Describe about the Decision-Making and Problem Solving for The Largest Carmaker.
Volkswagen is the largest carmaker in Europe and is the leading manufacturer of automobile all over the world. The company has twelve brands and respective brands operate as an independent entity in the market and have its own character. The product spectrum ranges from the small care having low fuel consumption to luxury vehicles and motor vehicles. The product ranges from the buses, pickups to heavy vehicles in the sector of commercial vehicles. There are fields in which the group is active and produces manufactures with turbo machineries, chemical reactors, compressors, large bore diesel engines for the marines. The other products include gear units for turbines of wind, vehicles transmissions and the system of testing for the mobility sectors. The group offers a wide range of financial services and this includes insurance and banking activities, fleet management, customer and dealer financing and leasing. The market condition in the year 2015 was difficult which led to the fall in the number of the vehicles delivered by the group to the consumers (Volkswagen.com 2016).
Purpose of the report:
The report has been prepared to discuss the emission scandal of Volkswagen and to come up with the approaches that would help in overcoming the issue faced. It also discusses about the methods that can improve the existing system.
Description of the problem:
The owners of Volkswagen lost $ 1500 in value on the cars. The analysis of the data of the car pricing shows that the value of cars has fallen. The median loss of value for the TDI diesel vehicle of Volkswagen was $ 1483 and the price of such vehicles has declined by 6.4%. The company posted a net loss of €1.58 billion for the year 2015 as compared with the net profit of €10.85 billion for the previous year. The operating loss of the company for the year ended 2015 stood at €4.1 billion. Because of the emission issue, the revenue of the group would fall by 5% and the share of the company was down at 0.5%. Therefore, the main issue was concerning the corporate governance approach of the company, which was faulty, and it came with a huge societal impact.
The consequences of the scandal by the company influenced the shareholders who lost confidence in the company and the company faced claim of the damages over the emission scandal. The company faced investigations and lawsuits all over the world. The company faced lawsuits and the institutional investors filed case.
Value lost by the different cars
Source: (created by author)
Description of the approach used:
The scandal management by Volkswagen make use of the approach, which was as quickly as possible, and open as possible. The company made use of the leadership approach as the rebuilding of the trust and confidence in the brand needs to be started from the inside of the organization. The organization has responded to the scandal by changing its structure and implementing it so that the consumers have confidence that the firms would not repeat it again. The standards of the corporate governance is to be made high so that the company would find it difficulty in committing the fraud in the future.
Reactive approach was used to rebrand the image and reputation of the company, which was intended to potentially save the company and speed up the efficiency program. There is a need to create such climate that the problems would be openly communicated, there is a need to make changes in the procedures of election of the directors, and the wide inclusion of the directors would prove beneficial to the company. Rebranding approach would lead to better practice of corporate social responsibility (Balbi 2015).
Another approach used was in relation to the stakeholders of the company. The trust of the customers would be retained by posting the bond that would assure them. This approach is to assure the stakeholders that the loss would not be shifted to them, as they would pay a bond out to the European Commission’s automotive industry. The company for its research and development of the green vehicles, structure of information technology and decarbonization of the conventional engines would use the money generated. The bond is set at the high amount to ensure that Volkswagen regrets the cheating emissions.
The company relied on the reactive approach of developing the tactics and strategies that was intended to reduce the legal liability and minimize costs. The approach used was not in the interest of the goodwill of the company, which called restring the trust of the government regulators and customers. The company later conducted the thorough investigations, which helped in identifying the process and decision maker. This is likely to persuade the justice departments and regulator to become less aggressive (Hakim 2016). The company initially followed the standard playbook of crisis by pledging to make amendments and apologizing quickly. Considering the nature of issue, the reaction based on the textbook crisis may not have been adequate.
