Volkswagen's Emission Scandal: Impact on Business and Stakeholders

This report provides a comprehensive analysis of the Volkswagen emission scandal, examining the ethical breaches related to the use of defeat devices in their vehicles. It delves into the scandal's impact on various aspects of the business, including sales and revenue, highlighting the significant decline experienced by the company. The report also explores the substantial health costs incurred due to the emissions, the repercussions on management bonuses, and the challenges faced by Volkswagen dealers. Furthermore, it discusses the importance of ethical practices in business and suggests recommendations for the company to rebuild its reputation, such as changing its name or establishing bonds to regain public trust. The analysis covers the scandal's global impact, emphasizing the need for ethical programs and transparency in the automotive industry.

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Table of Contents
EXECUTIVE SUMMARY.............................................................................................................3
INTRODUCTION...........................................................................................................................3
ANALYSIS......................................................................................................................................4
CONCLUSION................................................................................................................................7
RECOMMENDATIONS.................................................................................................................7

EXECUTIVE SUMMARY
Ethics can be described as moral standard by which people tent to judge behaviours. It
comprises of analysis and employment of concepts such as right and wrong. The case study
undertaken under this report is Volkswagen's in which the organisation used defeat device in
their vehicle in order to pass the diesel emission test. The report can be studied under four
section .First section highlights the impact of company's scandal on their sales and revenue.
Second section talks about cost which is being by incurred by business in order to provide better
health opportunity to the individuals who have been affected by the businesses conduct. Third
section emphasises on the impact of cheating scandal on bonus of management. The fourth
section deals with the consequences that the entire scandal upon the dealers. In order to enhance
their image it is suggested that the company restart it's business activities under different name or
they can sign up bond.
INTRODUCTION
Ethics can be described as moral beliefs or philosophies that are associated with
individuals or group which is related with what is right and wrong. Business ethics comprises of
moral principles that are responsible for guiding the way organisation behaves. If the
organisation wants to survive in the market for a longer period of time it is important for them to
adopt these ethical practices so that they can work in manner which does not harm environment
or humans (Blackwelder, and et. al., 2016). In the recent years the concern with adoption of
practices related with conserving environment and sustainability have been increased.
Under this report the organisation undertaken is Volkswagen which is a German
multinational automotive organisation. The report highlight the practices that have been used by
organisation in it's operation process which involves using defeat device or software in their
vehicle diesel engine in order to enhance the vehicle performance while maintaining the
emissions within regulatory standards (Crête, 2016).
The business reputation in the market is important for it's growth and sustainability. The
organisation's bottom line is directly impacted by the amount of trust and confidence which
they gained from consumers resulting from the organisation's reputation. Under this report the
effect of Volkswagen Scandal will be analysed in respect of corporate image and their position.

A similar case happened in Toyota company where the company did not disclose
information related with faulty pedals of their vehicle. In both cases the organisation tried to pass
the blame on engineers and software developers in order to save themselves. These incidents
have impacted the reputation of businesses in a great extent. In order to posses strong position in
the market businesses have to have a good corporate image so that they can gain people trust and
can motivate them to buy their products. This report will analyse the impact of Volkswagen
scandal on the business reputation and stakeholders as well (Stanwick and Stanwick, 2017).
ANALYSIS
The Volkswagen cheating scandal have impacted the business on a global extent that can
be explained in the following points.
“Volkswagen Defeat Devices impacted the sale and revenue of the company”
According to Roger Parloff, The Volkswagen cheating scandal have effected the group to a great
extent especially impacting Skoda and Audi. It have shown a great reduction in the sales of the
businesses. The effects are not only limited to the brands under the group but also have impacted
the functioning and systems of the parent business. The sales of the businesses had shown a
reduction which had not happened in their history. In the last 11 years the company's revenue did
not drop to a extent which it did because of the cheating scandal (Oldenkamp, van Zelm and
Huijbregts, 2016).
The drop in the revenue generation of the company was reflected in countries such as
China and US. The demand for the Volkswagen products reduced there in a great number. Due
to this the business faced losses in the month of December. The business made an announcement
that it would enable measures in order to fix the damages that have been caused to both human
life and environment both which have been caused due to defeat devices which were equipped in
their vehicle in order to pass the lab test. The organisation faced first drop in their deliveries in
the past 13 years which was because of the decrease in their sales and revenue. Due to the
organisation emission scandal the business sales in cars decreased thus, decreasing the
profitability of business (Jung, Chilton and Valero, 2017).
As the business adopted unethical practice of equip-ting their vehicle with defeat device
it directly effected the loyalty and belongingness which the customers had towards the
organisation. It resulted in loss of customers to company as they pref red to choose alternative
brands that are Volkswagen's competitors in the industry. Ever since 2002, the sale of

