Analysis of Volkswagen Emissions Scandal

The assignment requires a critical analysis of the Volkswagen emissions scandal, including its causes, consequences, and implications. It also involves recommending strategies for improving corporate image and position in the market. The analysis should consider various sources, including academic articles, books, and online resources. A detailed report is expected to be submitted, following a specific format.

PROJECT

EXECUTIVE SUMMARY
This report, describes the issues which was faced Volkswagen in 2015, where a defeat
device impacted negatively on their image. Scandal was so impactful that led this company to
face a drastic decrease in consumer base, profit margins and market value. Managers had a great
mind has helped Volkswagen in passing from tests around 600,000 cars as a whole with the help
of device. It is recommended in the project for Volkswagen to focus on all the legislations that
has been made by government of nation so that they can perform well in future.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
ANALYSIS......................................................................................................................................1
CONCLUSION................................................................................................................................4
RECOMMENDATION...................................................................................................................5
REFERENCES................................................................................................................................6
.........................................................................................................................................................6

INTRODUCTION
Ethics refers to a concept which states some moral principles that govern an individual
how to behave while working in an organisation (Rhodes, 2016). It is a moral philosophy which
is practise by a group or an individual. By following ethical culture and principles, a company
gain various to maintain smooth employee relations and run business successfully. Therefore, to
gain sustainability, it is essential for a company to develop effective ethical culture in their
workplace to promote strong teamwork and relationships. This would aid enterprises to increase
their long term productivity as well. Ethics is important in any company because with help of
this, it can provide magnificent service to their consumers and can retain them for longer period
of time. In context with present case scenario, it depicts an unethical work done by Volkswagen
for gaining profitability. This company deals in auto-mobile industries and manufacture various
kind of commercial and auto-mobile vehicles. Due to increasing global warming and rise of
pollution, Government of UK has banned those vehicles which emits large smoke. In this regard,
regulatory bodies have run an operation to check pollution level of each commercial vehicle. It
has given a huge threat to auto-mobile industries in their sales and manufacturing process. To
overcome from such issue, Volkswagen has innovated a new device named by 'defeat-device'
and fitted it in more than 600,000 cars. This device makes such vehicles to be able to pass
emission tests more easily. But this unethical activity has caught by Corporation's Head of U.S.
Operations which majorly impact on reputation of Volkswagen. Similarly, in UK General
Motors which deals in same segment, has admitted that it has fitted faulty ignition switches in
more than 800,000 small cars (Cavico and Mujtaba, 2016). This scandal has impacted negatively
on image of GM in marketplace.
The main aim of this present report is to analyse at what extent, reputation of
Volkswagen has been damaged due to this scandal. Further some recommendations are given to
improve and re-gain the reputation of company.
ANALYSIS
2015, was the year which took Volkswagen to face issues and impacted negatively upon
their reputation at the same time. Just because of a tiny “defeat device” so that vehicles could
easily pass the tests, Volkswagen had to go through drastic diminishing phase which led its CEO
and staff to leave the job. Due to these reasons, company's image was going even bad because of
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search engines in all over the world. As it was showing Volkswagen scandal, whenever an
individual was putting Volkswagen for gaining any sort of information.
Thesis statement- “To evaluate the support of internal management in the process of
developing defeated device for reducing emissions”.
Points to consider
Share Price:
Volkswagen company fit “ defeat device” in many cars worldwide, which have special
feature that control air pollution or do minimum air pollution. This device impact positively on
company shares price because media advertise and promote respective air pollution control
device in positive manner which attract more customers and investors, it result in increase
goodwill of Volkswagen due to which the share price of respective company get increased and
more investors wants to invest in respective company shares (Ewing, 2017). But when
regulatory bodies do analysis and testing of “defeat device” in September, 2015 they found that
defeat device is fitted in more than 11 millions cars which is running on road worldwide this is
making same or more amount of air pollution but when any pollution testing is done it shows
that it makes less air pollution, so according to the regulatory bodies it is consider as fraud. Due
to this negative news about device their is reduction in goodwill of Volkswagen which directly
affect number of investors and costumers, it also affect share price of respective company. Share
price of Volkswagen get decrease due to its negative publicity, at that time no one or no investors
is interested to invest their money in that company. This situation totally and badly affect the
Volkswagen sales, share price, goodwill, profit, growth etc. Due to this situation sale and profit
of respective Volkswagen started reducing in 2015, because of defeat device.
