Volkswagen Emission Scandal - Case Study Example

Scandals have become a part and parcel of everyday life with different corporate scandals taking place every year. 2015 witnessed Volkswagen emission scandal where the car manufacturer Volkswagen didn’t abide with the emission requirements as provided by the government and instead used it for its advantage. This paper will look at analyzing the Volkswagen emission scandal where details about the scandal would be provided, the impact it had on different people and communities and the steps that the organization is taking towards dealing with it. On the whole it will look to provide a complete story revolving around the scandal and the measures which were taken and needs to be taken in the future so that such incidents are controlled. The Scandal Volkswagen which owns 70 percent of the US passenger diesel car market has been accused of cheating on data emission test. Volkswagen has installed an emission software on about half million cars in US and over 10.5 million cars worldwide which uses a mechanism to provide low emission when being tested but during rides the actual degree of emission is high (Hotten, 2015). The device was called the defeat device and it was installed with the purpose of ensuring that better mileage and power while the car was drove. When the cars were tested for emission control the computer installed in the software shifted it to some other parameters thereby ensuring that the degree of emission was low. But when people drove the cars the engine used to transform itself due to the installed emission software leading to better power and mileage at the cost of higher carbon emission (Hotten, 2015). The limit of carbon emission was as high as 40 times which have been prescribed by the federal resulting in huge emission. Volkswagen agreed to the scandal and stated that it had carried out such act with the intention of having better business and providing customers with a car which was more powerful and provided more mileage. Volkswagen hasn’t looked towards recalling all the cars which have been fitted with the emission software as violation of federal emission law is neither an issue associated with the state or safety. The impact of the scandal has been so enormous that it has impacted their brand image and has resulted in impacting the manner in which Volkswagen was working (Hotten, 2015). Violating the federal emission law also leads towards creating a scenario where Volkswagen might have to face several issues in the coming days which would thereby again have an impact on their overall brand presence. Further, the scandal has already been highlighted and different regulatory bodies are looking to take different actions. Volkswagen on the other hand is on the back foot but hasn’t looked towards identifying the communication strategy which they need to develop so that the confidence of the stakeholders can be won again. Instead they are looking to be silent and are looking to cover up for the scandal. This makes it imperative that Volkswagen takes appropriate actions to control the entire incident and makes major ramifications in the manner they are working. Volkswagen Response Volkswagen at the moment is facing issues in associated with customer trust and loyalty. The director at the time of the scandal Mr Winterkorn has resigned from the post and has been replaced by Matthias Mueller. The prime focus of the business at the moment is to win back the confidence of the people so that they can trust the brand again. This has been matched by the fact that Volkswagen would look towards recalling millions of cars which would result at a cost of €6.7bn. This would help to improve their brand image and would lead towards ensuring that Volkswagen would be able to perform similarly. In addition to it the financial impact will have an impact on the organization as EPA could lead to a fine of up to $37,500 for each vehicle that breached the emission level and a total of $18 billion. This can impact Volkswagen immensely as it could lead towards having an impact on the overall performance. Thus, the future requirements for Volkswagen are very stringent and would require focusing on core areas so that brand image is improved and the overall business dimensions are better identified. The situation also shows that more people will be fired as different departments and heads which have undertaken the role of carrying out the incident will be known over due course of time. This will result in more heads to roll out but the manner in which the actual problem will be fixed in unknown. An area where Volkswagen has lacked in the entire incident has been the lack of clarity in communicating with the stakeholders. Volkswagen needs to act proactively and communicate with the stakeholders regarding the steps they are undertaking, the manner in which the guilty will be dealt and the future actions which would lead towards reducing such incidents (Mehrabia and Susan, 2007). This will help to win back the confidence of the stakeholders and would provide an opportunity through which Volkswagen would be able to work and carry out the different activities in a better way. How big is Volkswagen Problem? The problem for Volkswagen has increased considerably as all economies around the globe are raising concerns regarding environmental safety. Economies like UK, Italy, Germany, France, South Korea and Canada have already started an enquiry into the matter and are looking at the issue seriously. The different regulators and environmental groups have started questioning the legitimacy of Volkswagen regarding emission testing. As a result Volkswagen plans to recall around 8.5 million cars in Europe, 1.2 million in UK and 50,000 in US (Atiyeh, 2016). This would lead towards huge financial loss for the organization but the impact will be more towards the brand. It is already witnessed that the share prices of Volkswagen has fallen by one-third highlighting that the belief that people had on the car is slowly reducing. People doubt and have suspicion regarding the manner in which Volkswagen cares for the society. Volkswagen also hasn’t been able to come up with a clear communication strategy highlighting the actual incident but instead is looking to carry out the cover work so that certain improvements