Volkswagen Scandal: Essay On Impact, Performance, And Society.

In this report, a major public scandal done by the Volkswagen has been analyzed. This report depicts that how that scandal has impacted over the performance of the business and the society as whole. For this report, various newspaper article, journal article, annual report of the comapny, stakeholder’s report etc has been analyzed and found that by what level the performance, stability, flexibility, position, profitability etc of the comapny has been impacted. For analyzing this scandal, firstly, the comapny background has been analyzed. Further, the scandal has been studied and it has been evaluated that how much it has impacted over the position of the comapny.

In addition, the scandal event done by the company has been analyzed. This scandal depict that the event done by the comapny has impacted over the overall performance f the comapny (Thomas and Cotter, 2007). For this report, primary and secondary data has been used to identify that what was the level of the scandal and how it has affected the society and the stakeholders of the comapny. Corporate governance strategy of the comapny has been analyzed and on the basis of that strategy, the scandal level of the comapny has been investigated.

Volkswagen is a German comapny which manufactures the automobile products. It operates its activities as a manufacturer as well as the distributor of automobile parts in the international market. This comapny has diversified its business globally; this comapny has many subsidiary companies as well to run the business and activities of the comapny in international market smoothly (Palpacuer, 2008). The main activities of the business are to design, produce and distribute the cars and various other vehicles in global market. Mainly two division of the company carries out its activities which are financial services and namely automobile. The division of automobile contains the development of engines and vehicles as well as the selling and manufacturing of commercial vehicles, buses, passenger cars and trucks. Financial division of the comapny involves customer financing, dealer financing, baking, leasing and other insurance services, fleet management and rentals management (Nitschke and Innes, 2008).

This comapny leads the international market in the car segment. The major production line of the company is POLO, Volkswagen POLO etc. the major emphasize of the business is to enhance the focus over the core business, reducing the manufacturing cost and enhance the profit of the comapny. For achieving the target and objective of the comapny, this comapny is using various new strategies and policies to manage and enhance the level of the production and market share, comapny has seen various ethical and unethical ways to enhance the profitability and reduce the manufacturing cost of the comapny, due to unethical action of the comapny, comapny has faced various losses and the market share of the comapny has also been reduced.

Comapny has installed some software into millions of its cars to trick the agency of environment protection to testers into analyzing and thinking that the automobiles of the comapny are more environmental friendly then they used to be. Company has disclosed this fact into September, 2016 in front of its stakeholders. By hearing this, the investors of the comapny has understandably deserted the activities and the business of the comapny.

Case discussion

Volkswagen has cheated in emission testing by using the car appear which expect that the cars of the comapny are less polluting from the earlier cars of the comapny in past. The environmental protection agency of the US has discovered that the 4,82,000 Volkswagen diesel cars on the international roads which were actually producing approx 40 times more on the toxic fumes than it is permitted (Meredith, 2011).  That is the why the comapny has planned to install some software into its cars so that the agency could not found that total pollution rate from the cars of the company. This fraud of the comapny has affected the 11 million cars globally.

The defeat device of the Volkswagen is not a normal and physical device but it is a programme actually in the engine software which lets the car perceive that if this car would be driven as a test drive or under some conditions than the anti pollution mode of the car would start and thus it has become difficult for the agencies to identify that how much pollution is actually occurred by the cars of Volkswagen. The function of ‘clean diesel” engines cut the emission through various techniques such as exhaust flows, adjusting air fuel ratios or some urea based solution to render the harmless NOx. When the car is driven normally than it requires the greater performance, the control over the VW would not be done in the similar way (Markvart, 2015).

                                                                                        (Githui, 2012)

This picture describe about the case briefly, it depict that how the comapny has planned to manipulate the mind of the environmental agencies as well as the stakeholders of the comapny. The further study has been done over the analysis of the case and the evaluation of the case to analyze the scandal and its impact over the corporate and society as well.

According to the report of EPA, the vehicle of Volkswagen in global market has been reduced due to this scandal. Around 11 millions car of this comapny has been affected in international market. It has been found that the vehicles of the comapny are responsible for the 2,37,161 to 9,48,691 tonnes of NOx Emission every year. According to this, the NOx gas which also includes the nitrogen dioxide has been pumped in the air. In September 2015, it has been violated by EPA that the act of VW group is claiming that the producer had programmed TDI (Turbocharged Direct Injection) engines which is used to activate the emission control at the time of laboratory trails (Freeman, 2010).

This scandal has impacted over the performance and the market share of the company. Society as a whole has also been affected due to it. Through this report, it has been found that the market share and the performance of the comapny has affected at a huge level after this escalation. Through the reports and news articles, it has been found that the Volkswagen has cheated in emission testing by using the car appear which expect that the cars of the comapny are less polluting from the earlier cars of the comapny in past. The environmental protection agency of the US has discovered that the 4,82,000 Volkswagen diesel cars on the international roads which were actually producing approx 40 times more on the toxic fumes than it is permitted (Fortune, 2015).  

Analysis of scandal events

That is the why the comapny has planned to install some software into its cars so that the agency could not found that total pollution rate from the cars of the company. This fraud of the comapny has affected the 11 million cars globally. Through this scandal, the trust of the society over the comapny has become lower and thus the turnover of the comapny has also become lower (Brief, 2015). Further, it has been found that this scandal was one of the biggest scandals of corporate governance. This has affected the entire auto mobile industry as while for a particular period of time. This report also depict that the investors have started divestment from the comapny.

