Volkswagen Diesel Emissions Scandal Analysis

The assignment focuses on analyzing the Volkswagen diesel emissions scandal, highlighting the need for effective efforts to re-establish credibility with stakeholders. It explores various ways to develop a positive brand image, including re-branding and joining independent verification agencies. The importance of corporate social responsibility activities in building trust with customers is also emphasized.

ACADEMIC AND
PROFESSIONAL SKILLS

Table of Contents
Executive summary .........................................................................................................................1
Introduction......................................................................................................................................1
Analysis ...........................................................................................................................................2
Conclusion ......................................................................................................................................5
Recommendations ...........................................................................................................................5
References .......................................................................................................................................7
.........................................................................................................................................................7

Executive summary
This assignment includes the analyses and consequences of the emission scandal of
Volkswagen. There is a huge impact of scandal on the organisation and this scandal caused
catastrophic consequences for the company. Volkswagen lost it's brand reputation , employee
engagement and dignity due to occurrence of this scandal. This company will take time to
recreate image of Volkswagen again and become best car manufacturer. For achieving this goal,
the company must have a strong leadership and a clear vision and goal. The organisation must
support a strong code of ethics and make workers to perform ethically and achieve their tasks.
This assignment will help to analyse and evaluate the cause of scandal. The core values are
principles that guide how a company wants it's employees to behave or act. If there is an
effective code of ethics in the organisation, organisation will work in an appropriate manner and
develop good image.
Introduction
This case study is about Volkswagen company which is a automobile industry operating
at global level. Volkswagen is a German multinational automotive manufacturing company. The
headquarters of Volkswagen are located in Wolfsburg, Germany. Volkswagen wanted to be a
leader in the automotive sector therefore to achieve the goals and objectives of the company in
less time, this introduced diesel engines that caused harm to environment. This automotive
industry undergone a scandal because of it's diesel engine (Xie, and ET. AL , 2018). This scandal
caused losses to the market share of the company. In September 2015, a number of Volkswagen
cars were sold in US that have defeat software and these harm environment at a great extent.
Due to this scandal, Volkswagen became the target of several regulatory inquiries in different
countries. The Volkswagen group was given notice of violation by the United States
Environmental Protection Agency (EPA). The EPA has claimed that Volkswagen engineers
have programmed Turbocharged Direct Injection diesel engines to be under control of emission.
When these diesel engines are tested in laboratories, the motors are below the maximum limit
specified for Nox. The motors of Volkswagen were programmed with Turbocharged Direct
Injection engines in around eleven million cars across the world (Clemente and Gabbioneta,
2017). The main motive of this assignment is to analyse and examine predicaments of
Volkswagen. This assignment helps to know about ethical issues of the company and
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implications of these on profits of Volkswagen. This assignment will let to know the various
factors that affect managerial decisions at Volkswagen which caused this scandal (Wiemann,
2017). This assignment also explains arguments of the case study that occurred during this
scandal.
Analysis
In the year 2014, Volkswagen was the second largest automobile industry. Volkswagen
admitted rigging in diesel emission test and company suffered cost burden due to this.
Volkswagen came up with three public relations firm located in Britain, United states and
Germany for assisting company to cope up from crisis. This company has employed former
communications of BMW as a consultant. Volkswagen deals with different international
regulations. The primary consequences of this unethical action is given below-
Threatening health of people
The defeat device used in engines of Volkswagen produces additional toxic pollution
and it triggers premature death of many individuals in United States. According to a research,
nitrogen dioxide is a primary element of smog and it can cause heart diseases, premature death,
respiratory diseases, cardiovascular diseases and bronchitis (Delogu, and ET. AL., 2018). If there
is excess of nitrogen dioxide in atmosphere then there will be acid rain and this will create
problem to health of people as well as architecture and nature.
Slump in Bonus of workforces
When scandal took place in Volkswagen, sales of company was affected. The company
decided to reduce bonus of chief management to cope up with this crisis. The various models
that establishes rational and fair solution are deliberated.
Drop in sale of Volkswagen
The Volkswagen scandal has impacted top brands of Volkswagen like Audi and Skoda.
There is a decrease in sales of vehicles of Volkswagen. This has badly impacted the customer
loyalty. Clients and consumers have shifted to other competitors when this scandal occurred.
Plunge in Shares of the company
The unethical practise and act in Volkswagen led to decline in share value of the
company. When the scandal was exposed, the share value dropped by one third. The company
experienced a great loss due to this scandal.
