Volkswagen Group has largely recovered in terms of sales and market value after the diesel emissions scandal of 2015, which caused a stir. When analyzing Volkswagen’s remarkable comeback, it is obvious to see four different factors that contributed to this quick reversal. Volkswagen started a four-step plan focused on four essential words: Replace, Restructure, Redevelop, and Rebrand in order to push through the PR nightmare and regain sales momentum. This study’s goal is to investigate that procedure.
In This Article...
Design/methodology/approach
The performance of the Volkswagen Group and its response to the 2015 diesel emissions scandal are being examined in this case study. The corporation planned to replace the leadership, restructure the organization, redesign the strategy, and rename the product in order to achieve their dramatic turnaround. These four steps in the recovery process are examined in this study as a model for other businesses.
Findings
The business attempted an unprecedented turnaround by changing the leadership, restructuring the business, developing a new strategy, and rebranding its products. These four strategic components served as the cornerstone of a refocused business and still drive it ahead and away from the controversy. This four-step recovery method serves as a great case study for other businesses that may run into trouble and need to recover.
Originality/value
To push through the public relations nightmare and regain sales traction following their 2015 emissions testing scandal, Volkswagen started on a four-step approach that centered on four essential words: Replace, Restructure, Redevelop and Rebrand. These four strategic components served as the cornerstone of a refocused business and still drive it ahead and away from the controversy. This four-step recovery method serves as a great case study for other businesses that may run into trouble and need to recover.
What about Volkswagen was morally wrong?
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 repeatedly demonstrated, scandal is far more likely in situations like these, where governance and compliance will never be conducted as skillfully as necessary. It is reasonable to assume that moral courage was either insufficient at VW or absent altogether.
What is the VW scandal’s main adverse effect?
Volkswagen not only misled regulators and its own consumers, but they also endangered public health and damaged a resource that is shared by everyone in the world: clean air. We now understand that air pollution from roads has a negative influence on human health in addition to the environment.
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.
How did Volkswagen bounce back from the crisis over the emissions?
On June 28, 2016, Volkswagen agreed to a multi-billion dollar settlement to partially resolve claims of Clean Air Act violations stemming from the sale of 2.0 liter diesel engines fitted with software known as “defeat devices,” which were intended to cheat on government emissions tests. The agreement was officially signed.
What can VW do following this global disaster to win back consumers’ trust?
The 2018 Tiguan and Atlas SUVs from the German automaker will have warranties that are better than those offered by rival models like the Ford Explorer and Honda CR-V.
Volkswagen announced on Tuesday that it will provide transferrable six-year or 72,000-mile warranties for the SUVs, whichever comes first. On comparison, the basic warranties for the Ford Explorer and Honda CR-V are three years and 36,000 miles, and the powertrain warranties are five years and 60 miles.
President and CEO of the Volkswagen Group, Hinrich Woebcken, stated in a press statement that “we are confident in the dependability and workmanship of these SUVs, and we want our customers to feel confident in their purchase.”
Following a guilty plea to three crimes and a $14.7 billion settlement payment for its emissions-cheating scandal, Volkswagen made the decision. The second-largest manufacturer in the world sold over 600,000 vehicles with “defeat devices” intended to evade pollution inspections.
According to Consumer Reports, up to 11 million vehicles worldwide were impacted.
According to Consumer Reports, owners who want to maintain their cars’ defeat devices will need to take them to a dealer to get them updated to comply with current laws. As part of the $14.7 billion settlement, Volkswagen owners can now sell their vehicles back to the dealer and receive additional compensation.
Prior to the emissions scandal breaking, Volkswagen had reliability problems, particularly with its high-volume four- and five-cylinder engines that power cars like the Passat and Jetta. In last year’s JD Power survey on vehicle dependability, the automaker received ratings that were below the industry average.
Volkswagen’s new warranty offer demonstrates the automaker’s commitment to recovering consumer confidence and demonstrating that its vehicles are built to perform as promised over the long term.
Which rules did Volkswagen violate?
In January 2017, Volkswagen consented to enter a guilty plea and pay $4.3 billion in criminal and civil fines.
