Dieselgate Scandal Case Analysis

In 2015, Volkswagen incurred a problematic situation that left people asking the question, “Where were the Lawyers?” Volkswagen’s sales were spiraling out of control in crucial markets such as China and Brazil, which eventually lead to a reputation damage for the company. Likewise, the emissions testing catastrophe only made matters worse. Over 11 million of Volkswagen’s diesel cars worldwide were equipped with illegal software, used to cheat on emissions testing, posing a more serious threat to the environment as well as endangering human life. Specifically, this paper will discuss how I as an employee or manger would have prevented the incident and as a CEO, how I would have responded once the issue became public as well as to

Volkswagen is one of the largest automakers in the world and it has a global reputation as a high-quality German auto brand. Social responsibility is included in VW’s corporate culture and it seems that Volkswagen made some advances in Corporate Social Responsibility because the corporation was ranked 11th 2015 in the Global CSR Rep Track 100, which listed companies by reputation (Reputation Institute, 2015).However, the company has been threatened by an emission scandal which broke in September 2015, when the Environmental Protection Agency (EPA) disclosed that Volkswagen had installed defeat devices on diesel cars which were sold in the US. These devices equipped on VW cars cheated regulators in such a way that it could detect

The mistrust between the Volkswagen Company and their customers developed after the scandal associated with the incorrect emission of data and cheating of the system unfolded.  The scandal occurred on the eighteenth of September 2015 when it was found that the company had made a car with a turbo that released emission directly into the real word atmosphere. The allegations were genuine and were proved by the Environment Protection Agency in the United States (EPA) (Hotten, 2016).The chief

But was it ethical? This question will often be asked regarding the case of engineer James Liang and his role in the Volkswagen emission scandal. During the period of early 2006 to 2014, James Liang and his team of engineers developed a “defeat” device that allowed diesel powered vehicles to pass the EPA emission test, when in fact the vehicles were emitting up to 30 times the allowable limit. To many, this may seem a black and white case of ethics due to the fact that Liang’s team and Volkswagen blatantly cheated on a governmental testing regulation and then proceeded to falsely advertise the vehicles as “clean diesel and environmentally friendly” as reported by the United States Department of Justice; however, different ethical

Improved financial returns (higher share price/ dividends); VW has issued more than 502 million shares (Volkswagen AG, 2016, p.13)

As a multinational corporation, the implication of the scandal determines the fate of numerous stakeholders both internal and external. Internal stakeholders comprise of the board, managers and employees while external stakeholders subsume shareholders, customers and suppliers. The economic, political and social impacts of the dishonest practices would shape the fate of Volkswagen and affect the future prospects of the automotive industry. Common shareholders whilst not involved in the day to day running of the business placed faith and belief in the firm by providing capital had suffered severe economic loss as share prices (get something for stat). Despite the callous deception in advertising the defeat device displayed no signs of disturbing vehicle performance, however, customers of Volkswagen and its subsidiary vehicles suffer from lower resale value. In addition, even though the scandal was global, European consumers were the most affected with diesel cars accounting for 41% of all European cars (Fontaras, 2016). This high percentage in respect to other nations is a result of incentives provided by the European Union for the purchase of diesel vehicles such as subsidies towards the production process resulting in lower premiums compared to petrol counterparts (Vidal, 2015) In additional with sales falling suppliers of Volkswagen would likely lose future contracts or have current contracts downgraded as less parts are required. Thus, this loss of future

Companies betrayed their employees, consumers, supplies, shareholders, and the government by using unethical techniques and being dishonest to keep their company on top. For example, Volkswagen Company is now in a business ethical dilemma, because the company wanted their latest cars to pose as a diesel friendly. In 2015, “the Environmental Protection Agency (EPA) found that many Volkswagen cars being sold in America had a defeat device or software in diesel engines that could detect when they were being tested, changing the performance accordingly to improve results. The German car giant has since admitted cheating emissions tests in the U.S. VW has had a major push to sell diesel cars in the U.S, backed by a huge marketing campaign trumpeting its cars’ emission. The EPA’s finding cover 482,000 cars in the US only, including the VW-manufactured Audi A3, and the VW models Jetta, Beetle, Golf and Passat. But VW had admitted that about 11 million cars worldwide, including eight in Europe, are fitted with the so-called “defeat device” (Russell Hotten).” “Volkswagen had been intentionally and scandalously cheating on their nitrogen oxide (NOx) emissions for

