Abstract
Volkswagen, a noticeable market player in the automotive industry, shocked the industry with the action company failing to comply with the diesel emission test policies. Conservation of the environment and ensuring there is a sustainable environment has been a great concern across the world currently. The pollution of the environment and natural phenomena like globalization have been put into consideration by many environmental protection agencies. The case of Volkswagen’s noncompliance will be examined in this article, and the overwhelming devastating consequences of the unethical act had to direct and indirect stakeholders of the company. The primary reasons for this unethical act will also be examined, and the critical impacts of such an act will be explained in detail. In response, recommendations will be given in order to prevent the occurrence of any other similar or more devastating unethical act like the case of Volkswagen.
Introduction
Tightened measures have been put in place to control the emission of harmful and mortal effects of nitrogen oxide emitted from cars’ exhaust which is a pollutant to conserve and save the green. Therefore, to achieve that, there have been restrictions put in place by EPA since 1970 on the emissions for light-duty vehicles. Nitrogen oxide emitted into the environment endangers human life and can trigger diseases like asthma, cardiovascular, respiratory, and premature death. Federal agencies and EPA created a diminution to control the amount of nitrogen oxide emitted by vehicles’ tailpipes to 0.07 grams per mile from 1.25 grams. This standard posed a challenge to automakers in the industry that manufactures fuel-efficient diesel cars in the United States. Volkswagen was one of the players in the automobile industry attempting to crack the United States market; as a result, it became a substantial seller in the market. Her competitors were Nissan, Hyundai, Honda, and Mazda, which found these new standards quite challenging and had to look into their tactics and scrap them.
In 2015, the company announced a ‘diesel dupe’ as it rigged the emission test to portray that its diesel vehicles emitted less pollution than actual pollution. EPA reported that Volkswagen had sold an ample number of vehicles worldwide that had defeat devices or software embedded in their diesel engines to change the performance of the vehicles and improve their results. The unethical act aimed to pretend that its vehicles followed the emission standards, where the company conducted the test in a lab instead of the test being conducted on the roads (Rogerson, 2018). The cars were programmed to be able to detect situations in cars having TDI diesel engines experienced emission tests; then information is taken from steering, brakes, and accelerator. The program had slight changes in the engine setting aimed at diminishing the nitrogen oxide level emitted. An actual test conducted on the road found that the test on the road was 35 times more than the test in the lab.
Impact of the Volkswagen Diesel Scandal
In 2014, Volkswagen was ranked as the second-largest automaker in the world. Admitting to the unethical act of rigging diesel emission tests led the company to suffer a huge cost burden. It brought three public relations firms to assist the company deal with the crisis. The case involved various states worldwide; the company was therefore required to deal with several international regulations (Dura, 2017). This deceptive unethical scandal had the following primary consequences;
Volkswagen cars that were fitted with the defeat device would have led to the production of additional pollution that is very toxic to the environment and directly result in premature deaths in the United States. Studies have found that nitrogen oxide emitted from Volkswagen cars endangered the lives of 60 people who are likely to die prematurely. Excess pollution from these vehicles also contributed directly to chronic bronchitis cases and other cases of respiratory and heart in the United States. With time, the sickness cases of people with bronchitis, asthma, and other respiratory disease is likely to increase at a very high rate. The health costs of people are likely to increase due to the Volkswagen cars with defeat devices. In addition, the emission of excess nitrogen oxide into the natural environment would likely result in acid rain. Acid rains have a critical impact on people’s Health and can destroy the natural resource and nature.
When the testing scandal was revealed, it affected the company’s sales. This led to a crisis, and to cope with the crisis, the company had to reduce the bonuses accorded to the chief management substantially. This led to variable remuneration diminution. The reduction in bonus was to affect the management board and a group in the executive positions that assist the CEO in the company’s daily routine.
When the deceptive unethical practice of the company in the emission test came to light, there was a drastic slump in the Volkswagen’s share value. Just immediately when the scandal was unearthed, there was a swift reaction in the market that led to the reduction of the share value of the company to reduce by one-third. The company’s stock price continuously slumped in the United States, which meant billions of dollars from the company’s value were wiped out (Pries & Wäcken, 2020).
