Introduction: What the Scandal Entailed
The infamous Volkswagen diesel scandal of 2015 denotes a fraudulent case that was linked to the company’s move to establish software that had been fitted illegally in its vehicles around the globe to evade detection by the Environmental Protection Agency (EPA). This environmental conservation organization had previously warned VW regarding its contravention of the Clean Air Act by permitting the operation of some of its vehicles that we’re releasing more than the laid-down carbon emission levels (Hibbert 3). The “clean air” federal policy was developed to curb atmospheric contamination in the country. The global automaker proceeded to fix the illegitimate software, otherwise referred to as the “defeat device”, in more than 11 million cars already sold to its international clients. According to Jung and Park, more than 0.5 million of these cars were operating in America alone (127). The plan to introduce this ill-fated gadget was to control its vehicles’ carbon emission capacities, especially when the EPA officials were on the ground ready to penalize any organizations whose products did not meet the required thresholds.
What Happened and Why the Device Was Developed
Following the EPA’s stipulations regarding permissible carbon emission quantities, VW was aware of the agency’s plan to conduct random checks on cars with the view of testing the respective amount of GHG they were released into the air. The company’s innovative engineers came up with the “defeat device” whereby they modified their turbocharged direct injection (TDI) engines in a manner that all fitted vehicles could detect the EPA’s testing operations in advance (Jung and Park 128). The gadget could then adjust the corresponding carbon emissions automatically to levels that the Environmental Protection Agency could allow for all newly manufactured cars. In particular, the gadget could fine-tune the operation of VW’s car engines accordingly to reduce the quantity of carbon produced. As such, they managed to pass all tests done by the EPA, despite the deception deployed by the company.
It is crucial to realize that the device was established illegally with the view of escaping the EPA’s officials whose carbon emission findings would have substantial financial implications for any company that breached any of the rulings made regarding the Clean Air Act of the U.S. Several VW’s engineers and administrators worked collaboratively and secretly to come up with the gadget that was solely meant to help the company to continue with its profitable business at the expense of the environment. According to Jung and Park, such culprits had taken advantage of the organization’s poor leadership and dysfunctional ethical and corporate guidelines, which could not prevent any form of recklessness from being practiced, for instance, the development of an illegal carbon emission control program (127). Hence, Volkswagen’s employees had the opportunity to implement the infamous scandalous tool.
How the Company Was Caught
In an article by McGee, American-based detectives and undercover cops played a huge role in exposing VW’s illegal gadget that had been operating in its cars for a while without being discovered. These agents were also responsible for castigating the company because of its disreputable diesel emissions. However, the revelation of this scandal cannot be concluded with a mention of the contribution of a rarely recognized team of environmentalists who were working closely with the EPA in a study to determine emission disparities between American and European automobiles (McGee). A straightforward and strategic question from these environmental change agents regarding the “unproved” observation that diesel vehicles in America were producing minimal GHG emission compared to those in Europe unveiled the trick because those responsible for responding could not reveal the answer without mentioning the “defeat device.” John German was among the team of environmentalists. This higher-ranking official in a non-governmental agency, namely, the International Council on Clean Transportation (ICCT), steered research in 2013 to test the above hypothesis on VW’s diesel sedans.
According to Patra, German found out that indeed the company’s diesel automobiles operating in America were producing more than 35 times the allowable limit (140), despite the mystery that such cars could not be caught during the EPA’s random tests. As McGee reveals, German thought that his laboratory-testing tool was counterfeit because it was showing alarming results that did not relate to those of the EPA. After many attempts of resetting his device, the observed steady results proved that indeed the company had installed a device that barred the EPA from recording real carbon emissions. German’s move to share his findings with the EPA was strategic because he was sure that this agency would confirm and publicize VW’s fraudulent actions. According to Jung and Park, the California Air Resource Board (CARB) in conjunction with the EPA broke the news concerning Volkswagen’s contravention of the laid-down carbon emission guidelines and further ordered the company to stop the supply of all its 2016 diesel cars (128). Nonetheless, before the discovery, the device had significantly benefited the organization.
How VW Benefited From the Defeat Device
According to Goodman, the ill-fated gadget was installed in 2005. The goal was to allow the company to continue with its profitability levels because it did not have any available in-house option or financial capability of modifying its diesel engines at the time when America demanded a review of the then air pollution standards. Hence, substantial returns attained by VW after this period have a bearing on this device. In particular, according to Boston, the company’s 2014 financial report indicated a net profit of close to 20%. Revenue from investors increased to roughly 11 billion Euros in 2014 compared to the previous year’s results (Boston). Interestingly, a considerable amount of income came from cars such as Passat and Audi, which were in the list of vehicles that had been fitted with the gadget under investigation. In particular, as Jung and Park reveal, cars that operated with this infamous programming tool included, “VW models of Jetta (2009–2015), Beetle and Beetle Convertible (2012–2015), Passat (2012–2015), Jetta SportWagen (2009–2014), Golf (2010–2015), Gold SportWagen (2015), and Audi models of A3 (2010–2015)” (128). Hence, the company benefited significantly from the sale of these cars before the gadget was detected in 2015.
Conclusion: Charges Imposed
After thorough questioning, the organization’s officials agreed that they had introduced a gadget that helped them to evade the EPA’s laboratory procedures. However, VW’s deceitful act was met with stern charges that included an order from CARB and the EPA to have the company stop its supply of all its 2016 diesel automobiles (Jung and Park 128). Volkswagen was also required to recall vehicles that had the prohibited gadget not only in the U.S. but also in other countries across the world. It was to cater to the cost of this recalling exercise. The EPA and CARB also imposed an uncompromising penalty for this violation. According to Jung and Park, the company was fined approximately 40000 USD for every affected vehicle, implying an overall figure of close to 20 billion American dollars (131). On its part, CARB was also to penalize the organization, although its figure was not specified. Hence, conclusively, VW incurred huge penalties and losses that significantly affected its business operations beginning in 2015.
Works Cited
Boston, William. “Germany’s Volkswagen Posts Rise in 2014 Profits.”The Wall Street Journal. 2015, Web.
Goodman, Leah. “Why Volkswagen Cheated.”Newsweek. 2015, Web.
Hibbert, Lee. “The Volkswagen Emissions Testing Scandal Has Put the Issue of Professional Ethics in the Spotlight.” Professional Engineering, vol. 28, no. 10, 2015, p. 3.
Jung, Jay, and Su Park. “Case Study: Volkswagen’s Diesel Emissions Scandal.” Thunderbird International Business Review, vol. 59, no. 1, 2017, pp. 127-137.
McGee, Patrick. “How VW’s Cheating on Emissions Was Exposed.”Financial Times. 2017, Web.
Patra, Bibhu. “The Deliberate Deception: Case Study on Volkswagen Emission Scandal.” Vilakshan: The XIMB Journal of Management, vol. 13, no. 1, 2016, pp. 139-148.