Volkswagen showed an global rise after adoption of deceptive act by businesses. The
organisation had to pay large amount as compensation after the scandal was done by them.
(How VW Paid $25 Billion for 'Dieselgate', 2018).
“Volkswagen emissions cheating caused huge health cost ”
According to Noelle Eckley Selin, The vehicles of company were equipped with defect
device which released toxic pollution that caused approx 60 premature death and it stands as a
major threat to the security of individuals travailing in their vehicle. In the next years, many cars
produced by Volkswagen possessed threat to human life because they released a high amount of
nitrogen oxide in the surroundings. These practices have depicted that the business is not
adhering to the standards which have been established by Clean Air Act in relation with
emissions. As adhering to laws is a ethical duty that needs to be followed by organisation in
order to work legally. They adopted non ethical activities such as using nitrogen oxide which is
an key element components of smog. It is known that smog can cause respiratory diseases such
as heart diseases and it is dangerous to human life.
It have also resulted in premature deaths of individuals and it is noticed that by exploring
harmful particles in air it can cause large amount of air pollution.
The pollution release by these vehicle also resulted in chronic bronchitis of different
types such as thirty one and thirty four. Unites state invested a large amount of money with
dealing with sickness of individuals. The business was left with only a single option of recalling
their cars which comprises of defeat device because it would have resulted in more premature
deaths and other issues. (Volkswagen emissions cheating caused $100 million in health costs,
according to analysis, 2015). Along with this due to an excessive release of nitrogen oxide in the
environment which was caused due to Volkswagen cars it resulted in detrimental phenomenon
acid rain . It impacted both the human health and natural resources on a great extent. Due to such
issues and results the company faced an decline in it's sale across the globe thus, decreasing it's
profitability and also it has impacted the reputation of the business in an negative way.
“The emission scandal of Volkswagen resulted in cut of Managers Bonus”
According to Geir Moulson, When it was disclosed to public that the company have used
defect device in their vehicle the sale of the businesses were effected on a great extent. In order
to handle such situation the organisation decided to cut down the bonus of chief management of
the business. It showed that employees would no longer be getting fair remuneration for

performing their duties. Along with it the business made an statement which emphasized upon
reducing adherence in relation with all the models that are reaching for fair remuneration for the
employees. That means a rational solution which can be approached to all parties who are
involved in different process and activities of businesses was being considered. The reduction
was applied to management board and the members that help them to run business in a daily
basis. This have impacted the reputation of businesses in longer term cause it have developed an
feeling among management that they have not been remunerated on a fair basis. (Volkswagen
says its managers' bonuses will be cut following the automaker's diesel emissions scandal,
2018).
“ Emission scandal created hassel among Volkswagen Dealers”
When the result of the emission lab test became public the Volkswagen dealers were
provided with a package comprising of specific program which was done in order to assists
retailers in tackling diesel emission test. The programme included giving them money in form of
sales bonus or incentives or by providing subsidy. (Jung, Chilton and Valero, 2017). Due to drop
in revenue and profits it impacted the dealers on a great extent. The amount of loan changed as
per the number of dealers. As the scandal got revealed in the public and it impacted the
company's position and image. The dealers major concern was concern with funds. The entire
scandal was considered as deceptive act by individuals and had impacted different stakeholders
of the businesses. The employees were concerned about the security of their job. A Volkswagen
dealer residing in the east coast came up view that dealers of the business residing in US are not
earning money or they are just breaking even. (US Volkswagen Dealers Want VW to Pay, 2018.).
Another dealer Bill Wallace viewed that the customer traffic has dropped but it is important to
convert shoppers into sales. General manger of the business mentioned that the business will be
using portion of funds in order to crack deals with the diesel car owner that are unwilling to get
into the organisation's gasoline cars, and the rest of the portion of funds will be used to motivate
the staff members which will help them to increase their motivation and satisfaction level.
CONCLUSION
From the above report it has been concluded that Volkswagen's have used defeat devices
in their vehicle and the news adversely impacted the reputation of the same in the market. The
entire scandal resulted in declining the sale of the business for the first time in the past eleven
years. It has also decreased the share price of the business. In order to deal with the same the

company announced to cut down the bonus of the management of the company. The Scandal
have impacted both human life and environment to a large extent and have also caused acid rain.
In order to deals with such situation and protect the reputation of their business they need to take
certain measures.
RECOMMENDATIONS
The Scandal had impacted the business organisation reputation largely. This caused due
to the corporate culture of the business. It is recommanded to establish certain ethical programme
in the organisation that can guide it's employees the difference between what is right and what is
wrong. In order to deals with the losses related to reputation the organisation can use two ways
first one is changing the business name and the second one is setting up a bond. The company
can take up as many as measure in order to reduce the impact of the cheating scandal. The
Organisation have been in business for a long period of time and had high stake in the market
which got effected due to the scandal. Thus, the business can come up with a new name in order
to carry out their process in the market and it would help the organisation in changing it's image
in the minds of customers.
In order to gain the trust of people the organisation can team up with agencies that will be
assisting them in the testing process of emissions of vehicle along with their internal teams this
will help in gaining people's trust and also will help them to boost their image in the market.
Organisation can also consider posting bond in order to guarantee people that the same situation
would not appear in the future. It will help the company to regain the people's trust and also
would help them in enhancing their image. In this process of providing bond the businesses
needs to invest large amount of finance in order to assure the people that organisation truly
regrets their earlier decision and will not tent to repeat it in the future. In order to collect the
money that will be required in the providing bond the business can consider selling any of its
brand.
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Volkswagen emissions cheating caused $100 million in health costs, according to analysis. 2015.
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US Volkswagen Dealers Want VW to Pay. 2018. [Online]. Available Through:
<https://247wallst.com/autos/2016/03/22/us-volkswagen-dealers-want-vw-to-pay/>.
Volkswagen says its managers' bonuses will be cut following the automaker's diesel emissions
scandal. 2018. [Online]. Available
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