Volkswagen Scandal: Rebuilding Trust and Sustainability

This report examines the Volkswagen emissions scandal, highlighting the ethical failures and the subsequent erosion of consumer trust. It analyzes the critical role of the new CEO, Matthias Müller, in navigating the crisis and rebuilding the Volkswagen brand. The report delves into strategies for regaining consumer trust, including rebranding initiatives and independent verification. Furthermore, it explores how the CEO can manage sustainability across various business functions, such as operations, supply chain, human resources, and finance. The report emphasizes the importance of corporate social responsibility, ethical leadership, and the implementation of sustainable practices to restore Volkswagen's reputation and secure its long-term success in the automotive industry. The analysis offers practical recommendations for the CEO to address the challenges and transform the company.

RUNNING HEAD: Volkswagen Scandal Case 1
Volkswagen
Volkswagen Scandal Case
(Student Name)
10/7/2018

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Executive Summary
The company Volkswagen is one of the biggest companies in the industry of automobile. In
September 2015, the agency of Environment Protection had revealed that Volkswagen was
unethically underreporting the emission of their vehicles. It was found that the company
intentionally has programmed the software to control the emission during the times of
emission testing of the laboratory. It affected the environment at a huge level. The image of
the company was also ruined. The share price of the company also fallen down because of
such scandal case. The company has appointed new CEO to handle the issue and to cope up
from the challenges they are still facing. There are certain strategies that should be adopted
by the CEO of the company to resolve the problem such as rebranding and so on.

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Table of Contents
Executive Summary...............................................................................................................................2
Introduction...........................................................................................................................................4
Key Issues: Volkswagen Scandal Case..................................................................................................4
Impact of Issues.....................................................................................................................................5
Role of CEO and Leadership Power......................................................................................................6
Future Plans for Volkswagen.................................................................................................................7
Recommendation.................................................................................................................................10
Conclusion...........................................................................................................................................10
References...........................................................................................................................................12

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Introduction
Since the industrial revolution in the UK in 1800’s, the environment is the main victim of
human actions. Human is the main reason for environment pollution. There are certain steps
which have been taken by the government. It is done when the scientists realized that human
beings exploiting the environment and eventually managed to enforce environmental
regulation on the nation to save the environment. The main ingredient that affected the
environment is greenhouse pollutant and carbon monoxide from car emit nitro oxide and
other particulates from fuel combustion which is unhealthy for the environment. The
government enforced regulations to reduce the pollution and can protect the environment
(Hallstrom, Carlsson and Borjesson, 2015).
In 2015, the Volkswagen pleaded guilty in the case of emission of diesel cars. The company
violated the emission rate that has been allowed since 2009, by deception laboratories
through programming an emission control which was activated only in laboratories test but
not in street driving (Krall and Peng, 2015). The excess amount of emission in the
environment affected the health of the human being in US and Europe. To protect the
environment, multiple financial sanctions on the company have been applied as an alternative
solution by the government (Moravcsik, 2017).
In the following part, there will be a detailed discussion on the role of the CEO in dealing
with the crises of Volkswagen and the steps taken by CEO to gain the trust of the consumer.
In the end, the suitable recommendation will be provided.
Key Issues: Volkswagen Scandal Case
Volkswagen is one of the biggest car manufacturer companies in the world. It was indicated
that Volkswagen has installed software in its vehicles of diesel. It were sold since 2009, in the

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country of US (Ewing, 2017). The company embittered in the emission tests by reporting the
lower figures. It has created a great impact on the company, due to the case in the short span
of time, the share price of the company has fallen, and the company also faced the issue of
lawsuits as well as recall issues (Nemeth and Carvalho, 2017). Moreover, the US Department
of justice has taken steps towards the criminal investigation. The Company has also faced the
threat of fine of around billion dollars (Riehm and Lindner, 2017).
Impact of Issues
The radiated fumes have the ability, to cause air pollution in the environment as well as also
have an ability to worsen the breathing of anyone. The company has disturbed the whole
ecological system and also polluted the environment to a great extent. It is against the code of
ethics, along with the practices of the company (Griffin and Lont, 2018). After the case, the
company was banned to sale the models of 2015 and was also not allowed to sale the model
of 2016 till it fixes the program. Around fifty thousand of US vehicles have been told to,
recall by the Administration of Obama. It has affected the sale of the company to a great
extent and the market price of the company was also fallen down by twenty three per cent,
during the last year after the company have disclosed that, they cheated in the diesel emission
(Mansouri, 2016).
There were certain invisible and long-term damages associated with the case of scandal by
Volkswagen such as the negative impact on the trust of the brand, reputation, and morale of
workers, customer satisfaction, and reliability. It is very easy to earn the lost money but hard
to earn the reputation or rebuild the image and trust of the company.

