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
Following their 2015 emissions testing crisis, Volkswagen started a four-step approach focusing on four essential words: Replace, Restructure, Redevelop, and Rebrand in order to overcome the public relations nightmare and regain sales momentum. 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.
Where and how did Volkswagen’s ethical standards fail?
You are probably aware of the most recent Volkswagen “ethical crisis, in which VW engineers designed computers in their diesel cars to detect pollution testing and change engine operations to comply with legal emission levels during the tests.
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.
What acted unethically on Volkswagen’s part?
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.
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 poll on vehicle dependability, the carmaker 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.
What breach of morality 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, when cars were released into the market, certain environmental researchers began to have some reservations about the pollutants 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). In response to the accusations, Volkswagen acknowledged fitting the test vehicles with a defeat device that wasn’t utilized on the vehicles 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.
Volkswagen’s social responsibility in what ways?
In a wide variety of projects, the Volkswagen Group supports the arts and culture, education, science, health, and sport; other efforts help to strengthen regional structures and preserve the environment. Through these initiatives, CSR becomes a platform for learning for all brands across all of the company’s territories. Examples include our assistance to refugees and our partnership with the German Red Cross (DRK).
The German Red Cross bases its work on three principles: humanity, civic engagement, and responsibility. The Volkswagen Group also upholds these principles. In Germany and at our other foreign locations, we are promoting sound, balanced societal development. A strategic cooperation between the Volkswagen Group and the German Red Cross aids in the recruitment of additional volunteers. Along with enhancing the Red Cross’s rescue program, this objective serves as the partnership’s focal point.
Under the slogan “Helping Together, we are joining in the collective task of receiving and integrating the refugees who come to Europe and Germany, and this is done through a wide range of projects, from immediate assistance in the initial housing facilities to local integration and education projects, on to providing vehicles and non-monetary resources.
We would like to continue our strategic partnership with NABU and are working hard to create the conditions necessary for this. Our long-standing cooperation and consultancy agreement with the German Nature and Biodiversity Conservation Union (NABU) expired on December 31, 2015. Extension of the contract and further collaboration are suspended for the time being as a result of the diesel issue.
How did Volkswagen falsify their emissions data?
In order to pass an emissions test and seem to be a low-emission vehicle, Volkswagen added software that altered the engine’s operation. the remaining time? The vehicles were spewing harmful pollutants at rates up to 150 times higher than those of a typical vehicle.
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)
Six Volkswagen executives and staff members were indicted by a federal grand jury for their participation in the conspiracy at the end of January as well(21). The company is the focus of separate criminal investigations by the attorneys general of 42 states, the District of Columbia, and Puerto Rico (22)