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Creating Hassel for dealers of Volkswagen
When Volkswagen scandal took place, a program is organised for dealers to assist
retailers for coping up with emission scandal. This program included a huge amount of money in
the form of incentives, sales bonus or subsidiary for coping up against lower profits and sales.
The crisis of Volkswagen affected the brand name and due to this dealers are not permitted to
sell diesel vehicles (Painter,and Martins, 2017). The managers and leaders of Volkswagen are
coming up with various solutions to be made for improving satisfaction and motivation of
employees and customers.
Reasons for the emission scandal
The Volkswagen scandal has impacted the reputation, brand image and profits of the company.
Volkswagen is a leading manufacturer and dealer of vehicle and automotives. It is essential for
this company to increase its competitive advantage and protect company from competitors. This
want to be the biggest car manufacturer of the world (Jung and “Alison” Park, 2017). So the
managers and engineers decided to look for alternatives for achieving the goals and objective of
the company in specified time frame. Volkswagen implemented defeat device in diesel engines
and cheated to perform better than other car manufacturers. When the scandal was brought to
worldwide spotlight, the company representatives accepted that they have used a cheating
software in Turbocharged Direct Injection models. The company accepted partial guilt so hat
they get time to analyse situation and develop a crisis management plan. Volkswagen confessed
their wrongdoings publicly when US regulators threatened company to withdraw certificate.
There are various reasons of occurrence of this emission scandal in the organisation listed below
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Environmental uncertainty
The forecasting environmental uncertainty is a challenge for Volkswagen because they
operate in a unpredictable and fast environment. Volkswagen was unable to compete with
competitors as it was not having latest technology in the company. Thus the managers decides to
take an illegal and immoral action for becoming the best car manufacturer. These managers did
not have enough knowledge and they had no idea that they will get caught in the carbon dioxide
scheme. The environmental uncertainty is one of the biggest reason for the occurrence of this
scandal.
Lack of motivation
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The corporate culture of Volkswagen forced the employees to do work and achieve goals
and objectives of the company in given time. Engineers of Volkswagen were not able to make
profits for the company thus they decided to chose an unethical and illegal way of functioning.
The engineers of Volkswagen implemented defeat devices to the computers as they were not
finding solution to build an effective engine that compile with standards of United States.
According to the scientific management perspective, a set of activities or tasks must be done in
an appropriate manner without considering human relations perspective of worker. The
employees of Volkswagen were exploited by this scientific management perspective followed in
the company as according to this perspective only result matters and anything can be done for
improving labour productivity. The workers of Volkswagen are not given responsibilities under
right conditions. The managers of Volkswagen fire any worker if he is unable to achieve his
goals in time (Le-Khac And ET. Al. , 2018). This develops demotivation among employees. In
Volkswagen, employees are just told to perform better and if they are not able to do so, they
will be punished for not delivering a low emission and good fuel economy engine. Employees
talked about emission cheat outside the company because of bonus structure of Volkswagen.
Organisational culture
The organisational culture of company is defined as traditional way of implementing
activities inside organisation. The bonus system of Volkswagen was responsible for occurrence
of scandal. The employees are given bonuses according to individual or team performance. The
culture of Volkswagen is achievement culture and it believes in rewarding high performance
employees. In such organisational culture, employees are not free to talk freely and express their
opinion. No worker wants to place economic welfare at risk so he do not tell about wrong actions
taken by company to higher authorities. The motivation factors of the company like
responsibility, policies, recognition, personal growth, pay and security, working conditions, etc.
are fulfilled but these motivators are in wrong place. This reflects that the present financial
condition and brand image of Volkswagen got affected by the scandal. An effective plan is
required to get back good image of company and earn trust of stakeholders. The emission
scandal has impacted business across value chain, suppliers and dealers of Volkswagen around
the world. This scandal affected stakeholders of the company including customers, employees,
regulators and shareholders.