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Role of CEO and Leadership Power
It is vital to have a sturdy leadership power in which, the employees feel free to put their
point in front of high authority to overcome from crises and earn the reputation back,. If the
leader is strong, they can resolve the issues efficiently at the initial stages.
The role of the CEO played a prominent role in the crises faced by the company. If CEO has
a capability to take an effective decision, then the company could overcome from such crises.
The CEO can implement their experience to make the transformation of the company and can
manage and overcome the obstacle in the company by creating and applying different
strategies among people in order to face any kind of challenges, therefore it would also help
the employee to adopt every changes in the organization such as challenges in work life,
stress, layoff, and discrimination. Therefore, Mr. Mathius Muller has been selected as a new
CEO by the company Volkswagen after the occurrence of emission scandal (Jung and Alison
Park, 2017).
The decision of the CEO directly affected on the whole company. The new CEO was needed
because of the following reason:
 The employee of the company was greatly impacted because of the issue of emission
 The company was required to manage the litigation or disruption that caused the stock
price to plummet
 Excessive coverage in the media resulted in the loss of confidence among
shareholders or customers
 The government scrutiny required disclosure in regulatory filings.
Therefore, it is essential for the CEO to reshape the management of the company in which the
stress should be on the human values rather than on profit-making. The foremost step in

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reshaping the management of the company is building the integrity to gain the loyalty of the
team member of the company. (Stanwick and Stanwick, 2017).
Future Plans for Volkswagen
There are certain possible solutions that the CEO can adopt to improve the reputation of the
company. These are explained in below points (Zhou, 2016):
Rebranding
The Volkswagen has become a global brand in the last sixty years. It is one of the biggest car
company in the competitive world. The scandal case of Volkswagen affected the brand image
of the company at a high level. Some of them believed that it can be forgotten soon and other
has reviewed that the company should restart with the new brand. The re-branding of the
company can make relaxed for the company to improve the programs of efficiency and
potentially that can improve the image of the company. The rebranding can be costly one but
it can help in reducing the negative publicity that has occurred due to the scandal. It is
important that the rebranding not only emphasis on external changes but also modify another
phase of the company. The new company should focus on reducing carbon emission, energy
consumption, saving water and reduce wastage. The company should try to work with the
organization that can help in rebuilt the image which involve the Federal Trade Commission,
to focus on sustainability work and collaborates with university, and other institution to
entrench its practices of corporate social responsibility in the organization.
Collaborating with Independent Verification Agency
The Volkswagen has its individual internal team to check or examine the emission of
vehicles. To rebuild the trust of customers and brand image, the company should tie-up with
other independent verification agencies. The companies with whom Volkswagen can

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partnering are Fair Labour Association, Federal Trade Commission, World Business Council
for Sustainable Development, Landfill Methane Outreach Program. It will help to generate,
sustainable prospect for company, society and the surroundings. The independent verification
agencies have tied up with number of partner organizations. For the discussion of sustainable
development issues, their management committee meets three times in a year to handle the
most recent issues. If Volkswagen will decide to partner with such independent groups, then
it will be benefited for the company in two ways: rebuild the trust if the customers and gain
the recognition and recompenses from the NGOs which, rank and test companies that are
based on corporate social responsibilities practices. If a company joins the prestigious
international organization, it will provide them with stronger credibility. Therefore,
Volkswagen can take step towards joining an independent verification agency to earn the
trust of the customers and come back in the competitive market more efficiently.
Posting a Bond
Volkswagen can regain the trust of the customer through posting a bong which assures the
public that the case will not repeat again in the future. A bond is the needle of creditability.
Volkswagen can state that, if the case will repeat again in the future or any other fraud
happen again within the company, then the company has to pay bond which is out to the
automotive industry of European Commission. It will stimulate the regulators of European
Commissions to be strict and exhaustive with their audit. The amount can also be invested in
the research and development of the green vehicle, safety, the infrastructure of information
technology, decarbonization of conventional engines. Therefore, to increase the faith among
customers that Volkswagen truly adopted the standard of emission, the bond need to be set at
a high amount. Volkswagen has spread their roots in different brands. In order to finance this
bond, the company has to sell one of their brands in the market. The reason to sell the brand

