Volkswagen: An Analysis of the Emission Scandal and its Consequences

This case study examines the Volkswagen emission scandal, focusing on the use of a defeat device to pass emission tests and its wide-ranging consequences. It analyzes the impact on shareholders, including financial losses and loss of trust, as well as the effects on the automotive industry, including regulatory scrutiny and changes in testing procedures. The study also explores the impact on customers, including concerns about vehicle performance and value, and the responses of regulators. The case study concludes with recommendations for Volkswagen to improve its environmental practices and adhere to environmental laws. The analysis covers the scandal's effects on revenue, share price, stakeholders, public relations, and the automotive sector, emphasizing the ethical and business implications.

Volkswagen Case Study

EXCECUTIVE SUMMARY
This report is based on an issue that is occurred in Volkswagen related to a defeat device
which is fitted by the company to enable the vehicle to pass emission tests. Volkswagen is
German multinational automotive company which was founded in 1937 ans deal in automotive
sector. This research will be discussed about the emission scandal that how it impacted on
shareholder, industry, customers and others. This problem not only affect shareholder but also
other factors and elements such as customers, revenue, share price, board, managers, public
relations, automotive industry and relations of the government that are framed to provide
protection to the environment. To solve this issue, it will also be recommended that how
company can make improvement by following environmental laws and acts.

Table of Contents
EXCECUTIVE SUMMARY...........................................................................................................1
INTRODUCTION...........................................................................................................................1
CONCLUSION................................................................................................................................5
Recommendation.............................................................................................................................6
REFERENCES................................................................................................................................7
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INTRODUCTION
Organisational ethics are the principles and standards by which businesses operate in
reference for business. Ethics is a branch of philosophy that include a systematizing and
recommonded concepts that are conducted in good and bad manner. This assignment is related to
Volkswagen Group of company. This company also known as the Volkswagen
Aktiengesellschaft and it is Germany based multinational company the manufactures automotive
(Aring, 2014). This company founded in 1937 and produce 100 production facilities across 27
countries. It is headquartered in Wolfsburg, Lower Saxony, Germany from the company provide
services worldwide. The organisation deals with the designing, manufacturing and distributing of
the passenger and commercial vehicles, turbo machines, engines, motorcycles and the various
automotive. This company also offers many services related to the automotive including the
services like leasing, financing and fleet management. The annual revenue of the company is
above €213.292 billion, net income is €11.844 billion and total equity is €117.117 billion. This
company has seventh rank by Fortune Global 500. This group operate business of motorcycle
under the brand of Ducatui and passenger cars under Bugatti, Audi, Porsche, Lamborghini,
Volkswagen Marques and Skoda. Volkswagen group of companies has a large market with high
annual revenue which is in news due to a case of cheating on the diesel emission. In this report
will be discussed about emissions, it refers to the production and discharge of something,
specially gas and radiation. Further will be defined about revenue, share price, shareholders,
board, managers, customers or patients etc. of the the company.
ANALYSIS
The automotive sector is the largest industry sector in Germany which reported a
turnover of 384 billions euros which is the on fifth of the net German industry revenue.
Volkswagen scandal has led to a devastating series of critical consequences to its direct and
indirect stakeholders. This emission scandal is under investigation by various government due to
search its main purpose and affect which coming out with a specific and relevant solution to
solve the case.
In 2015, Volkswagen admitted rigging in diesel emission test for which the organisation
suffer from huge amount of cost burden (Bachmann, Ehrlich and Ruzic, 2017). In 2015, the
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company admitted that almost 600,000 cars made for the US market had been fitted with defeat
devices which is used in order to enable thye vehicles to pass emissions tests. This emission
scandal create impact on various elements of the company such as revenue, share price,
shareholders, board, managers, customers or patients, public relation, the industry or sector
regulators and others.
Shareholder- it refers to an individual or institution that include a corporation which
legally owns one or more shares. The major shareholders of the company are employees,
customers, directors and others who have damaged the most by this scandal (Berger and et. al.,
2015). The aim of shareholders was the one of increasing short term profitability of the company
and promoting the increase in stock prices so that they also would have gain benefits personally
in terms of compensations. In fact, the returns which they will get, drastically lower due to
economic losses in terms of fine, legal charges and specially in term of lost profit margins. The
company also some fines related to this scandal and the pay amount almost to 20 of billions of
dollars. This firm might have to repay the retailers and to compensate for damages caused to
consumers. Cause of this emission scandal, this company lost almost a third of their value or
about 22 billion euro. Shareholders representing 1670 claims are seeking 9.2 billion euros in
damages over the scandal which broke in 2015 and the cost Volkswagen 27.4 billion euros in
penalties and in from of fines. It highly affect the shareholders in negative manner and the
b5trust of them was triggered. This scandal provide and opportunity to assert claims for
damages.
The shareholders of Volkswagen that have accused its executives that overseeing a
shambles and demanded changes to manage the structure of management in the fist annual
meeting since the car-maker become embroiled in diesel emissions scandal. Investor are also the
shareholder of this company, investors organised a meeting in Hanover when this issue arise, to
criticise the German company's board for its handling of this scandal and call for a dramatic
overhaul of its corporate governance.
Industry or sector- The Volkswagen emission scandal in which the German car
producing company was caught red handed deploying a sophisticated defeat device that heat
emission tests and create a major impact or has taken the global car industry by storm or in
problem (Cavico and Mujtaba, 2016). In UK, it all began after environmental regulator and the
Environmental Protection Agency identified that Volkswagen automotive were emitting nitrogen
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oxide levels 40 times the standard allowed under the Clean Air Act. Cause of this emission
scandal, the regulatory searches have impacted planning and strategy across the sector. In 2017,
Daimler AG cancelled its plans to sell diesel Mercedes-Benz cars in US. In South Korea, the
government of that country revoked the sale certificates for some of Nissan's and BMW's diesel
cars (Crête, 2016). In France, the French government are also organise investigation of PSA
Group which produce Peugeot and Citrogen. The organisation denies wrongdoing and has taken
steps top become make more transparency in their work or products. PSA group began
publishing real world with the help of third party certified emissions results after the Volkswagen
Scandal.
Source: Emissions-related Controversies in the Auto-mobile Industry,(2019).
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Illustration: Emissions-related Controversies in the Auto-mobile Industry

