Volkswagen Emission Scandal: A Business Ethics Case Study

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EXECUTIVE SUMMARY
This report has Cleary specified the recent scandal happened within the Volkswagen. The
managers were aware of the excess limits of carbon emission but still, they appeared the same
in order to achieve the highest performance. This unfair activity not only destroyed the
company's image as well as it caused health and environmental issues. This scandal badly
affected the revenue of the company and broke the trust of consumers, investors and senior
regulators. This unhealthy activity of the Volkswagen engineers and managers could damage
the environment very badly and the toxic environment could damage human health as well.
Now Volkswagen can arrange some campaign and seminars to educate the customers about
the carbon emissions, cleaning dumpsites and greenhouse gases in order to achieve the trust of
customers, senior regulators and investors as well as they should acknowledge the customers’
questions and highlight the future activities which are about to taken by the company in order
to maintain the transparency among public, regulators and investors.
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Contents
EXECUTIVE SUMMARY...................................................................................................................1
INTRODUCTION............................................................................................................................. 3
ANALYSIS OF ETHICAL ISSUES IN VOLKSWAGEN WITH ENGINEERS...............................................4
CONCLUSION................................................................................................................................. 8
RECOMMENDATION......................................................................................................................9
REFERENCES.................................................................................................................................10
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INTRODUCTION
This assignment is based on the Study of business and law and how Volkswagen is working in it.
Volkswagen is a multinational automotive manufacturing company of German and it is
headquartered in Wolfsburg, Germany. Volkswagen ranked 7th largest market share from the
last two decades in Europe. Volkswagen is one of the biggest companies in Berlin, Germany.
Volkswagen started working for cars from 1937 and rapidly came up with well-known models
such as Audi, Passat, Golf, and Polo. After these models, it became the best seller in Germany.
Later on, The Volkswagen group came up with Bentley, Bugatti, Lamborghini, and Scania also till
2012. This company also introduced trucks i.e. TRITON AG. Volkswagen is serving the facilities
across 27 countries and operates 100 production facilities out of 150 operations. In this
assignment, the business structure and how the defeat devices have been fitted in order to pass
emission tests (Mansouri, N., 2016). There are some hurdles which engineers are facing at the
time of manufacturing of the car and the main concern is arising at the time of building an
engine of diesel in order to achieve the highest performance. There are some scandals which
are performing by them. How this scandal affected public relations, customers, regulators, and
revenue are discussed. In addition, these scandals are creating ethical issues as well so the
implications of these issues are also analyzed with proper understanding. Further, how these
issues are occurring and why the emissions are far beyond limits which are set legally is also
elaborated.
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ANALYSIS OF ETHICAL ISSUES IN VOLKSWAGEN WITH ENGINEERS
Volkswagen is a well-known company and the recent scandal created left the very bad effect in
terms of ethics that directly impacted the company’s reputation and image. This is very
important to analyze all wrongdoings which happened in a company. As per the Volkswagen
law, how things got affected has been discussed below. The major 4 things are badly affected
such as –
Revenue
In the fiscal year of 2018, it has reported that the annual Revenue was EUR€230.682 billion that
has increased by 6.2% over the previous fiscal year’s cycle (Georgievski and Qudah, 2016). The
share of Volkswagen traded in €148 per share and till November 2018, the value of the capital
market was US$73.8 billion. As per the previous year's revenue of 2018, it is mandatory to
maintain the revenue in upcoming years which will not be possible if the managers will not
make the changes in the process of building diesel engine.
The company is in a very crucial stage where the revenue could be decreased badly if the
wrongdoings or scandals will not be stopped by the employees. Managers are required to take
necessary actions on such happenings in a company to maintain and to increase the company’s
revenue. It has found that the scandals by employees are getting the support of the managers
also because of that emissions has crossed the legal limits.
Apart from this, the sales revenue gets generated from workshop services, license revenue, and
other things also and it should be presented according to segment and market. Cost of sales
also affects the revenue of the company as the items include the primary development cost and
primary office and operating equipment also. As per the previous year's impairment losses, the
government has provided the €424 million as per the income in the fiscal year 2018 that was
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€435. There is distribution and administrative expenses also that impacts the revenue of
Volkswagen.
Public relation /media coverage
Volkswagen is 1 of the well-known brand and the recent emission scandal has broken the trust
of investors and customers. The company’s growth is falling down because of this scandal.
Apart from this, the articles, posts and all media coverage made Volkswagen threatened. It has
become very important to stop all such scandals and need to rebrand the Volkswagen structure
to rebuild the company’s reputation as well as customer’s and investor’s trusts. There are 4
Public relation firms that have been agreed to continue the work on the project and these are –
herring Schuppener of German firm as lead PR counsel, Finsbury in London and North America
will be handled by Kekst and Edelman.
Volkswagen apologized to its customers and investors for the scandal and the company is also
trying to recover its image in the market. This scandal broke the customer's trust and the public
relations have fallen down and this scandal has impacted very badly in the name of trust and
truth (Barth et al., 2017). That is a big task for the company to recover everything once again
although it is not impossible. If the company will try hard then definitely their hard work will
pay off. The company needs to take some important decisions and need to rebrand the
company to go green. This is needed to start some new campaign where they can promote the
process of rebuilding the brand and can share the future manufacturing plans. The more
initiatives the company will take, the more opportunities the company will get to be on the
green.
As the scandals got highlighted, this is also required to highlight their green activities in media
so the public relations can be improved and that the trust of investors and consumers can be
built again and this will help to keep things transparent in front of the public. Media is one of
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the strong ways to provide the information to their customers and definitely, the company can
ask for some time to know more about the scandal so that the necessary action could be taken.