can be made so that the car maker is able to bring about a change in its brand image. Volkswagen also faces problems at other places as all economies are looking towards being strict and with no determined manner in which Volkswagen looks to rectify the issue the problems are compounding. The impact will be seen in the future and it becomes important that Volkswagen addresses the issue and looks at solving the matter so that the overall performance is better. Implication for other car makers The incident carried out by Volkswagen has created doubts in the mind of regulators regarding the manner in which other players are working. The regulatory and government bodies are enquiring other players to gauge the level of authenticity they have carried out in meeting the emission norms. Ford, BMW and Renault-Nissan have already come forward and sated that they are not using “defeat device” in their car. Other players have not commented anything regarding the same (Atiyeh, 2016). As a result the different regulatory bodies are taking the matter seriously and looking at identifying the different strategies which needs to be taken so that such incidents can be brought forward and controlled in the future. Even the EU is looking to make changes in the emission process as it is outdated and looks at having more stringent and measures so that testing on roads is improved. This thereby has a strong effect on other players as they are doubted with suspicion. The different players also look to be active and are taking appropriate steps so that the emission test can be carried out effectively which would help to reduce the impact and ensure such scandals are reduced. Impact on diesel market The impact on the diesel car market has been negative due to the incident. Many players have invested heavily in diesel car market on the purview that it is more environmental friendly. The government has also supported the same but off late it has been identified that diesel cars results in a high degree of emission. This might even lead towards government having a restriction on the number of diesel vehicles which would run on roads. As a result the entire car industry would be impacted and would lead towards huge financial losses. The sale for diesel car is already decreasing and with the Volkswagen scandal the impact will be further negative and would thereby have an impact on the overall market. The rate of growth in diesel market is extremely low and the incident would further have an impact on the market. The situation seems grim and tense and it is important that appropriate steps are taken so that better results can be achieved and such acts can be controlled in the future. Volkswagen Communication Strategy Volkswagen has to look at coming forward and taking appropriate steps so that the situation can be controlled. On the forefront it is imperative that Volkswagen looks at communicating with the stakeholders and taking responsibility for the act. They should look towards making changes and winning back the confidence of the stakeholder through different policies and strategies which looks at recalling the cars which have the software. This has to be supported by a comment from the top management that they will look towards the stakeholders and take every possible step to win back their confidence (William & Stella, 2001). They should look towards ensuring that the communication is clear and the stakeholders are able to understand the manner in which they will act in the future. Volkswagen with this regard has to chalk out a complete strategy and should aim towards making changes based on the emission norms. The car maker has to act proactively and needs to work on the different dimensions through which major ramifications need to be made. This will bring forward Volkswagen in a good light and would help to win back the confidence of the stakeholders. This will help the stakeholder to understand the fact that Volkswagen is looking towards correcting their mistake and would thereby help to improve their brand image and would lead towards ensuring that the overall brand image is improved over a period of time. Apart from it Volkswagen needs to develop a long term plan which would be aimed towards winning back the confidence of the people. This will require communicating with the stakeholders directly and from time to time so that the manner in which Volkswagen is looking to work is clear (Wood, 2002). The overall stance should be aimed towards improving the brand image and looking towards working on the different dimensions through which the overall future prospect improves and better working mechanism is identified. Thus, the overall manner in which Volkswagen needs to work should be aimed towards improving the brand image. The emission scandal where Volkswagen used a device which showed lower emission as compared to the real situation needs to be amended. Volkswagen should look forward towards recalling the cars which are fitted with the device and should abide with the environmental requirements as provided by the regulatory bodies. This has to be matched by a proper communication strategy so that the confidence of the stakeholders can be won again. Volkswagen has to show that they care for environment and society and have taken appropriate steps through which the degree of emission is controlled and are working as per the regulatory needs. Thus, Volkswagen needs to undergo a lot of changes and has to look to act wisely and genuinely so that the overall brand image of the organization improves and no such scandals are carried out in the future. References Atiyeh, C. 2016. Everything you need to know about VW Diesel Emission Scandal. Retrieved on July 9, 2016 from http://blog.caranddriver.com/everything-you-need-to-know-about-the-vw-diesel-emissions-scandal/ Hotten, R. 2015. Volkswagen: The Scandal Explained. Retrieved on July 9, 2016 from http://www.bbc.com/news/business-34324772 Mehrabian, A. and Susan, R. 2007. Inference of attitudes from nonverbal communication in two channels, Journal of Consulting Psychology 31:248-252 William, B. & Stella, T. 2001. Culture & Interpersonal Communication. Canadian Journal of Communication, 16 (1), 35-38 Wood, J. T. 2002. Interpersonal Communication: Everyday Encounters. Wadsworth/Thomson Learning Read More