The competitors of this company is also affected by this emission scandal because they
are also suffered by various process and rules of government and environmental laws that affect
their profit margins and sales process. The re are various checking process like carbo emission
and nitrogen oxide emission from diesel engines have organised by the government because they
have various affect on the health of human and environment but they are not only particular
under the lens in the filter of regulatory and industry analysts (Georgievsk and Al Qudah, 2016).
European Union, the government has reformed test procedures as a outcome of the scandals. In
2017, they announced that the model of new car will be subject to stricter tests that are more
reliable and representative for the driving conditions of real world. These reforms constitute an
important and specially conside4ring the political support the auto industry.
This scandal affected the auto industry and different companies of various countries. In
Germany, it create negative impact on the auto companies of this nation. This country has faced
the affect of the China slowdown and Greece debt crisis cause of it has dependency on the
automotive sector and has the scale of economy of this company as an integral part of
automotive sector. The country faced this impact to its economic growth because the car sales
are significantly affected by this emission.
Customers and patients- Customers refers to those person who buy and purchase goods
and services from a company and an organisation according to their needs and wants. They are
main pillar of the growth of any company and help in enhancing the productivity of the company
if the organisation produce good and services according to them. If the firm will not develop
goods and products according their desires, they will not make contribution in the success of the
company. If the organisation suffer from any problem, they also affected by that issues. A
problem is also raised in Volkswagen which is related to the emission scandal. Volkswagen is
the world's largest auto manufacturer company which is recently admitted to cheat9ing its
emissions tests in the US. This organisation has 600.000(approximately) of its TDI vehicles in
the US which contained sophisticated software that turns of the pollution controls when the
vehicle is turn on and driven by anyone (Jung, Chilton and Valero, 2017). When it detects the
vehicle is undergoing an emission test. This sandal affects the Audi3, Volkswagen Jetta,
Volkswagen Golf or Volkswagen Beetle and the sales of them digressed because after knowing
about this issues, the consumer are not like to purchasing them. Because, this scandal affect their
thinking and make change in this thought regarding these vehicles.
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After knowing about this scandal, customer are not showing their interest towards this
brand. They raised queries and complaints so the tools and techniques in place for handling the
queries and problems by the Volkswagen customer service team regarding this issues. During the
time, when this emission scandal came in light in 2015, various owners wanted to know that
whether their vehicle had this software installed (Lappe and Spang, 2014). VW set up a new self
service testing system to provide customers with further details about this scandal. This emission
effect on the consumers needs and now these days , they demand a high level of speed,
convenience and transparency.
Regulators- It is a body that supervise a particular industry or business activity so that
they can operate their business in a manner-full way. In VW when the issues related to scandal
were arise, this affect the regulations also that are framed by government for the organisation.
This affect various environmental laws and in US the government regulated various regulations
against defeat devices. Clan Air Act, this cat is developed by the government to prohibits the
manufacturer, selling or installation of any device that internally circumvents. This act is framed
by the authorities for rendering inoperative a required elements of the vehicle's emissions control
system. The Europe Commission got the authority to provide approval of models of cars across
