With the FTC recently releasing the final court summary on the case, Michael Toebe considers the controversy that tarnished the company’s reputation and for which Volkswagen has paid dearly. Has VW learned from the incident?
There are lessons to be learned from VW’s mistakes, which have resulted in severe financial penalties being meted out as punishment and corrective measures. Volkswagen’s reputation has been tarnished frequently in the media over the last four years due to its poor decision-making and irresponsibility.
Dieselgate, as the incident was known, was a blow to VW’s reputation. In 2015, the firm admitted to falsifying emissions testing on 11 million vehicles worldwide. The financial blow was heavy. The business has given American car owners a stunning $9.5 billion in the last four years.
The Federal Trade Commission (FTC) refers to this as the “biggest consumer redress program in U.S. history,” making it historically significant.
The needed repairs were thought undesirable, and the financial incentives and temptation to cheat became too high. As is frequent in emerging scandals and the reputation crisis that they accompany, leadership participated in careless decision-making instead of responding ethically.
Nevertheless, there is a different school of thought, according to Bret Hood, director of 21st Century Learning & Consulting and adjunct professor of corporate governance and ethics at the University of Virginia. “Some have argued that VW actively contemplated the risk versus the reward, but I would bet that they approached the issue as did Ford with the Pinto,” he says. He claims that we analyze the situation from a cost-benefit perspective and choose the one with the lowest cost. Because our automated System 1 minds are working in our subconscious to assist us generate a preset outcomein this example, sales volumewe never perform an objective review, which is where we fall short.
Even though it may seem like a dubious justification, Hood believes that there is another factor that is very likely at play. “There are a number of ethical models, such as the Rest Model, Kohlberg’s stages of moral development, and the Jones Moral Intensity model, but as Ann Tenbrunsel and Max Bazerman point out, most of the time, the decision-makers have not classified the dilemma as an ethical issue, he says. Daniel Kahneman’s research on System 1 (automatic) and System 2 (rational deliberation) thinking supports this view.
As history has often demonstrated, scandal is considerably more likely in situations like this, where governance and compliance will never be performed as skillfully as necessary. It is plausible to assume that moral bravery was either weak at VW or absent altogether.
In This Article...
What ethical transgressions did Volkswagen commit?
Volkswagen’s moral predicament was brought on by allegations that the automaker had cheated on air quality tests that were administered by the United States. The business sought to market diesel vehicles throughout the country. Interestingly, Volkswagen conducted a marketing effort where they claimed their cars had low emission levels since they were aware of the emission standards utilized in America (Hotten par.3). Before allowing the vehicles into the market, the American authorities had to evaluate them first. Between 2008 and 2015, the firm marketed cars on the American market that did not adhere to the requirements for emissions set by the American government. Volkswagen had installed specialized software that manipulated the emissions in the vehicles used for the emission test (Ewing 40).
The software was essential in persuading the regulators that the automobiles weren’t spewing out dangerous gases at quantities that were too high to handle. However, after cars were released onto the market, some environmental researchers began to have certain reservations about the emissions they were producing, which prompted the government to launch an investigation. Their research revealed that the vehicles were releasing up to forty times more than what was legal. As a result, Volkswagen eventually had to respond to an American government request for information about the abnormalities and admit fitting test vehicles with unique equipment that was not included in production vehicles. The Jetta, Golf, and Passat are a some of the car models that the EPA discovered to have broken the rules (Ewing 48). On its part, Volkswagen responded to the charges by confessing to having installed the test cars with a defeat device that was not used on the ones that were on the road. Due to this, other nations that had a major market for Volkswagen vehicles began looking into them for possible regulatory infractions.
What negative effects did this infringement have on Volkswagen?
You have ten gift articles to give each month as a subscriber. What you share can be read by anybody.
After Volkswagen admitted to installing software to cheat on emissions testing, it appears that the automotive industry has become the newest target of corporate misbehavior.
