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Background of Volkswagen Group

Discuss about the Management Theory and Practices for Volkswagen Group.

The Volkswagen Group of company also known as the Volkswagen Aktiengesellschaft, is Germany based multinational company that manufactures automotives. The Headquarter of the office is at Wolfsburg, Lower Saxony, Germany where from the company serves worldwide. As mentioned by Reitze (2016), the company deals with the designing, manufacturing and distributing of the passenger and commercial vehicles, turbo machines, engines, motorcycles and other such automotives. The company also offers many services related to the automotives including the services like leasing, financing and fleet management. Volkswagen Group of company is the second largest company in the world in the field of automotives after the Toyota Company (Baur, 2015). The average number of motor vehicles produced by the company in the year 2015 was around 9.93 million and for about two decades in a row, has maintained the largest market share in Europe. The annual revenue of the company is above €213.292 billion. In the list of the world largest companies by Fortune Global 500 in the year 2016, the company ranked seventh (Brooks, 2016). The Volkswagen Group of companies sells motorcycle under the brand Ducati and passenger cars under Bugatti, Audi, Porsche, Lamborghini, Volkswagen Marques and Skoda. The commercial cars are sold by the company under the brand MAN, Neoplan and Volkswagen Commercial Vehicles. The Volkswagen Company which has such huge market criteria, high annual revenue and fame is in news because of the case of cheating on the diesel emission test. The Volkswagen Company marched with the Squadron of Audi TDI models on Washington and it also promoted the “Clean Diesel” as an alternative to the electric and the hybrid vehicles. Even after this the company stewed in on its own toxic vapours from the vehicles (Ewing, 2015).

In this study the company Volkswagen Group which has been in the news for the past two years, has been taken to show the Ethical dilemma that was faced by the organization during the emission scandal that as faced by the company is the year 2015. The two of the managerial concepts have been applied to critically analyse this ethical dilemma of the Volkswagen Company. The relationship between the leadership, ethics and the decision making of the Volkswagen has been evaluated critically. In the conclusion part of the study, a reflection has been given on the ways that may ensure the leaders on the decisions that are made on the ethics of the company.     

According to Barrett et al. (2015) on the September 18th, 2015, the Volkswagen Emission Scandal came to notice when it was found that the company intentionally had programmed the TDI (Turbo Charged Injection) to get active some specific emission controls only during the times of emission testing of the laboratory. United States Environmental Protection Agency then issued a letter of violence of the Clean Air Act to the Volkswagen Group Company. This emission software was installed by the Volkswagen in about 0.5 million cars in U.S. itself and 10.5 million cars worldwide (Griggs-Hall, 2015).

The Emission Scandal

The unique parameters of the cycle of emission drive set by the Environmental Protection Agency are allowed to be sensed by the company because of the emission software that is installed in the cars. As stated by Goel (2015), this software used to sense when the car was being tested and accordingly it activated the equipments that reduces the emissions. But while the car was used during the regular drive, the software used to turn down and this would result in increase of emissions that was far above than the legal limits would allow. Due to this during the test mode the cars that are tested are fully complaint and all the emission levels are acceptable (Lane, 2016). However, during the normal drive time the software switches to another mode that changes the fuel pressure, recirculation of the exhaust gas, injection time and the amount of urea fluid that is sprayed in the exhaust. During this mode of the software high power of mileage is delivered to the car but with that there is also high level emission of nitrogen oxide (NOx), which a kind of smog that is mainly responsible for lung cancer. This emission of the nitrogen oxide is around 40 times higher than the normal federal limit (Blackwelder et al., 2016).


In the year 2015, the International Council on Clean Transportation found out in a study that there was a discrepancy between the US and the European models of the vehicles commissioned. Then different groups of research groups were set up for the detection of the case (Thompson & Kottasova, 2015). The detection of this manipulation of the emission of the nitrogen oxide gas was detected by the group of five researcher scientists at the West Virginia University. These scientists detected the additional emission of nitrogen oxide in 2 out of 3 cares during the live roads test. Then two more data related on the findings were purchased by the International Council on Clean Transportation from two other sources. After that with the help of Portable Emission Measurement System Systems the data purchased and the tests data were generated and the results and the findings were then submitted to the California Air Resources Boards. Due to this the Volkswagen then became the targets for multiple investigations that were held in the different countries worldwide and the whole case of the emission fraud done by the Volkswagen came into public view. Consequently the price of the stock of the company started falling within the days after the breakout of the news (Geddes, Lindebaum, & Gabriel, 2016).

According to Zhang et al. (2016) it was found out that there were also different higher authorities of the company who were involved in this scandal. The CEO of the Volkswagen Group, Martin Winterkorn was found out to be the main culprit and hence he had to resign. There was also involvement of other people as well such as Heinz- Jakob Neusser, the head of the brand development of the company, Ulrich Hackenburg and Wolfgang Hatz, the researcher and development head at the Porsche. All of these people were suspended as a consequence of the scandal caused by them (Bovens, 2016). To rectify this mistake of emission issues, the Volkswagen Company planned to spend €16.2 billion on refitting the affected vehicles (Volkswagen, 2016).