Analysis and discussion:
Appraisal of Approach
Fresh approach to the corporate governance:
The leadership approach used by the company would help in restructuring the structure of corporate governance. A new Chief Executive Officer has been suggested by the chairman of the General and group work council of Volkswagen. The new CEO would have deep technical knowledge. This would help in changing the corporate culture. The appointment of the new CEO would bring new lease of life into the organization by changing the business strategy, business environment and competitive position (Hwang and Yoon 2012). Some of the other things related to the approach is collaborating with other organizations, which would help in focusing on the work related to sustainability, and this would embed the practice of corporate social responsibility in every sector of the company.
The approach to corporate governance is in regard with the particular incentives, which is extremely short sighted. The structure of the company should be such that it leads to the decision making at the faster pace and incorporates efficient actions. The changes structure if the company should be able to develop the potential of the company. The company should also install the software and the diesel engine that contained the software to cheat the emission tests. This diesel engine should install the software and the flow device of transformer (Hwang and Yoon 2012). The process of repairing the vehicles by the Volkswagen would began by the next year and this would be done by sending the letter to the motorists, which would advise the customers about the schedule of repairing the vehicle. The vehicles having engines of 2 liter or 1.2 liter would be fixed with the updating of the software that would be installed in half hour. The structural and the realignment of the staffs at Volkswagen is the continuous process after the scandal. There is no room for dissonance in the current framework. The company needs to adapt to the models that would help in predicting the future emissions (Griggs-Hall 2015).
The company needs to adapt to the technology that would cut the emissions of the nitrogen dioxide tailpipe. The ‘lean nitrogen dioxide’ is the technology that should be adapted to the diesel cars. The technology grabs the nitrogen oxide by using the earth oxides such as cerium oxide and barium oxide and forming nitrate such as barium nitrate. This technology of controlling the emissions has to be regenerated by running rich in an environment that is oxygen starved (Davies, 2015).
Improvements in the approach used:
The senior management of the company has been met with the sweeping change in the attempt to overhaul the culture following the scandal and cut the cost. The structure of the company should be transformed as the scandal concerning the emission was due to the corporate mindset that leads to the breaking of rules and there was the ‘whole chain of errors’. The change in the management would speed up the process of decision-making and help in increasing the efficiency and would reduce the complexities. The company has admitted the installation of the defeat devices in the vehicles, which it sold worldwide.
The models of the computers are used to predict the future emission in the vehicles. The environment protection agency publishes the model and for every model, the distribution rates of the emission are different. The model also takes into account the few high emission vehicles. The company needs to make changes in the procedures of testing of EPA and so that the necessary information and data is obtained for the proper sizing and the design of the model. The model should be valid for the various types of the operating condition and in the variety of the operating conditions (Hotten, 2016).
The company is also looking forward to strengthen the sustainability management and for this purpose and has appointed the sustainability council of top class that would provide the guidance to the company on various matters such as environmental protection, social responsibility sustainability mobility and digitization (Thompson and Kottasova 2015).
The technical solutions is positively evaluated and the company is ensuring that the models used are meeting the legal requirements in the future and the cost of implementing the solutions to the customers would be managed in the financial, technical and manufacturing terms. The software installed in the vehicles should be updated. The company would increase the precision of the measurement by making use of flow transformer that would be used in combination with the redesigned software that would optimize the quantity injected. The implementing solutions are charge free and it would provide the customers with the replacement of vehicle that is appropriate (Mintzberg 2015).
The company faces the technical challenge for retorting the vehicles such that there is the same emission strategy for the emissions and the limits of emission is able to meet within the same. The company is also seeking the California Air resources board and environmental protection agency for the solutions. The company is also shaping the change in the digital platform in association with the supply industry partners. Partnership and the digitalization is thought of being the cornerstone of the Group (Pettigrew 2014).
The company would improve the approach by using the technology of selective catalytic reduction. The technology is highly efficient in removing the nitrogen oxide and there is not as high a fuel penalty. The trapping of nitrogen oxide is a lower cost approach, which is used for the small vehicles. The quantity and the timing of spraying urea and the engine have to be calibrated.