Managers :
The Volkswagen scandal has been erupted in the month of September 2015 when firm
admitted that nearly 6,00,000 cars are sold in the United States were fitted with “defeat devices”
which is developed to circumvent emissions tests. In Volkswagen, the manager main duty is to
operate and regulate their business operation in better manner. At the time of developing this
device, manager need to examine and analyse it properly (Fracarolli Nunes and Lee Park, 2016).
Away with this, manager of Volkswagen has also kept his focus on building “defeat devices”
considering an aim of passing the tests which were related to pollution emission based tests. As
per the given report by media, it can be analysed that the senior R&D managers at the group
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circle are leading three brands that includes VW, Audi and Porsche have been suspended at the
time of investigation. This can be observed that if company manager perform their role and
responsibility in proper manner so this will not affect on business activities and operations.
Along with this, it can be seen that some of the manager are also found guilty while investigation
of polluted diesel defect in the cars of US nation. It is required for manager is to made best
suitable decision which are fulfilling all needs and requirements of organisation. The main
reason behind this scandal is that mangers are not focused and they does not properly operate
their company functions and operations. Even they does not know how this scandal will develop
in major way that directly impact on organisation goodwill or reputation.
Public relation:
When this scandal took place, Volkswagen's reputation along with its market value go
reduced to minimal which impacted negatively upon public relations as well of the company
with the society. They installed device meant to circulate environmental protection in millions of
cars (Siano and et.al., 2017). Later on people examine device was in effective in controlling
environmental pollution. This result to decrease public relations as well as it lose potential
customer of their business. This was one of the unique scandal in sense from which Volkswagen
faces lot of issues related to public relationship and losing customer loyalty. Now they are
almost ruined from the market of car industry. From this situation it is not possible to over come.
If once customer loyalty decrease it become difficult for them to over gain the market again. This
affected adversely and led Volkswagen to start losing market share. Past and present public
relation have become massive issue for Volkswagen with public relationship at large
corporations, even become massive scale in market. Now general public are against Volkswagen
as they want their company to be dissolved.
Regulators:
Volkswagen is caught in implementing cheat emission test and their cars produced 40
times more pollution. External investigation was carried out and Martin Winterkorn said he is
sorry for what happened (Mansouri, 2016). German government warned jeopardises for playing
with reputation of car industry. Germany has confirmed that VW has implemented software
which is installed for cheating emission test and these cars are sold in Europe. Transportation
department of UK carried out their own research or inquiry from British car owners. Porsche
chief Matthias Muller is appointed as group chief executive to handle this. Small group of people
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are being blamed for this scandal and have been suspended. Investigation on Winterkorn was
started by German prosecutors. France and Italy individually started investigation on this
scandal. It was found that two rogue engineers were core part of this scandal and this was
confirmed by Police raid VW's headquarters in Wolfsburg which is in Germany. It was founded
by German transport ministry that around 3.6 million cars in Europe requires new fuel tank and
important hardware changes are required (Clemente and Gabbioneta, 2017). European
investment Bank said that they are investigating if any EU loan was taken to cheat emissions test
and will demand money if it is taken. Poll has shown that two-third of Germans are still having
trust on VW and are saying that scandal was exaggerated. Criminal complaint was filed by
Lower Saxony when they found that VW file was disappeared. US authorities have accused
carmakers for installing defective devices in luxury sports car.
Evaluation of the Extent to which reputation of company has been damaged
As per the article views it has been analysed that the scandal of Volkswagen in terms of
defeat devices impacts negatively on the reputation of the firm (Stanwick and Stanwick, 2017).