Impact of scandal on organisation
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Volkswagen has to deal with external and internal environment factors for recovering
from this catastrophic scandal. Company is affected by various external factors of business like
competitors, suppliers, customers and labour market. The organisation of Volkswagen was under
tension as it wanted to become largest manufacture of cars around the world. This pushed
managers and engineers to make unethical decisions and actions. This resulted in conspiring with
suppliers of company to add illegal software (.Kumar, Rahman and Chan, 2017). After this
scandal, suppliers start putting extra restrictions in dealings with Volkswagen and this impacts
future performance of the company. Volkswagen is now trying to gain back trust of customers as
it has sold about eleven million cars of faulty emissions across the world. The sales of company
has dropped at a high rate as this scandal made customers to not believe this brand. Volkswagen
was charged because of cheating on diesel emission and their net loss was €1.58 billion for 2015,
which is a drastic change from the net profit of previous year of €10.85 billion. The incremental
costs of the company increases as additional administrative burden is generated to the company.
There are certain internal factors that impacts performance and moral of employees. Volkswagen
fired the top executives who were involved in the scandal (Jung, Chilton and Valero, 2017). This
company is coping up from this scandal activity and working ethically without job cutting. These
measures will help in gaining reputation of the company. Volkswagen implemented qualified
software and systems for meeting standards of US emissions.
Conclusion
It can be analysed from the findings and analysis of emission scandal that this deceptive
scandal of Volkswagen is a complicated case that is full of dramatic hassles for indirect and
direct stakeholders. The action of implementing hazardous diesel engine is unethical and
immoral action that resulted in disastrous consequences. The company was given orders to
initiate green punishment, this is best solution for this case given by government authorities.
Electronic cars are used that enables environment protection agencies to save time as well as cost
for finding new systems for controlling emission tests. Volkswagen compensates the scandal in
a proper manner and penalised according to this way.
Recommendations
This unethical scandal affected the business culture and structure of organisation.
Volkswagen follows compliance based business ethics that does not allow to treat employees
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ethically and workers are demotivated as they loose jobs or take illegal actions. The pollution
and emission are concern of Environmental Pollution Agency. This has an important role for
providing new technologies to research and development department of company and make
them work ethically. Volkswagen must ensure that such scandal does not occur again in future.
Organisations should value their workers by value based approach. The EPA offers programs to
automobile engineers for ensuring level of pollutants and emissions. Volkswagen should be
focusing on building it's brand image. This company should be making effective efforts for re-
establishing credibility with the organisation. There are different ways which can be used by
Volkswagen to develop brand image again such as re-branding or joining independent
verification agencies. Another option recommended to Volkswagen is to sell one of the brand
and post a bond, but it is an expensive option. Customers will not gain trust immediately they
will take time. The consumers who trust this company whole heartedly shall buy cheap stocks of
Volkswagen. Moreover, the company can involve into corporate social responsibility activities
and this will help in building a good image in front of stakeholders.
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References
Books and journals
Clemente, M. and Gabbioneta, C., 2017. How does the media frame corporate scandals? The case
of German newspapers and the Volkswagen diesel scandal. Journal of Management
Inquiry. 26(3).pp.287-302.
Delogu, M. and ET. AL., 2018. Challenges for modelling and integrating environmental
performances in concept design: the case of an automotive component
lightweighting. International Journal of Sustainable Engineering, 11(2), pp.135-148.
Jung, J.C. and “Alison” Park, S.B., 2017. Case study: Volkswagen's diesel emissions
scandal. Thunderbird International Business Review. 59(1). pp.127-137.
Jung, K., Chilton, K. and Valero, J. N., 2017. Uncovering stakeholders in public–private relations
on social media: a case study of the 2015 Volkswagen scandal. Quality & Quantity.
51(3). pp.1113-1131.
Kumar, D., Rahman, Z. and Chan, F. T., 2017. A fuzzy AHP and fuzzy multi-objective linear
programming model for order allocation in a sustainable supply chain: A case
study. International Journal of Computer Integrated Manufacturing. 30(6). pp.535-
551.
Le-Khac, N.A. And ET. Al. , 2018. Smart vehicle forensics: Challenges and case study. Future
Generation Computer Systems.
Painter, C. and Martins, J. T., 2017. Organisational communication management during the
Volkswagen diesel emissions scandal: A hermeneutic study in attribution, crisis
management, and information orientation. Knowledge and Process Management.
24(3). pp.204-218.
Wiemann, J., 2017. Export of German-style vocational education: a case study in the automotive
industry in Puebla, Mexico. International Journal of Automotive Technology and
Management, 17(2), pp.208-222.
Xie, H. and ET. AL , 2018. A distribution density-based methodology for driving data cluster
analysis: A case study for an extended-range electric city bus. Pattern Recognition, 73,
pp.131-143.
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