Other approach available:
Implementing the new structure of the Group:
The structure of the group would be changed by institutionalizing the comprehensive new alignment and changing the strategic goals of the company and its way of thinking. In the future, the company will be managed in a decentralized fashion and there will be more independence in relation to its regions and brand. The board of management would be fully focused on the core task of the company and it would take into account the global issues of the future and strategies, control and synergies. The technical changes affecting the model of business of the company would come with the significant input and this would streamline the process of decision-making. The cost efficiency of the company would be improved and it would become lean. These structural changes would help in reducing the managerial complexities and would help in leading the company for the long term (Krall and Peng 2015).
Developing the new strategic destination:
The company has initiated a new strategic target, as this would help in addressing the issues of the future. The realignment of the company is done using strategic and technological basis. The electrification and digitalization is being prepared by the company to expand the sakes of the business outside the core business it conducts. The company is intended to take the advantage of its huge potential, which would lead to success in the long term. The future emission test of Volkswagen would be evaluated independently and has developed the technical solutions for the European customers. The company is extensively working on improving the technical solutions (Minda 2015).
Significant improvement in efficiency:
The strategies of the company are designed that they are able to provide the operational and financial excellence across all the divisions and functions. The company is seeking for the efficient utilization of resources and it would generate the potential for improvement in the annual earning of the company.
Realigning the competent business and developing the new competencies:
The company would address the topic concerning the artificial intelligence, the autonomous driving as it will provide with the resources, and this would help in licensing the self-driving system that is competitive. The company is to develop the battery technology and would be involved in the streamlining of the potential revenue for the company (Thompson and Kottasova 2015).
Conclusion and recommendation:
Justification of the best approach:
The company needs to dedicate all its resources and efforts in reestablishing the credibility of the company and the company can prefer to rebrand, however, the option is unlikely on fairer basis. The other thing that is easy to accomplish is to join the independent agencies for the purpose of verification and the option is feasible one. The company can post a bond and sell one of its brands.
The best recommendation for the company would be to join the independent verification agencies and sell one of its brands as one of its changed structure in relation to the corporate governance. This is so because the sakes of the company would gradually increase as the consumers would slowly regain the trust in the brand. The Volkswagen should regret about deceiving the customers and it needs to show it to the customers. The group should dedicate itself to the better practice of the corporate responsibility. This would perhaps help the company in regaining the global stats in the industry of automobiles. The Volkswagen group is also recommended to employ ‘ethical leader’ who would be a strong moral manager and a strong moral person.
Implementation plan for best approach:
The company should change the structure of the organization and it should follow the approach of checking if the actions on their part is morally permissible and it should implement the executive ethical leadership reputation matrix. This would act as an implementation plan in employing ethical leader. Therefore, restructuring the corporate governance of Volkswagen group.
Summary of key learning:
The scandal of the company depicts how the rhetoric of the corporate social responsibility is deviated from practice and shows how easy solutions can be challenged by the corporate misconduct. The Volkswagen group was involved in the scandal and the report explains the scandal in context of emissions tests. The actions of the group regarding the installation of the software, which actually lead to emission greater than the standard emission rates, were not morally permissible. The cheating scandal of Volkswagen is one of the significant stories in the business and the operation of the financial market was fundamentally changed due to the scandal. Thus, the company has the faulty approach to the corporate governance and the range of the corporate governance of Volkswagen ranges from the aspiration to average. The corporate governance of the company requires a new approach and it is a formality, which has to be satisfied, and it is not hugely valuable by the company.
The scandal of the company could not be prevented despite the efforts of the company in mitigating the risk and the corporate commitment to sustainability. The scandal of Volkswagen highlights that the programmes of corporate governance would not be effective if the corporate managers do not foster the assumptions about the ethical conduct. The company needs to improve the ideas of corporate governance and the ethos of the company can be build using the better approach to the corporate social responsibility along with the protection of the whistleblowers and the better regulation.
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