Even, directors of the comapny has justified that it has taken place due to some misunderstanding and it was not the motto of the comapny to manipulate the inventors, society, customers, financial institutions, debtors etc. further, it has also been described that the company has made the changes into its various models and the cars to enhance the customer’s trust again. Further, the reports of the comapny depict that after the director’s statement of the comapny, and changes into the models of the comapny, the comapny ahs again started to gain the trust of the comapny (Burki, 2015).

In the year of 2015, it has been found that the numerous models of VW had software which is called as “Defeat Device” which has been installed by the company to manipulate the regulatory board of the US and show that all the models of the comapny are environmental friendly. But in reality, all the models were harming the environment allot.

Ethical obligation of the comapny is not only make the changes into the problems but it is also required for the comapny to accept the scandal which has been done (Bongaerts, 1999).   The CEO of the comapny has said that they have not done any mistake, they didn’t lie with the regulatory board of the US, it was just a misunderstanding which has taken place and due to which, this case has became a scandal.

Ethical obligation of the comapny is not only make the changes into the problems but it is also required for the comapny to accept the scandal which has been done (Coghlan, 2015). If a comapny do not accept its mistake and just ignore the issues than it could become a big problem for the company in future as the investors and stakeholders do not trust over the comapny again and found that this comapny would offer them high loss in near future.

In case of Volkswagen Scandal, the CEO of the comapny has said that they have not done any mistake, they didn’t lie with the regulatory board of the US, it was just a misunderstanding which has taken place and due to which, this case has became a scandal. In the entire statement, he has never mentioned that this was their mistake and due to which the investment rate in the comapny became stable at the same time, the society has also started to but the cars of another company rather than the VW’s car (De Gante, Aslan and Matrawy, 2014).

According to a report, it has been analyzed that the US market is second biggest market in the world. But if the sales of the VW are analyzed than the total sales of the comapny was only 6% after the scandal. Through it has also been analyzed that the sales of VW has reduced in all over the world. The Russian market has been affected more due to this scandal (Donker, Poff and Zahir, 2008).

Further, it has been found that the diesel cars of the comapny have been hurter a lot. After the VW scandal, entire companies have reduced the level of diesel car. The comapny has faced a reduction in the share price of the comapny. The worth of the comapny has been reduced in the market. Through this study, it has also been analyzed that the comapny has made lot changes in the cars and thus currently, the turnover of the comapny has again exceed. The new policies of the comapny are helping the comapny to come back again the market with a good production process and less polluted cars.

Conclusion:

Through this study, it has been analyzed that the VW has installed some software into millions of its cars to trick the agency of environment protection to testers into analyzing and thinking that the automobiles of the comapny are more environmental friendly then they used to be. Due to this scandal, the worth of the comapny has been reduced in the market. Through this study, it has also been analyzed that the comapny has made lot changes in the cars and thus currently, the turnover of the comapny has again exceed. The new policies of the comapny are helping the comapny to come back again the market with a good production process and less polluted cars.

Through this scandal, it has been analyzed that the comapny is required to make some changes into its policies and the strategies as well as the CSR policies to become competitive gain and this would also help the comapny to get back the trust of the stakeholders.

References:

Bongaerts, J 1999 ‘Carbon Dioxide Emissions and Cars: An Environmental Agreement at EU Level’ European Energy and Environmental Law Review, Vol. 8, no.4, pp. 101-104.

Brief, P 2015 ‘Policy Solutions to Reduce Vehicle Exhaust Emissions under Real-World Driving Conditions’ Policy.Washington,DC: The International Counsel on Clean Transportaion.

Burki, T K 2015 ‘Diesel cars and health: the Volkswagen emissions scandal’ The Lancet. Respiratory medicine.

Coghlan, A 2015 ‘The curious case of NO x pollution’  New Scientist,  Vol.227, no. 3041, pp. 10-11.

De Gante, A., Aslan, M. and Matrawy, A., 2014, June. Smart wireless sensor network management based on software-defined networking. In Communications (QBSC), 2014 27th Biennial Symposium on (pp. 71-75). IEEE.

Donker, H., Poff, D. and Zahir, S., 2008. Corporate values, codes of ethics, and firm performance: A look at the Canadian context. Journal of Business Ethics, 82(3), pp.527-537.

Fortune. 2015. The biggest scandal of 2015. Retrieved from https://fortune.com/2015/12/27/biggest-corporate-scandals-2015/ available as on 20^th Oct 2017.

Freeman, R.E., 2010. Strategic management: A stakeholder approach. Cambridge university press.

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Markvart, T 2015 ‘Do we need a solar power breakthrough?’ The Conversation. Southampton: eprints

Meredith Belbin, R., 2011. Management teams: Why they succeed or fail. Human Resource Management International Digest, 19(3).

Nitschke, C.R. and Innes, J.L., 2008. Integrating climate change into forest management in South-Central British Columbia: An assessment of landscape vulnerability and development of a climate-smart framework. Forest Ecology and Management, 256(3), pp.313-327.

Palpacuer, F., 2008. Bringing the social context back in: governance and wealth distribution in global commodity chains. Economy and Society, 37(3), pp.393-419.

Thomas, R.S. and Cotter, J.F., 2007. Shareholder proposals in the new millennium: Shareholder support, board response, and market reaction. Journal of Corporate Finance, 13(2), pp.368-391.