heavily in India, where it plans to build a new plant, and other companies are looking to North America.

“It used to be that we made a majority of sales with three customers from China,” he said. “Now we have many, many smaller customers scattered all over the globe.

Instead of making a few parts at a huge scale, as cheaply as possible, Hawe must make a wide variety of parts for an array of customers, as quickly as possible.

The new socioeconomic model for Germany may be less about erecting pillars than managing an ever more intricate, international juggling act.

“Being able to live with and manage uncertainty and to handle complexity becomes, in my opinion, a core strength,” Mr. Haeusgen said. “The way my grandpa did it won’t work today.”

Few expected the new transatlantic relationship to echo the warm and trusting alliance nurtured by Angela Merkel and Barack Obama, who was a vocal supporter of Mrs Merkel's refugee policy.

Germany's outspoken Vice-Chancellor Sigmar Gabriel retorted that the migrant crisis was the result of "faulty, interventionist American policies in the Mediterranean and Middle East".

though few here believe his Congress would approve the 35% tax he appears to be threatening to impose on imported vehicles.

"A lot of these countries aren't paying what they're supposed to be paying, which I think is very unfair to the United States."

Mr Trump added that Nato was "very important" to him

Nato Secretary-General Jens Stoltenberg, Mr Steinmeier said the president-elect's comments had caused "worry and concern".

the US deployed 3,000 soldiers, 80 tanks and hundreds of armoured vehicles to Poland in a move by President Barack Obama to reassure Nato allies concerned about a more aggressive Russia.

At his Senate confirmation hearing last week, Mr Trump's choice for defence secretary, Gen James Mattis, had described Nato as central to US defence, and had accused Russian President Vladimir Putin of trying to "break" the alliance.

Mr Trump described Mrs Merkel as Europe's most important leader but said the EU had become "basically a vehicle for Germany".

His newfound interest in cars and racing, he said, was in some ways connected to his interest in tech.

“It’s a fiddly technological skill that you can always improve on,” Mr. Schachter said. “The same kind of guy who might be upgrading the video card on their computer for better performance might also be upgrading their car.” There’s also the visceral thrill. “When you make software, it’s an unreal product,” he said. “Building something physical is attractive in different ways.”

Then there’s the fact that cars are becoming much more like computers. Racecars now carry something like an automotive Fitbit, sophisticated sensors that precisely measure just about everything that’s happening on the track, from G-force to where drivers are braking and accelerating. All this data can be tracked and analyzed, turning racing into a sport of empiricism as much as of instinct.

At some point during every conversation I had with a tech guy who is interested in racing, there would come an awkward moment in which he would ask me not to paint him as an extravagant, sexist cretin. Mr. Schachter told me, “Try to tone down the rich guy hobby thing.

Mr. Bonforte said that many of his friends preferred to stay silent about racing because “the things that make us smell like the 1 percent, we’re very nervous about.” He added that while he has invited several women to come to the track, none had accepted his offer. The rise of a new boys’ club in Silicon Valley — one that was apparently leading to new deals and other business prizes — was “a totally valid concern,

Mr. Schachter pointed out that the most popular car for racing enthusiasts is a Mazda Miata, older models of which sell for less than $5,000. Renting a car for a day on the track costs a few hundred.

Abdeslam is allegedly the brother of another suspect currently in custody and being questioned — and of one of the deceased attackers, officials said.

French officials were working with authorities in Belgium, Spain and Serbia in an attempt to shed more light on the attack, which ISIS claimed responsibility for and which French President Francois Hollande described as an "act of war."

Less than two days after the attacks Sunday, French warplanes conducted raids in Syria, targeting ISIS' stronghold in Raqqa, the defense ministry said. Reuters reported that the operation was France's biggest strike against ISIS in Syria to date.

"The raid ... including 10 fighter jets, was launched simultaneously from the United Arab Emirates and Jordan. Twenty bombs were dropped," the ministry said in a statement.

The airstrikes, which were carried out in coordination with the U.S., hit a command post, a jihadist recruitment center, a munitions depot and a militant training camp, the statement said.

Paris Prosecutor Francois Molins said seven terrorists died in the attack on Friday. Officials initially said there were eight attackers — as did ISIS. It seems now Abdeslam is believed to be the eighth attacker.

A French prosecutor also said officials have identified two more assailants, whose names were not released to NBC News — a 20-year-old who was part of the attack on the Stade de France and a 31-year-old who was part of the attack on one of the restaurants in the 10th arrondissement. Both were French nationals living in Belgium.

"We consider this means they have a network," Francoise Shepmans, mayor of the town of Molenbeek where the individuals were detained, told Belgium's TV RTBF.

The most distracting, he found, belonged to the Mazda 6, followed by Microsoft’s Cortana system, and cars from Hyundai, Chrysler, Nissan and Volkswagen. Apple’s Siri system also created a “high distraction,” the research found.

“I don’t like to use the word ‘trade war,’ but I can’t say how this wouldn’t be warlike behavior.”

Promising to “defend European jobs,” European Commission President Jean-Claude Juncker said

that it would retaliate against any metals tariffs, saying it had put together a package of penalties that would affect a total of $3.5 billion in U.S. exports, including Harley-Davidson motorcycles, bourbon and denim

The U.S. imported $20.5 billion in German passenger cars in 2017. The U.S. charges tariffs of 2.5% on most cars from countries with which it doesn’t have a free-trade agreement, and 25% on pickup trucks. The EU has a tariff of 10% on car imports under WTO rules.

Mr. Trump on Saturday also criticized the global goods deficit of more than $800 billion that the U.S. ran up last year, faulting the nation’s “very stupid” trade deals. “Our jobs and wealth are being given to other countries that have taken advantage of us for years.

It remains unclear which countries may be hit by the metals tariffs. The president said he would provide more details next week.

he said. Shares in BMW, along with Daimler AG and Volkswagen AG , fell in the wake of Mr. Trump’s comments. Mr. Trump didn’t follow through on that threat.