Volkswagen previously was never been in limelight before and carried a good reputation in all
over the world. But, this scandal, created issues for Volkswagen as it was every where in news
from social media to newspapers. On 18th September, it has announced worldwide that
Volkswagen installed a software to cheat on emission tests that allowing diesel cars to produce
up to 40 time more pollution than legal limit. After this investigation, Volkswagen’s shares
plunge by 18% due to this drastic scandal as well as the company lost at least 14 billion euros in
share value. At the market opening, the values of its shares has becoming fall down on 3.6%, the
market capitalization has decreased to 50 billion euros. Major countries as Japan, Italy and USA
reduce its investments amount from the organisation's that reduce its market share worldwide.
This scandal also having some negative impact on its employees as Martin Winterkorn (CEO of
Volkswagen) resign from the organisation. Furthermore, Volkswagen faced massive fines from
regulatory bodies of the country (Volkswagen scandal: what is the car manufacturer’s online
reputation impact? 2018). This scandal highly impacts on reputation of company and it has been
damaged its brand image in market.
CONCLUSION
This has been concluded from this report that to run business successfully, it becomes
necessary for organisations to follow ethical principles. By setting code of conduct, companies
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can give instruction to employees to work in professional manner. This would help in operating
activities in ethical manner. By getting support of managers, improving relationship with
government authorities and following ethical principles, a company can establish its positive
image at marketplace.
RECOMMENDATION
As per present case study, Volkswagen has faced scandals to use defeat device in vehicle
to pass emission tests. This has adversely affected its brand reputation at marketplace.
Therefore, in order to improve reputation and build effective image, it has to give contribution in
reducing emission. For this process, by giving recruitment to highly skilled engineers, this
company can innovate new device which helps in emitting less smoke from vehicles. Before
fitting this device, it is recommended to managers to pass this device from Congressional
Committee. This would help in gaining support of regulatory bodies to run new cars
successfully. Furthermore, it is also recommended to Volkswagen to adopt efficient and effective
policies which help in changing defective management structure. Managers should timely check
reports of pollution emission tests. They should keep a check on working habits of engineers
and find out if there are any defaults in their behaviour. They should always follow sound and
ethical business practices that further improve its goodwill and brand image. Practices adopted
should be of true and fair view and never adopt any unethical or illegal practices. As a result of
the cheat scandal of Volkswagen that company indulged in, the global reputation of company
was adversely affected. Consequently, the share price of company fell down. To deal this,
company can adopt two practices by which Volkswagen would be able to improve its corporate
image and position in market. Firstly, company can bring innovation in its existing models of
cars so as to gain the trust and acceptability in market. Along with this, company can publicly
announce a bond wherein Volkswagen would give a commitment that it will not indulge in any
unethical practice in future.
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REFERENCES
Rhodes, C., 2016. Democratic business ethics: Volkswagen’s emissions scandal and the
disruption of corporate sovereignty. Organization Studies. 37(10). pp.1501-1518.
Cavico, F.J. and Mujtaba, B.G., 2016. Volkswagen emissions scandal: a global case study of
legal, ethical, and practical consequences and recommendations for sustainable
management. Global Journal of Research in Business & Management. 4(2). pp.303-
311.
Ewing, J., 2017. Faster, Higher, Farther: The Inside Story of the Volkswagen Scandal. Random
House.
Fracarolli Nunes, M. and Lee Park, C., 2016. Caught red-handed: the cost of the Volkswagen
Dieselgate. Journal of Global Responsibility. 7(2). pp.288-302.
Siano, A., and et. al., 2017. “More than words”: Expanding the taxonomy of greenwashing after
the Volkswagen scandal. Journal of Business Research. 71. pp.27-37.
Mansouri, N., 2016. A case study of Volkswagen unethical practice in diesel emission test.
International Journal of Science and Engineering Applications. 5(4). pp.211-216.
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.
Stanwick, P. and Stanwick, S., 2017. Volkswagen emissions scandal: The perils of installing
illegal software. International Review of Management and Business Research. 6(1).
p.18.
Online
Volkswagen scandal: what is the car manufacturer’s online reputation impact? 2018. [Online].
Available through:<https://www.reputationvip.com/blog/volkswagen-scandal-what-is-
the-car-manufacturers-online-reputation-impact>
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