From what I gather, VW put a lot of money into developing a new Diesel engine that turned out to not balance all the tradeoffs the way they wanted. They can get power, but at the cost of fuel economy and emissions. They can get lower emissions, at the cost of fuel economy and power. They can get fuel economy at the cost of power and emissions. To redesign the engine would have been very costly, so they decided that instead of making a better engine, they'd adjust the tradeoff depending on the operating conditions. So what's going to happen now with the recalls, if they meet emissions requirements, they won't get fuel economy and performance that are competitive with petrol engines, and lots of VW customers are going to be very unhappy, and they're going to lose a lot of business to vehicles that have the performance and fuel economy characteristics people want.
So what's likely to have happened within VW is that they built and tested engines and found that they were never going to meet all the requirements at once. So engineers reported this to managment who made the decision to add "defeat device" software to violate emissions standards under normal operating conditions. And I'm sure it went pretty far up the chain of command, because no one engineer is going to want to bear the weight of that decision, nor can they because all of this would require the involvement of lots of engineers. And since this mechanism was formally added to the design, then they'd have formal testing procedures that ensure it behaves the way they intend, so the testing engineers will also be aware of all of this as well.
So who is at fault? It's a cascade:
- The emissions laws are incompatible with consumer demands.
- The laws of physics make it very hard to meet consumer demands while also meeting emissions standards.
- The engine design engineers produced a design that couldn't balance all the tradeoffs.
- The software developers took carefully planned steps to develop the defeat device.
So, basically, those to blame are God, hardware engineers, software engineers, lawmakers, and consumers. Basically the whole universe.