The Main Ethical Dilemmas of Volkswagen Group

This scandal however raised the awareness about the higher level of pollution that is being emitted by the cars built by different rage of car makers and in the live road driving would probably exceed the legal emission limits. The case of the Volkswagen Scandal, on the contrary of the manager’s responsibility focuses on the point of view of the CEO of the company during the time of the scandal, Martin Winterkorn.. However, the ethical dilemma that prevailed in the company during the time of the scandal evolution and it became known to public, focuses on the different reasons and action due to which there was a scandal in the company (Babalola et al., 2016)

The main ethical dilemmas of the Volkswagen Company that lead to the scandal focuses on  that if to use or not to use the technological knowledge of the software so that the company could get an advantage of it that is to cheat the environmental test so that it could sell more cars. This advantage that the company got from the cheat software device does not only benefit the company but also unknowingly benefits its customers too. The cars that emit low carbon have lower tax assessments than the cars that emit more and high level carbon and nitrogen oxides. However, in the whole scandal of the Volkswagen the company has shown its CEO to be the ultimate responsible for the actions and before the ethical dilemma of the company would be analyzed, the different parties that are involved in this dilemma are required to be identified. These parties are the Volkswagen Company and its employees, the environmental testing agency, the customers and the natives of the country, who are also indirectly effected by the scandal because the air that is influenced by the emission affected them also (Zhou, 2016).


The reason why the company Volkswagen implemented the cheating software device is not ascertained but on the contrary a few reasons may be identified behind it such as: maybe the company required selling more cars, to compete in the market and to make profit. All these may be a justification for this action of the company as cheating of the environmental test would lead to all this advantages only. The main ethical challenge for any of the leader in today’s world are to take decisions and engross itself in activities that put forward the self interest of the company (ethical egoism), to be culturally competent (utilitarianism) and to achieve greater profits so that it could easily compete with the organizations in the market (Kantian ethics) and that too without disrespecting or demeaning any other stakeholders and individuals (Cavico & Mujtaba, 2016). This means that all of the leader’s requirement and the goals could be achieved by them but that has to be done without hurting anyone else’s sentiments and morals. The CEO and the other leaders of the Volkswagen Company failed to complete this ethical challenge. However, it implemented the mortal of gaining more and more profit, in the process it cheated and disrespected the country’s safety and environmental criteria. The main mistake that the Volkswagen made was to commit such a blunder of in respect to its corporate governance with a confidence that it may carry out this without being caught.

Identification of Parties Involved in the Dilemma

The role of the leaders of the organization is to lead the other employees, motivate them and to show the way to them. He requires teaching its employees and the other people of the organization that working and taking actions according to the morality of the business would benefit the company and the stakeholders. The role of the leader does not remain concentrated only to this. The other roles of the leader also includes to see if there is nothing illegal operating in its company and object if any such things is being detected and encompass its employees also to do so. The leaders of the Volkswagen Group of company did not even follow this role of the leadership management. They did not even try to work accordingly to the morality of the business and neither did the leaders objected about being a cheating software being operated illegally in the company. The managerial concepts states that the managers of the company must live and act according to the “stand your ground” rule and must not decline from objecting against something illegal and wrong and have strength to keep its stand on the matter (Fracarolli & Lee, 2016).

According to Mulgan (2014) among the different managerial concepts is the Consequentialism ethics and the Deontology ethics that could be applied in this case of ethical dilemma. The Consequentialism ethics the concepts that could be applied in the case of the Volkswagen Company would be the concept of Utilitarianism. The concept of Utilitarianism could be applied to the ethical dilemma that has been caused in the Volkswagen Company. The accomplishment that is gained by the action is whether if the result of this action is overall good for all or not. This concept is actually about increasing and maximizing the profit and with that it should be applied that the pleasure of the other people around is also raised up. In the concept of Utilitarianism, it applies that everything and every choice in life could be reduced or increased to pleasure even if there are lives at stake. This concept when applied to the case of Volkswagen applies many parties involved. The different parties that have been involved are the Volkswagen and all of its employers including the CEO and the other leaders, the customers of Volkswagen automotives, the Environmental testing Agency, EPA and the indirect party that is also involved is the general people who are living in the country as they are also affected by the polluted air because of the emission from the vehicle (Barrow, 2015). The concept of Utilitarianism however, does not justify the actions of the Volkswagen Groups as in this process there was no pleasure or goodness maximized. In fact, the in the end almost everyone who was involved or affected by this scandal were unhappy and as the justification for the act and the great goodness is signified by the praiseworthiness and in this case also the same is applied (Hayry, 2013).