James Liang was a engineer working for Volkswagen as the “leader of diesel competence” his role in the diesel emissions cheating scandal was to “calibrate the diesel engine software to recognize specific emissions tests’ drive cycles. The defeat devices themselves operated by detecting when a vehicle was being tested for emissions and turned on all emission control systems that otherwise remained off when the car detected it was driven on the road.” (autoweek) When the scandal broke nearly a decade later Liang was charged with and pled guilty to one count of conspiracy to defraud the United States and violating the clean air act.(nytimes) Liang co-operated with the United States government and received a 40 month sentence and a 200,000 dollar fine.(cit) Volkswagen itself was required to pay 22 billion dollars in connection to the scandal.(nytimes)

VW has a very expensive, hard lesson to learn and an even harder task trying to regain the trust they lost with the ineffective apologies and lack of truthful communication at the beginning of the emissions scandal. Many people still love and trust VW, but many are angry, hurt, and very distrustful of anything VW says or does. VW will need to become a very strong and open communicator to survive this scandal, and rebuild lost relationships…if possible. Rebuilding these lost relationships with sincere, open communication might save a once great company that has fallen from its

Once the EPA violation was announced, shares of Volkswagen have plunged nearly 30% since the news of the automaker's Clean Air Act violations first surfaced last Friday. The stock is now more than 50% below the 52-week high that it hit in March (La Monica). It was expected that Volkswagen’s fourth quarter profits would reflect this financial blow. Volkswagen set aside nearly $7 million to ensure compliance and their EPA fines could be at least $18

Legal: Legal action taken by car owners, shareholders and the EPA have the power to fine and sue VW for up to 37, 000.00 dollars per vehicle for breaching environmental standards regarding nitrogen oxide emissions from their vehicles, and a maximum fine of roughly 18 billion dollars may be issued by the EPA (Hotten, 2015). Breaching legal regulations, particularly environmental regulations, set out by government departments will result in poor company reputation as VW will be seen as a significant contributor to environmental issues such as air

In today’s society we often come to many debates on several issues that go on in our world today. Recently there was an ethical debate on whether or not it is ethical to release vehicles with software that defeats emission testing by the EPA. Volkswagen is being accused of using illegal software designed to hide emissions during testing by installing cars with a software. The EPA accused Volkswagen of using the device in nearly over a half a million cars (Davenport). The cars are reportedly to have been installed with a software that had the ability to turn off the emissions controls when driving normally and turns them on when the vehicle is undergoing an emissions test. With all of these assumptions of Volkswagen cheating the emissions testing does that question their ethical corporate responsibility?

It is not hard to see that the scandal would cause a horrid blow to VW’s image. Until the incident, VW had, like many other German companies, the reputation of “German engineering” (Robertson, 2013). However, instead of using that innovation to develop diesel-fueled cars compliant with U.S. standards, it decided to try to scam its way in the market. Not only did the company admit to having 11 million cars with software intended to cheat tests (Gates, Ewing, Russell & Watkins, 2017), it also plead guilty to “destroying evidence in an elaborate cover-up” (VW Admits Emissions Cheating and Cover-up, 2017); building further distrust among its consumers.

According to NY Times, in 1993, Volkswagen was accused of spying on General Motor’s German division named Opel. Several executives moved to Volkswagen and took trade secrets with them. This resulted in a large settlement where Volkswagen had to repay 100 million dollars and buy 1 billion dollars in car parts from GM. The ability to gain future concepts to improve their auto market enticed VW into possibly stealing secrets to gain an edge.

Volkswagen Group a German multinational car manufacturer headquartered in Wolfsburg, Germany has got itself into a major legal issue. In return, it has effected many different stakeholders throughout the world. The legal issue in this case is that the car company was exposed by the Environmental Protection Agency for installing a “defeat device” in diesel cars that lead the car to be able to emit toxic gases 40 times the legal limit. This device would recognize when the car was being tested and changed the emissions of the car so it would pass emissions tests. The company has admitted in September to installing this specific device in 11 million cars around the world, more specifically 500,000 in the United States and 8.5 million in Europe (Hakim). It is also important to note that Volkswagen owns the brands Audi, Porsche, SEAT, and Skoda. Class actions suites have already started pouring in from the United States and group litigations have also started in Europe, Netherlands, Ireland, with a shareholders suit in the company’s home of Germany.