under a new legisation that meant to provide protection a repeat of Volkswagen Group's diesel
emission scandal (Mansouri, 2016).
CONCLUSION
From the above assignment, it can be conclude that Volkswagen emission scandal is and
critical case which have generate various issues to its direct and indirect shareholders. This
problem not only affect shareholder but also other factors and elements such as customers,
revenue, share price, board, managers, public relations, automotive industry and relations of the
government that are framed to provide protection to the environment. In this report, it is defined
that how the shareholders are affected by the diesel emission and how they react towards it and
how it impacted the industry. It is also described that how this scandal affect the regulations and
customers needs and demands towards the products of Volkswagen. The impact of this emission
in automotive sector is also defined that how this affect the business of automotive industry.
Competitors are also affected by this issue in negative manners because they are also suffered by
various process and rules of government and environmental laws that affect their profit margins
and sales process.
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Recommendation
In Volkswagen, there is an issue arise related to emission scandal that the company had
been used a software which turns off pollutions control when the vehicle is driven. This defat
device is used by the company to enable the vehicle to pass in emission tests. The company use
an sophisticated device within its products and this the reason for which this problem is raised.
To solve this issue, there are various recommendations that must be followed by the company
reduce the negative effect of this problem on its shareholders, customers, regulations and others
(Rangaraju and et. al., 2015).
 By following the rules and regulations that are developed by EPA against this emission,
the organisation make improvement in its organisational growth and sales.
 The company must offering a technology and aids of research development that make
increment in its customers which enhance the profit margins of the firm.
 The organisation must used value based business practices hierarchy so that they can
work properly and gain trust of their shareholders.
REFERENCES
Books & Journals
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Aring, M., 2014. Innovations in Quality Apprenticeships for High-skilled Manufacturing Jobs in
the United States: At BMW, Siemens, Volkswagen. ILO.
Bachmann, R., Ehrlich, G. and Ruzic, D., 2017. Firms and collective reputation: the volkswagen
emissions scandal as a case study.
Berger, C. and et. al., 2015. Simulations on consumer tests: A systematic evaluation approach in
an industrial case study. IEEE Intelligent Transportation Systems Magazine. 7(4).
pp.24-36.
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.
Crête, R., 2016. The Volkswagen scandal from the viewpoint of corporate governance.
European Journal of Risk Regulation. 7(1). pp.25-31.
Georgievski, B. and Al Qudah, A., 2016. The effect of the Volkswagen scandal (a comparative
case study).
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.
Lappe, M. and Spang, K., 2014. Investments in project management are profitable: A case study-
based analysis of the relationship between the costs and benefits of project management.
International Journal of Project Management. 32(4).pp.603-612.
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.
Rangaraju, S. and et. al., 2015. Impacts of electricity mix, charging profile, and driving behavior
on the emissions performance of battery electric vehicles: A Belgian case study. Applied
Energy. 148.pp.496-505.
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.
Zhang, B., and et. al., 2016. The issue arena of a corporate social responsibility crisis–The
Volkswagen case in Twitter. Studies in Media and Communication. 4(2). pp.32-43.
Online
Emissions-related Controversies in the Auto-mobile Industry. 2019. [Online]. Available
Through:<Emissions-related Controversies in the Auto-mobile Industry>.
Impact of Scandal on customers. 2019 [Online]. Available Through:
<https://www.theguardian.com/business/2015/oct/15/vw-customers-demand-answers-
and-compensation-over-emissions-scandal>.
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