Volkswagen Emission Scandal: A Comprehensive Report

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Executive summary
At the end of the year 2015, Industry of automotive gets stunned by the illegal action of the
company known to be Volkswagen which is the biggest automotive association in the market.
This scandal was related to the emission and the investigators who were investigating the case
found out several important aspects of this scandal. This report highlights the emission scandal
of the organization Volkswagen and the impact of this scandal on the sales and on the growth of
the organization. There is a huge impact of this emission scandal on the stakeholders of the
company and the stakeholders had faced several consequences after this emission scandal. This
case is still in progress and a final decision on this case have to be taken. This report highlights
the various participants who were involved in this scandal and also there is an explanation of the
various impact of this scandal on the stakeholders of the association. Various recommendations
are provided in the end so that such a scandal will not take place in the future.
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Contents
Executive summary.......................................................................................................................2
Introduction....................................................................................................................................4
Analysis...........................................................................................................................................5
Conclusion......................................................................................................................................9
Recommendation.........................................................................................................................10
References.....................................................................................................................................11
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Introduction
In the last few years, every country is mainly focused on the safety of the environment. Global
warming and environmental pollution like emission is a big concern for the countries in today's
era. In order to save the world from air pollution, many emission standards have been so that the
vehicle will not disturb the environment of the world. This report highlights the emission scandal
done by the organization Volkswagen in the year 2015. Volkswagen is one of the biggest
company in the industry of automobile. The company is also known to be the biggest seller in the
market of the automobile. The company has many competitors in the market which are Hyundai,
Nissan, Honda, and Mazda. In the year 2015, Volkswagen has embedded software in the diesel
engine of the vehicles in order to improve the performance of those vehicles. In that year, the
company has made 6, 00,000 cars in the US market. The company has embedded that software
device in all their cars in order to improve the efficiency of their vehicles. In order to improve
the performance of the vehicles, engineers of the company have failed to maintain the emission
standards. In order to hide this fact, the company has tested the emission of their vehicles in the
labs instead of testing the emission of the vehicles on the roads. Company has cheated the whole
system in order and failed to maintain the emission standards in order to improve the efficiency
of the diesel engines. This report shows the involvements of various participants in this emission
scandal and the impact of this scandal on all the stakeholders of the company. In the end, several
recommendations are provided so that such a scandal will not take place in the future.
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Analysis
After the emission scandal on the company Volkswagen, stakeholders of the company had faced
various consequences and the company also saw the downfall in their sales. This case is still not
finished as the case is still investigating by the various authorities in order to find out a suitable
result. The company has faced various consequences after this emission scandal and also suffers
a lot of loss in their revenue. The various impact of this emission scandal on the company and on
the automotive industry are mention below:
Danger to the health of the people
In the year 2015, Volkswagen launched thousands of cars in the market which contains a defeat
device. This defeat device is the major reason behind the production of toxic pollution in the
environment. This toxic pollution is very dangerous for the health of the people of the US.
Volkswagen diesel cars not only produce toxic pollution bit also produce nitrogen oxide.
According to a survey, it has been shown that Volkswagen and diesel cars of the company Audi
produced nitrogen oxide 40 times more than it was allowed by the act of clean air. It has been
shown that approx. 36.7 million kg of nitrogen oxide was produced by the diesel cars of the
company Volkswagen and Audi in the year 2008 to 2015. Nitrogen oxide is very harmful to the
health of the people especially for the health of older people and also for children. This air
pollution can tend to disturb the health of the people and they can suffer from various disease
related to respiratory and heart diseases (Rhodes, 2016).
In a survey, it has been shown that Volkswagen has launched many cars in the market which
consist of a defeat device. This defeat device will produce extra nitrogen oxide in the
environment which will dangerous for the health of the people. If these diesel cars with defeat
device remain in the market then it will cause approx. 140 lives in the next few years. And also,
these cars can cause the health of the people which will cost approx. $840 million to the
company. This nitrogen oxide not only dangerous for human beings but also harmful to nature as
well. According to a study, excess of nitrogen oxide in the air can cause acid rain which will be
harmful to nature and animals (Schiermeier, 2015).
The decrease in the bonus of the employees
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After the emission scandal of the organization Volkswagen, the company ha facing various
consequences and there is a big decrease in the sales of the association. This scandal not only
affects the growth of the company but also affect the overall revenue of the company in the
country (Cavico and Mujtaba, 2016). This is a big reason the company was forced to decrease
the bonus of their employees in order to cope up with the disaster. As the company is facing
various consequences after the scandal, the organization has decided to reduce the bonus of their
main employees and also reduce the bonus of the main management. Board of management and
the assistants of the CEO are also the ones who are not receiving their bonus from the company.
The only chairman of the association Hans Dieter Poetsch is receiving their bonus on time.
The decrease in the sales of the company
After the emission scandal of the company in the year 2015, the company has aced various
consequences and the big consequences the company has faced is the decrease in their sales.
After that scandal, the company is failed to attract new customers and also the there is a decrease
in the customer retention rate of the organization. Customers who were attached to the company
from the big time has decided to switch their brand after the emission scandal of the
Volkswagen. Most of the customers of the Volkswagen had switched to their competitors brand.
This has affected the sales of the company a lot and the organization has faced a big downfall in
their profits (Oldenkamp, et. al., 2016). Emission scandal has created a bad reputation of the
brand in the market and the new customers are hesitating in purchasing the cars from the
Volkswagen Company. After that incident, there is a rapid decrease in the sales of the company
which has affected the overall revenue of the organization in the world.