It follows the settlement of a criminal probe into General Motors’ handling of faulty ignition switches that contributed to at least 124 fatalities. It is simply a matter of time until the firm has to deal with several civil and criminal fines, especially in light of a video in which the chief of Volkswagen’s American operations tells a Brooklyn audience that the corporation was “dishonest” and “completely screwed up.”
What legal actions is Volkswagen likely to face, and how high up the corporate structure may prosecutors go in their pursuit of criminal prosecution?
Volkswagen installed what is known as a “defeat device” in vehicles with 2-liter diesel engines that made it appear to meet emissions standards, according to a notice of violation filed by the Environmental Protection Agency on Sept. 18. The software installed in the cars very likely resulted in a violation of the Clean Air Act by avoiding applicable testing requirements for automobiles and giving false information to obtain a “certificate of conformity requirement”
For violations of the Clean Air Act, the E.P.A. may levy civil penalties of up to $37,500 per car on an automaker. Based on selling over 500,000 vehicles with the defeat device, Volkswagen may be subject to a total fine of around $18 billion.
That is just the beginning of Volkswagen’s possible responsibility. The Justice Department may seek criminal sanctions based on the same action, although the Environmental Protection Agency may only issue civil penalties. In Hudson v. United States, the Supreme Court ruled that even when a significant financial fine has already been levied by a regulatory body, prosecutors may still pursue criminal charges.
That Volkswagen apparently designed the software to make its emission controls work in a testing lab but not on the road would seem to rule out any defense based on lack of knowledge or mistake. The Clean Air Act authorizes a criminal prosecution for knowingly providing a false statement in an application to the E.P.A. and for tampering with “any monitoring device or method required for tracking emissions.”
Given the potential costs owners of its vehicles could incur because their cars may not perform anywhere close to what Volkswagen claimed or get much lower gas mileage, the losses could be significant. The company could face a fine based on its profits from the violations or any loss suffered by victims.
According to Bloomberg News, the criminal investigation is being handled by the Detroit office of the Federal Bureau of Examination, which indicates that other potential charges will be investigated. The Justice Department’s investigation is not restricted to environmental issues.
What moral dilemmas are raised by the Volkswagen Dieselgate scandal?
AUTHENTIC ACTIONS BY VOLKSWAGEN. Volkswagen has been charged with breaking rules pertaining to emissions in its vehicles. On 10.5 million of the company’s diesel vehicles, emission software has been fitted. These so-called “defeat devices” are able to tell if they have been tested.
Why did the Volkswagen crisis occur?
Volkswagen misrepresented the diesel vehicles for years in order to obtain EPA and CARB certifications that permitted the vehicles to be marketed in the U.S. Volkswagen knew that the diesel vehicles would dodge U.S. emissions rules. Volkswagen hesitated until authorities threatened to withdraw approval when EPA and CARB eventually started to catch on.
The Volkswagen scandal is unethical, why?
Everyone has a right to a healthy environment, according to the Environment Quality Act, which is obviously violated by the affair. In essence, actions or processes that could harm the environment are forbidden by law, making Volkswagen’s activity unethical.
What impact did the Volkswagen scandal have on consumers?
We discovered a decline in consumer preference for diesel cars. This force was detrimental to BMW and Mercedes-Benz because they kept selling these vehicles after the incident. According to our model, non-VW German automakers lost US$0.7 billion in sales as a result of this effect.
Volkswagen, did they have a code of conduct?
Compliance is adhering to legal obligations, internal corporate regulations, moral standards, and self-imposed norms for the protection of the business and its brands in the case of the Volkswagen Group.
A firm can only be successful in the long run if it behaves honorably, conforms with international laws, and upholds its ethical standards and voluntary commitments. All Group employees must be accustomed to complying.
All corporate decisions are based on the group-wide code of conduct, which also provides guidelines for moral behavior. Additional in-depth information and suggestions are provided in other publications from the Volkswagen Group.
The Volkswagen Group Code of Conduct
The Volkswagen Group employees are all subject to the same set of rules known as the Code of Conduct. It facilitates observing current laws and regulations and provides direction, counsel, and support while making decisions at work on a daily basis. The emphasis is on each employee’s need to adhere to the standards of ethical behaviour.