Briefly describe Volkswagen’s emissions scandal and provide background on the co

Question

Briefly describe Volkswagen’s emissions scandal and provide background on the company and automobile industry.

Do you think Volkswagen’s brand reputation was severely damaged by the emissions scandal? How about its brand equity? Discuss what brand equity is, and how Volkswagen’s brand equity will be impacted.

How should Volkswagen handle the emissions scandal in an ethical way? Discuss the related ethical issues from both consumer and brand manager perspectives.

What can you learn from this case? What suggestions could you offer to Volkswagen’s top management?

Please provide references if possible. Thanks in advance!

Explanation / Answer

Volkswagen

About-

• Volkswagen is a German automobile manufacturer headquartered in Wolfsburg, Lower Saxony, Germany. Established in 1937and is now the biggest automaker in both Germany and Europe.

• Volkswagen has three cars in the top 10 list of best-selling cars of all time ,the Volkswagen Golf, the Volkswagen Beetle, and the Volkswagen Passat. With these three cars, Volkswagen has the most cars of any automobile manufacturer in the list that are still being manufactured.

• Volkswagen means "people's car" in German. Its current international slogan is "Das Auto" ("The Car").

• Production in 62 plants across 21 countries. • Sales in 153 countries.

Automobile industry-

Volkswagen Group, as a unit, is currently Europe's largest automaker. For a long time, Volkswagen has had a market share over 20 percent. • In 2010, Volkswagen, posted record sales of 6.29 million vehicles, with its global market share at 11.4%. In 2008, Volkswagen became the third largest automaker in the world, and, as of 2012, Volkswagen is the second largest manufacturer worldwide. Volkswagen has aimed to double its US market share from 2% to 4% in 2014, and is aiming to become, sustainably, the world's largest car maker by 2018. Volkswagen Group's core markets include Germany and China.

Volkswagen emission scandal-

Volkswagen has been cheating in emission tests by making its cars appear far less polluting than they are. The US Environmental Protection Agency discovered that 482,000 VW diesel cars on American roads were emitting up to 40 times more toxic fumes than permitted - and VW has since admitted the cheat affects 11m cars worldwide.

VW’s “defeat device” is not a physical device but a programme in the engine software that lets the car perceive if it is being driven under test conditions - and only then pull out all the anti-pollution stops. “Clean diesel” engines cut emissions through techniques such as adjusting air- fuel ratios and exhaust flows, and in some (though not most VWs) injecting a urea-based solution to render NOx harmless. When running normally, requiring greater performance, VW’s controls would not operate in the same way.

Damaged reputation-

a). Company’s reputation is now damage

b). Global sales declined

c). Fine up to $ 18bn (€11.6bn)

d).Rise downtime cost

e). Loss of customer goodwill

Brand equity damaged-

On the first business day after the news, Volkswagen's stock price declined 20% and declined another 17% the following day, the same day a social media advertisement with Wired about "how diesel was re-engineered" was removed as well as a series of YouTube ads titled "Diesel Old Wives’ Tales". On Wednesday, 23 September, Volkswagen chief executive officer Martin Winterkorn resigned. Volkswagen hired Kirkland & Ellis law firm for defense, the same firm that defended BP during the Deepwater Horizon oil spill.

What should be done-?

A). If the company restarts under a new name, this may improve brand image to have a company that is smaller and more efficient than the current Volkswagen Group. Re-branding will make it easier for the company to speed up efficiency programs and potentially save the company. Rebranding can be expensive and risky, but it may reduce the negative publicity that was caused by the scandal. It is important that the rebranding not only focuses on exterior changes, but also changes in other aspects of the company.

b). The company should also partner up with other independent verification agencies to rebuild consumer trust.

c). One last technique to recapture purchaser trust is for Volkswagen to post a bond that guarantees people in general not at all like this will happen once more. A bond is a pointer of believability. Maybe Volkswagen can express that if any misrepresentation happens again inside the organization, they will pay a bond out to the European Commissions car industry.

Ethical issues-

1. Company's duty to look after the welfare of customer

2. Company's duty to maintain EPA's law and restriction

3. Company's duty to produce environment friendly product

4.   Engineer's duty to make trusty software

Learning-

reference- http://theconversation.com/what-we-can-all-learn-from-the-vw-emissions-saga-71264

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