Drop in the shares of the company
Emission scandal of the company has led to the serious drops in the share of the organization in
the market. It has been seen that after the reveal of the emission scandal of the organization,
there was a rapid drop in the shares of the organization (Blackwelder, et. al., 2016). The overall
share value of the organization dropped drastically to one third. Due to which company had
suffered a loss of billion dollars.
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This figure has shown that the company has faced a drastic drop in its stock price.
Impact on the dealers of the company Volkswagen
After the incident of emission scandal, there was a big impact on the dealers of the company.
Due to the lower sales and fewer profits, there was a big impact on the condition of the dealers.
Because of fewer sales and profits, dealers of the company had faced various problems while
working with the company. In order to improve the condition of the dealers of the company,
Volkswagen America has decided to provide some finds to the dealers of the company so that
they can improve their financial condition. This whole incident affects the growth of the business
and also disturbs the brand name in the market. After that incident, dealers were not allowed to
sell the diesel vehicles in the market. Dealers were more concern about their financial condition
because there were no sales of the vehicles (Bachmann, et. al., 2017). Dealers of the company
have used the fund in order to boost the name of the brand again in the marketing and also spend
a lot of money in advertising the new products of the company in the market. All the dealers of
the company facing various issues as the company are not able to attract new customers and also
the company is generating only a few profits. All the deals of the company have been disturbed
after the emission incident which had affected the growth of the company in a huge manner.
In order to overcome such scenario and to boost the sales of the company, Volkswagen has
decided to cancel all the loans of the customers who are having that diesel car and offer them
new cars which will follow all the standards of emission in the country. The company also
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decided to give various compensation to their customers in order to solve their problems.
According to a survey, there will be a cost of around 7 billion dollars which company have to
suffer in order to buy those affected cars back. It has been said that the whole emission scandal
has cost the company around 6.7 million euros (Anenberg, et. al., 2017). It has been said that the
company has suffered a big amount in order to repay its deception. Government of America has
ordered the company to bring back all its diesel vehicles which have defeat device in order to fix
them. Company is planning to use advanced technology in order to launch electric cars which
have a zero effect on pollution. This strategy will allow the company to gain the trust of their
customers once again.
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Conclusion
This report concludes with the emission scandal of the company Volkswagen and the impact of
this scandal on the growth of the company. This emission scandal not only affects the sales of the
company but also create a huge impact on the stakeholder so the organization. All the dealers of
the company had faced lots of consequences after the incident of emission scandal. Because of
the unethical decision of the company, Volkswagen and their stakeholders had faced a big
amount of consequences. In order to find a solution to this problem, the company has decided to
launch electronic cars in the market which have zero effect on the environment. This report
further concludes with the penalties Volkswagen had to face and the compensation they have to
make to all their customers who have purchased this diesel vehicle. As the case is still in
progress, it can be said that the company can face green punishment in which the company has to
stop manufacturing diesel vehicles.
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Recommendation
It has been said that unethical decision not only affects the growth of the company but also
affects the overall revenue of the company. After the unethical incident of the company
Volkswagen, the company has faced a drastic drop in their sales and also a decrease in company
sales. It is recommended to the company to perform its functions according to the legal rules and
standards. If the company follow the legal rules and standards set by the government than the
company did not have to suffer such loss. It is also recommended to the company to teach all
their employees and management about the ethics rules and regulation of the government
(Stanwick and Stanwick, 2017). Employees are the one who plays an important role in the
success or failure of any organization. This it is recommended to the company to teach their
employees all the ethical rules so that the employees will not break any law or standards. If all
the employees of the company do their work with proper ethics than the company will not have
to face any legal issue in the future (Holland, et. al., 2016). It is recommended to the company to
give support to their employees financially and mentally so that the employees do not have to do
anything wrong in order to earn more money. It is recommended to the company to check the
engines of their vehicles before launching the vehicles in the market. The company has to ensure
that they are following all the standards and the laws possess by the government before
launching the vehicle in the market. This will save the company from any kind of trouble in the
future.
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References
 Anenberg, S.C., Miller, J., Minjares, R., Du, L., Henze, D.K., Lacey, F., Malley, C.S.,
Emberson, L., Franco, V., Klimont, Z. and Heyes, C., 2017. Impacts and mitigation of
excess diesel-related NO x emissions in 11 major vehicle markets. Nature, 545(7655),
p.467.
 Bachmann, R., Ehrlich, G., and Ruzic, D., 2017. Firms and collective reputation: The
Volkswagen emissions scandal as a case study.
 Blackwelder, B., Coleman, K., Colunga-Santoyo, S., Harrison, J.S. and Wozniak, D.,
2016. The Volkswagen Scandal.
 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.
 Holland, S.P., Mansur, E.T., Muller, N.Z. and Yates, A.J., 2016. Damages and expected
deaths due to excess NO x emissions from 2009 to 2015 Volkswagen diesel
vehicles. Environmental science & technology, 50(3), pp.1111-1117.
 Krall, J.R. and Peng, R.D., 2015. The Volkswagen scandal: Deception, driving, and
deaths. Significance, 12(6), pp.12-15.
 Oldenkamp, R., van Zelm, R. and Huijbregts, M.A., 2016. Valuing human health damage
caused by the fraud of Volkswagen. Environmental Pollution, 212, pp.121-127.
 Rhodes, C., 2016. Democratic business ethics: Volkswagen’s emissions scandal and the
disruption of corporate sovereignty. Organization Studies, 37(10), pp.1501-1518.
 Schiermeier, Q., 2015. The science behind the Volkswagen emissions scandal. Nature
News.
 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.
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