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is that the company should concentrate on creating cleaner hybrid and electric vehicles. It is
the best way to re-enter in the market with new product. They should also coordinate with
policymaker to boost the expansion of the electric vehicles and acceptance of consumer in the
market.
Others
 The company should adopt sustainable steps in running the operations. The company
should regulate strict policies for the employee to adopt sustainability in the
operations of the company. The company should strictly follow corporate social
responsibilities to overcome from the crises of scandal. The culture of the company
should be reshaped which help in motivating the employees.
 The company can conserve their resources, optimize the process, save cost, increase
productivity, and promote corporate values through adopting sustainable supply
chain. The incorporation of the supply chain in the organization is difficult but the
failure to act may be the biggest risk of all. The company can map the supply chain to
identify the environmental and social challenges they have, and prioritize efforts with
the suppliers and evaluate the performance of the suppliers to manage sustainability in
the supply chain.
 The HR plays a prominent role in the organization. It should be the responsibility of
HR to arrange programs for the employee to motivate them after the issue happened
in the company. Proper HR should be hired by the company to manage the
sustainability in the organization. The finance department should also know their
responsibility towards the company. It would help the company to manage
sustainability in the organization.

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Recommendation
It is recommended that Volkswagen should consecrate all their determination and resources
into rebuilding reliability with the company. The company has an option to select the path of
rebranding, which can be the toughest thing for the company to do. The company can also
associate with the independent verification agencies. It is viable and impartially easy to
undertake. The third option will be the costliest one to sell out one of its brands. It is the
method of last resort.
A mishmash of the second and last option would be recommended. As consumer slowly
regain the trust in the brand, and the sale will gradually increase. To manage the
sustainability in the business function of the company, the company should regulate the rules
in the organization and coordinate with the suppliers time to time to maintain sustainability.
The HR should take follow up from the employees time to time and arrange programs to give
knowledge to their employers about the responsibilities of them towards their company. At
the last should strictly follow corporate social responsibility to manage sustainability in the
organization.
Conclusion
From the above, it can be concluded that corporate culture is a curial factor. The Volkswagen
has faced certain challenges because of the scandal did by the company. Various issues have
been occurred because of the scandal. The environment was polluted and the people were
also facing the issue of breathing as well as the stock price of the company fallen down
because of such crises. The image of the company also affected from such act. Therefore, the
company has to take certain steps to rebuild their image and earn the trust of the consumers.
The company has hired new CEO to manage such crises happened in the company. Thus, it is
the responsibility of the CEO to manage the issue and help in rebuilds the image of the

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company. There are certain recommendations provided in the report to help the company to
re-enter in the market.

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References
Ewing, J. (2017) Faster, Higher, Farther: The Inside Story of the Volkswagen Scandal. New
York: Random House.
Griffin, P.A. and Lont, D.H. (2018) Game changer? The impact of the VW emission-cheating
scandal on the interrelation between large automakers’ equity and credit markets. Journal of
Contemporary Accounting & Economics, 14(2), pp.179-196.
Hallstrom, E., Carlsson-Kanyama, A. and Borjesson, P. (2015) Environmental impact of
dietary change: a systematic review. Journal of Cleaner Production, 91, pp.1-11.
Jung, J.C. and Alison Park, S.B. (2017) Case Study: Volkswagen's Diesel Emissions
Scandal. Thunderbird International Business Review, 59(1), pp.127-137.
Krall, J.R. and Peng, R.D. (2015) The Volkswagen scandal: Deception, driving and
deaths. Significance, 12(6), pp.12-15.
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.
Moravcsik, A. (2017) Faster, Higher, Farther: The Volkswagen Scandal. Foreign
Affairs, 96(5), p.183.
Nemeth, K. and Carvalho, J.M. (2017) “Dieselgate” and Consumer Law: Repercussions of
the Volkswagen scandal in the European Union. Journal of European Consumer and Market
Law, 6(1), pp.35-35.