Customers
From the past 50 years, Volkswagen has given its best to provide the best reliable and quality
services to the customers. Customers have shown the great Interest towards the products of
Volkswagen (Wei et al., 2016). The pleasing and fascinating models with low rates attracted the
customers a lot. Generally, the services that Volkswagen has provided till 2018 were really
amazing and the company was awarded as a top green automotive company also. The recent
scandal spoiled everything and badly impacted the customer’s trust.
As per the survey after scandal, it has been revealed by Volkswagen diesel owners that the
people got impacted because of scandal should collect the compensation but they are also
looking for more possible offers. In addition, Volkswagen apologized to customers also and
wrote letters to the affected customers regarding the necessary actions to be taken to resolve
this issue although customers are really not satisfied with their response anymore. Few of the
drivers are still waiting for some more information so that they can decide about the action to
be taken against the company.
Apart from this, customers are also expecting from the government to investigate genuinely
about the scandal and specify how the problem will be resolved from the customer's end as
well as from the company’s end. Even customers are also expecting either instant changes or
decision in favor of affected customers. Overall they want assurance for preventions and
evidence that these kinds of scandals will not happen again (Mittal, V., 2016). Customers are
really disappointed as they were loyal customers with Volkswagen. This scandal has left a very
negative response to the customers.
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Regulators
The regulators who invested in Volkswagen actually showed trust in the company. Now the
regulators are quite disappointed because of the scandal. Even regulators have sued against
Volkswagen as automakers of the company committed the fraud and lied to the investors. The
security and exchange commission also stated that the more than $13 billion bonds and assets
backed securities has been issued by Volkswagen from April 2014 to May 2015 in the US
market. On the other hand, the senior executives were aware that the legal vehicle emissions
limits for 500,000 vehicles were grossly exceeded. These kinds of things have badly impacted
the whole structure and broken the trust of regulators. Now the situation is, the regulators will
not be able to trust again on the Volkswagen group no matter what the place of Volkswagen it
is and who are the engineers working over there.
Regulators are the main body of the company. Companies are able to take initiative because of
regulators. They are the one who provides the security to the company so that if a company will
suffer from any loss in future then the regulators can help them (Mittal, V., 2016). The scandal
by Volkswagen's engineers and managers has created a very bad image in the eyes of public,
customers, and regulators as well. It has become very important for VW to rebuild the trust in
the eyes of regulators also because without them the company will not be able to survive in the
market in case of any financial issues.
In addition, Mr. Martin Winterkorn who was the chief executive of the Volkswagen groups quit
the company when the diesel emissions cheating got highlighted. Ultimately, it can say that
these days Volkswagen is facing the black days. Volkswagen can definitely come out from these
bad days. All is needed to respond to the customers accurately and need to clarify each and
everything to the regulators and investors in order to gain some trust from them. This is also
requiring assurance that the things will not repeat in the future.
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CONCLUSION
In the whole case study, it has found that Volkswagen is facing a very crucial time period these
days because of that emission cheating scandal and wrong installation of software in the
engines of diesel. This was shocking for public worldwide (Lane, E.L., 2016). Now, this has
become very important for the company to recover the image as early as possible in order to
maintain the top position in the market the same as it used to be on top. Volkswagen has
certain opportunities to go greener that has been discussed above. This report has clarified how
the information can be spread to the customers to maintain transparency with them. The lies
and the things which were hidden from the regulators that cause the big loss to the company as
well as the customers have been clarified. The previous growth of the company also has been
highlighted so that future plans can be done accordingly for better growth.
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RECOMMENDATION
As per the study of the Volkswagen emission scandal, it has become quite difficult to handle the
situation. Company is required to take certain decisions to take action very carefully.
Volkswagen is one of the top largest companies that have provided the best services to their
customers. By keeping this thing in mind, the company can rebuild the trust of customers,
investors, and regulators in order to restructure the company. The recovery is important and
needs to be in green again. Company can organize some campaigns where they can educate the
public about the future process and action they will take and they can arrange some sponsored
activities also if they will provide online education programs based on emission of carbon,
cleanup of dump areas, greenhouse gases, and green park buildings in underprivileged areas in
order to gain some trust of the customers will also help. They are mainly required to overlook
the software which is undetected from many years. As the company is rebuilding the brand,
they should focus on the sustainability of work and should collaborate with universities,
scientific institutions, and suppliers to implant the practices of social responsibilities in the new
company.
Apart from this, the company can post a bond to regain the customer’s trust by stating that
these activities will not happen again. And they can also mention in the bond that in case any
kind of fraud will be happening in future within a company then the company is ready to pay
the bond to the European Commission automotive industry. This statement on the bond will be
an indicator of credibility that will help the company to regain the trust of customers and
investors and will ease to create a better image in the market again. This is also important to set
the bond of the good amount so that the consumers can understand that Volkswagen is really
regretful for the emission scandal and that will definitely work to restructure the company with
their consumer's trust.
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REFERENCES
Barth, M., Bauer, A., Hughes, E., King, A., and Koerner, H., 2017. Volkswagen Public Relations
Plan.
Georgievski, B. and Al Qudah, A., 2016. The effect of the Volkswagen scandal (a comparative
case study). Research Journal of Finance and Accounting, 7(2).
Lane, E.L., 2016. Volkswagen and the High-tech Greenwash. European Journal of Risk
Regulation, 7(1), pp.32-34.
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.
Mittal, V., 2016. Avoiding the Trap of Spurious Loyalty: Lessons from Wells Fargo and
Volkswagen.
Wei, J., Zhao, M., Wang, F., Cheng, P. and Zhao, D., 2016. An empirical study of the Volkswagen
crisis in China: customers’ information processing and behavioral intentions. Risk analysis,
36(1), pp.114-129.
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