Looks like it really made the wrong decision.
The entire Dieselgate saga and the subsequent vehicle buyback are incidences that Volkswagen probably wishes that it could have avoided. Six VW executives have already been charged with criminal and civil fines, and now FCA could be facing its own scandal involving diesel engines. Amazingly, VW did have an opportunity to prevent Dieselgate if it had decided to go through with a promising partnership with Daimler over a decade ago. Automotive News Europe explains how VW could have avoided the biggest automotive scandal in history.
Back in 2005, VW CEO Bernd Pischetsrieder was looking for a partner during the company's difficult restructuring period. Senior-level meetings were held to form a deal that would have given VW access to Daimler's diesel engines and cross-shareholdings of around 10 percent. Instead of taking this deal, Volkswagen decided to develop its own diesel engines which would meet the US's strict standards, and we all know how well that worked out. After this deal fell through, high-level VW employees held meetings near Brunswick, Germany in Summer of 2005 about a secret project called "Table Mountain." This project turned out to be the defeat device used on 11 million diesel cars.
We know that this plan was eventually discovered, but it took around ten years for anyone to catch on the VW's deceit. If VW had gone with the Daimler deal, which was owned by Chrysler at the time, it would have had access to Mercedes' BlueTec diesel engines which use a urea solution to reduce emissions. At the time, VW didn't like the idea of using urea because it would have added 1,000 Euros to the price of each car. As it turns out, VW should have taken the deal so that it could have avoided all of its current woes. Too bad hindsight is much clearer than foresight.