The blame for total case of the deceiving software and its instalment all goes to Volkswagen as they knew all about the system going on in the company because they are the one who invented it. The invention of this software was clearly done with an intention of deceiving kept in mind. The company created the software and installed in the different vehicles so that it could be able to easily cheat on the device that would conduct the emission test. This deceive had indeed generate utility for the company however, it did not went towards the greater good and therefore does not justifies the concept of Utilitarianism. The punishment for such act of the Volkswagen Company would be moral obligatory (Barrow, 2015). According to the concept of Utilitarianism, the punishment should be given in response for such an act so that the company does not dare to repeat anything as such again in future. However, in reality the punishment for the Volkswagen Company has been more than this. The Company is currently undergoing huge loss and a significant drop in the stock level of the company. Apart from this the company has to spent a huge amount of money as rectification amount to the customers. The company has lost a huge chunk of market demand for its diesel cars (Rhodes, 2016).

Reasons Behind Implementing the Cheating Software Device

From the deontology ethical concept, the concept that is of the Kantian ethics could be applied to the Volkswagen case. According to O'Neill (2013) this concept is about maximizing the profit of the company to a level where the company would become self sufficient and may be able to compete with the other competitor companies of the market so that it could easily survive in the market. In the case of the Volkswagen Company the company has however, been able to maximize its profit and has been counted on second number in the automobile industry but the concept does not justifies the act of the company because during the maximization of the profit the company did not paid attention towards the ethical and the morality of the business. From the deontological point of view the cheating of the environmental thing is not a morally right thing to do by the company and this effect the moral issues of the company as well. Therefore the company should be punished for such unethical behaviour according to the deontological point of view (Arnold & Harris, 2012).

As mentioned by Kanabar et al. (2016) from the case of the emission scandal in one of the most famous and trustworthy automobile companies, the Volkswagen Group of Companies clearly states about the ethical and the morals of the business of such firms. Moreover it also highlights about the behaviour and the managerial skills of the earlier managers and the leaders of the company. The ethical responsibilities of the managers were totally not followed by these leaders and not even the rule of “stand your grounds concepts. These leaders and the managers even after having a clear knowledge of the deceive going on in the company did not stood up against it in fact they were the ones who created the cheat machines that deceived the environmental test devices and systems. These managers of the company had totally corrupted the company in all sense. Therefore, the role of the new managers in the company would be to revise and create an ethical organization that would then support the moral behaviour and morality of the Volkswagen Company. The company at present due to such trust related and fraud of system scandal has lost its total reputation in the market. With the lost of the reputation the company has also lost its stock level and demand for its diesel cars. This would help to establish the company a personal and corporate reputation as at present the company desperately needs to gain back its lost reputation. The next leader needs to regain that lost trust with full honesty, accepting his ethical responsibilities and understand the situation of the affected parties and compensate them with best possible ways and also identify the harms to the individuals and the nature. The new leader is also expected to adopt some remedial measures regarding the matter and make genuine promises of not repeating the same mistake again ever in future (Lindebaum, Geddes & Gabriel, 2016).

Evaluation of Leadership, Ethics, and Decision-Making in Volkswagen Group

The new present CEO of the Volkswagen Company is Matthias Muller, and the challenges faced by him in again reconstructing the company’s brand name would be very crucial (Rhodes, 2016). The role and the challenge for Matthias Muller s the new CEO of the company would be to change and reconstruct the prevailing past culture of immorality, rule breaking, fraud and deceit and transform it into a culture of honesty, trust, integrity and abidance of law and ethics. even after the former CEO had many other leaders of the company have resigned but that does not gives a surety that such a thing would never be repeated. The company’s new CEO was already present in the company as company’s head of product planning at the time many of such scandalised cars were being developed. Therefore, he has even more pressure for reconstructing the lost reputation and trust of the company. He would also face major issues and challenges in the process.

From the above study of the scandal case of the Volkswagen deceiving the emission test system by installation of the cheating software could be fully analysed. The ethical dilemmas that were faced by the company and its leaders and managers have been discussed. The different theoretical concepts of managerial ethics have also been applied to this case so that the ethical dilemma could be critically evaluated. The relationship between the ethics, leadership and decision making of the company has also been shown in order to more analyse and evaluate the responsibilities of the managers and the leaders. The role of the new leader and his requirements has also been discussed in this study. 

References:

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Babalola, M. T., Stouten, J., Euwema, M. C., & Ovadje, F. (2016). The Relation Between Ethical Leadership and Workplace Conflicts The Mediating Role of Employee Resolution Efficacy. Journal of Management, 0149206316638163.

Barrett, S. R., Speth, R. L., Eastham, S. D., Dedoussi, I. C., Ashok, A., Malina, R., & Keith, D. W. (2015). Impact of the Volkswagen emissions control defeat device on US public health. Environmental Research Letters,10(11), 114005.

Barrow, R. (2015). Utilitarianism: A contemporary statement. Routledge.

Baur, D. G. (2015). Case Study: Porsche versus Volkswagen. Available at SSRN 2649141.

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