The Root Cause of the Scandal
This paper aims to overview and investigate several particular issues that are presented in the case study written by Bachmann, Ehrlich, and Ruzic (2018). It is stated that the emissions scandal, which was caused by Volkswagen’s production, had a vast adverse impact on the company’s reputation and sales (Griffin & Lont, 2016). First of all, it is essential to dwelling upon the primary causal aspect of the scandal to put further reasonings in the proper context.
The scandal began to develop in May 2014, when West Virginia University’s Center for Alternative Fuels Engines and Emissions discovered significant discrepancies between Volkswagen diesel cars’ earlier test results and on-road emissions (Bachmann et al., 2018). The on-road emissions were considerably higher than the ones from the lab tests. When the California Air Resources Board (CARB) conducted a new series of tests in May 2015, the on-road emissions were again significantly higher than the test-box results (Bachmann et al., 2018). After Volkswagen was informed that their 2016 diesel cars could not be certified for the American market, the company admitted that they used “a defeat device in their software”, which allowed regulating the emissions, and thus the cars were capable of producing fake results in the test box (Bachmann et al., 2018, p. 5).
This brief outline of the events, which has led to the outbreak of the scandal, was provided to give a proper context for the explanation of the primary cause of the adverse effect, which this situation had on the reputation of Volkswagen (and other German automobile manufacturers, too). In my opinion, the public sentiments about the scandal were so profoundly frustrated in tone because the company was considered to be an immensely reliable and trustworthy car manufacturer (Strittmatter & Lechner, 2017). German engineering was a definite benchmark of high-quality products, and this aspect was widely used in Volkswagen advertising. It is also evident that the society was so frustrated with the scandal because the emissions had an immensely adverse impact on public health (Barrett et al., 2015; Oldenkamp, van Zelm, & Huijbregts, 2016).
Corruption: Individual Mistake or Cultural Trend?
Further, it is critical to investigate whether corruption, which caused the outbreak of the scandal, represents an individual mistake or an ongoing cultural trend. Firstly, answering this question, it is essential to mention that the situation under discussion was one of the automobile industry’s major scandals in several decades (Bachmann et al., 2018, p. 5). Therefore, it could be suggested that this event represents a unique situation, which could hardly be considered a trend. However, it is also possible to overview the problem from a different standpoint. The article by Aurand et al. (2017) provides considerable insight into the company’s internal culture and work ethics.
The authors primarily exemplify the management style of Ferdinand Piëch, Chairman, and CEO of Volkswagen from 1993-2002, who told a group of his employees to develop a new Golf body fit in six weeks, or otherwise, they would be fired (Aurand et al., 2017). Martin Winterkorn, Volkswagen CEO from 2007-September, 2015, is reported to have an approach, which is relatively similar to Piëch’s (Aurand et al., 2017). It is stated by the authors that Winterkorn’s high level of ambitions was “notoriously intimidating and demanding” (Aurand et al., 2017, p. 15). Therefore, it is possible to suggest that such a management style could be the cause of the company’s cheating in test boxes. Based on this information, it could be stated that the corruption, which led to the outbreak of the emissions scandal, can be considered a cultural trend since the significantly demanding management style appears to be distinctive for German employers (Aurand et al., 2017).
What Could Be Done to Re-Establish Trust?
Since the primary cause of the scandal and its underlying cultural factors were discussed, a hypothetical situation, in which I am put into the position of a consultant to the board during the period of the scandal, should be observed. In this position, it is essential to propose several steps, which would improve the public image of the company. It is worth mentioning that situations similar to this scandal are difficult to handle since they harm the company’s reputation to a significant extent (Bachmann et al., 2018). However, it is possible to propose several steps, which would improve the situation. First of all, it is essential to recall the cars with the defeat device, even though it implies significant losses for the company (Aurand et al., 2017).
Secondly, the contribution to the improvement of public health and environmental damage should be made since it is one of the most dangerous consequences of the emissions (Barrett et al., 2015). Another solution, which is mentioned by Aurand et al. (2017), is to implement a customer-oriented program of “buyback and approved emissions modifications,” which also implies significant expenses for Volkswagen; however, it would help to re-establish the customers’ loyalty (p. 16). It the context of the situation under discussion, it is more important to prove that the company is striving for the improvement of the situation than to calculate the losses. The reason is that in the long-term perspective the negative public image of the company would bring additional expenditures and an overall decline of demand for Volkswagen production.
Suggestions for the New CEO
The final section of this paper is dedicated to the provision of recommendations for the new CEO of the company, which would help to avoid similar scandals in the future. It is argued that one of the core aspects of Volkswagen’s business, which should be changed, is the corporate culture, ethics, and management style. As it was previously mentioned, there are at least two examples of the Volkswagen CEOs’ managerial decisions and behaviors, which harmed the long-term perspective (Aurand et al., 2017). Therefore, it is essential to change the overall corporate culture to be less strict and demanding toward its employees. It could be hardly doubted that this managerial style has also benefited the company’s success, but it is evident from the case under discussion that this decision has led the company to one of the biggest industry scandals in several decades (Bachmann et al., 2018). It could also be suggested that Volkswagen would implement a more transparent policy on the presentation of its production. The implementation of this approach would help to retrieve the customers’ loyalty and trust in the long-term perspective.
In conclusion, it should be stated that the case under discussion is of critical significance for the understanding of any company’s reputation and responsibilities importance. This paper has discussed the principal causes of the outbreak of the scandal as well as the underlying factors of corruption. Additionally, there were proposed several steps and recommendations for the new CEO of the company, which could also be useful in other similar cases.
References
Aurand, T. W., Finley, W., Krishnan, V., Sullivan, U. Y., Bowen, J., Rackauskas, M.,… & Willkomm, J. (2017). The VW diesel scandal: Engaging students via case research, analysis, writing, and presentation of findings. Journal of Higher Education Theory and Practice, 17(7), 10-21.
Bachmann, R., Ehrlich, G., & Ruzic, D. (2018). Firms and collective reputation: The Volkswagen emission scandal as a case study. Web.
Barrett, S. R., Speth, R. L., Eastham, S. D., Dedoussi, I. C., Ashok, A., Malina, R., & Keith, D. W. (2015). Impact of the Volkswagen emissions control defeat device on US public health.Environmental Research Letters, 10(11), 1-10. Web.
Griffin, P. A., & Lont, D. H. (2016). Game changer? The impact of the VW emission cheating scandal on the co-integration of large automakers’ securities. Web.
Oldenkamp, R., van Zelm, R., & Huijbregts, M. A. (2016). Valuing the human health damage caused by the fraud of Volkswagen. Environmental Pollution, 212, 121-127.
Strittmatter, A., & Lechner, M. (2017). Sorting on the used-car market after the Volkswagen emission scandal. Web.