Volkswagen was the subject of a criminal investigation by the U.S. Department of Justice for conspiracy, obstructing justice, and entering goods by false pretenses. Due to the improper importation of the impacted automobiles, the manufacturer and U.S. Customs and Border Protection have resolved civil fraud claims. (19)
In accordance with that decision, Volkswagen entered a plea agreement in March 2017 to federal charges of conspiring to deceive the United States, committing wire fraud, violating the Clean Air Act, obstructing justice, and bringing in goods using false declarations. The business must pay a criminal fine of $2.8 billion as part of the plea agreement in addition to the $1.5 in civil penalties it already committed to in January. (20)
A federal grand jury charged six Volkswagen executives and staff members for their roles in the conspiracy in January as well.
(21) The attorneys general of 42 states, the District of Columbia, and Puerto Rico are each conducting their own criminal investigations into the firm.
(22)
Volkswagen’s environmental practices?
The Paris Climate Agreement is a commitment we have made. By 2050, we want to be a carbon-neutral business.
We aim to cut the overall greenhouse gas emissions from light-duty and passenger vehicles by 30% by 2025 compared to 2015. Along the whole life cycle, we actively support the transition to renewable energy sources.
In the fields of materials, energy, water, and land usage, we want to promote circular economy concepts and increase resource efficiency.
We aim to reduce the environmental externalities associated with production (CO2, energy, water, waste, and volatile organic compounds) by 45% per car by 2025 compared to 2010.
Between 20 and 25 percent of our model portfolio’s automobiles will be battery electric by 2025. By 2030, the Group fleet must contain at least 40% electric vehicles.
By establishing and overseeing efficient management systems that address the environmental implications of our mobility solutions over all life cycle phases, we hope to establish ourselves as an example for a contemporary, open, and successful organization in terms of integrity.
Volkswagens: Are they harmful to the environment?
According to the EPA, there are 500,000 VW vehicles breaking the law in the US alone. A lawsuit brought on behalf of automobile owners has already been filed against VW, and the company’s stock price is in freefall.
We’re looking at 11 million cars on the road with the cheating devices installed, according to VW’s own recent admission.
According to the EPA, afflicted VW vehicles in the US are emitting up to 40 times more nitrogen oxide (NOx) than they should. Even if the estimate is probably quite high, it’s still a big deal.
One reason is that NOx is a bad pollutant that can aggravate a wide range of medical ailments, such as asthma, bronchitis, and emphysema, in addition to occasionally warming the earth.
How was the Clean Air Act broken by Volkswagen?
DC (Washington) – The EPA has concluded a civil enforcement lawsuit against Volkswagen AG, Audi AG, Dr. Ing. h.c. F. Porsche AG, Volkswagen Group of America, Inc., Volkswagen Group of America Chattanooga Operations, LLC, and Porsche Cars North America, Inc. through a series of three partial settlements ” (collectively “Volkswagen). On October 25, 2016, the United States District Court for the District of Northern California accepted the first partial settlement with several of these Volkswagen businesses addressing automobiles featuring 2.0 liter diesel engines (the “2.0 liter partial settlement) (the “2.0 liter partial settlement). On May 17, 2017, the court authorized the second partial settlement addressing vehicles featuring 3.0 liter diesel engines (the “3.0 liter partial settlement) (the “3.0 liter partial settlement). Third, on April 13, 2017, the court authorized a third partial settlement involving fines and injunctive remedies to stop further infractions ” (the “third partial settlement).
These agreements resolve claims that Volkswagen broke the Clean Air Act (“CAA”) when it sold about 590,000 diesel motor vehicles with “defeat devices” for model years 2009 to 2016. These automobiles, according to the EPA, have defeat devices in the form of computer software that is intended to rig federal emissions tests. Oxides of nitrogen (NOx), a significant excess pollutant that is at issue in this instance, are dangerous to human health.
In conjunction with the third partial settlement, the US Department of Justice reached a plea deal in the criminal case against Volkswagen AG for conspiracy, obstruction of justice, and entry of goods by false statement; US Customs and Border Protection also reached a deal with Volkswagen regarding civil fraud claims stemming from the illegal importation of the affected vehicles. On this page, there are no details about these resolutions.