When this deceptive scandal by the Volkswagen company was taking place, some programs were provided to dealers aimed at assisting the dealers to cope with the rigging, which included incentives, bonuses, or subsidies in dealership networks. When the scandal was unearthed, the sales of Volkswagen stopped. Hence the dealers suffered from sluggish sales and very little profits. In order to relax the crisis, the company gave discretionary funds to the dealers, which they were supposed to use as per their wishes. The dealers were worried about whether the funds were sufficient for their survival. Dealers with cash flow were to be considered for further programs though no specific date for the programs was declared.
The scandal was an international deception that affected the investments of dealers, their customers, and employees. Many employees were very concerned about their job security and lived in fear of an encounter with their customers, whether the customers were aware of the scandal or not. The funds given by the company to the dealers only provided assistance to break even or have a thin profit. Customer traffics of the dealers was significantly reduced. Some dealers used the funds to close deals with the owner of the diesel cars to improve the satisfaction and motivation of sales workforces; others used the funds to cover store operating costs, boost their marketing budget, and strengthen the brand.
Despite the Volkswagen scandal having an impact on group brands, the slump in Volkswagen vehicle sales was more substantial than the group brands. The scandal led to a bad reputation for the company that substantially affected the loyalty of the customers. The negative impact on the reputation led customers to shift to the competitor Volkswagen, thus leading to a noticeable slump in the sales of Volkswagen vehicles.
Current Solutions for Finalizing Volkswagen Scandal
To solve the scandal, Volkswagen gave a concrete plan that has since been accepted by the environmental protection agency and the United States government. The proposed plan states that there must be more approvals and comments from the owners of the Volkswagen company. The plan also describes that the company would be committed to creating green car technology. Rather than squandering a lot of money on penalties, this money should be spent on advancing traditional technology. This will enable the company to bring out changes in the industry that will require Volkswagen to put more effort into electric vehicles that have minimal environmental pollution (Mansouri, 2016)..
Zero-emission cars over very few years will significantly eliminate the emission to the environment that is ten times greater than the emission produced by Volkswagen cars fitted with deceptive devices. Practically, an increased number of Volkswagen electronic vehicles being used on the road would also compensate for the emission from vehicles with the deceptive device. The zero-emission benefits the environment and will also be a privilege to the economy as there will be increased demand for batteries. In order to match the demand for batteries, it will also require more manufacturing companies to manufacture batteries. More manufacturing companies will also create more job opportunities and investments in the United States and other regions.
Recommendations
Volkswagen company’s business culture and structure were primarily the roots of this unethical scandal. In today’s business practices, there is quite a vast difference from the business practices in the past. A company obtains a reverse result when compliance-based ethics, like the case of Volkswagen, declines to treat its employees ethically as they are faced with the dilemma of losing a job or taking unethical actions. Employees’ actions are vital for any company’s success or failure. Thus companies must value their employees and improve their morality to undertake their practices based on ethics. There is no hierarchy in companies that practice value-based ethics, as employees work in designated teams to achieve expected results. Value-based ethics promotes democracy, which means that juniors can voice their complaints to their seniors or give their opinions, resulting in increased productivity.
It is self-evident that pollution of the natural environment and emissions to the atmosphere are of great concern to environment control agencies and EPA. The new standards EPA gave to automaker companies have put immense pressure on the companies to adhere to them. Therefore, it is imperative for the EPA to provide and offer companies development, technology, and research assistance to alleviate the pressure imposed on them. In the case of the Volkswagen scandal, stringent emissions standards had opposite outcomes of the intended expectations that led to devastating events. It is essential to have a plan for feasible emission standards and to provide the automakers with technology, development, and research to eliminate the chances of such cases in the future. Also, it is recommended that companies value their employees through a value-based approach to prevent these kinds of scandals from occurring. EPA also recommends providing automakers with supportive programs to ensure that emissions and pollutants are under control.
Conclusion
The deceptive scandal at Volkswagen was a huge, complicated practice that caused significant problems for its direct and indirect stakeholders. It was unethical to cheat on the emission test, and the results were disastrous. The suitable solution to solve this problem was the proposal of green punishment. Electronic cars are an amicable solution as they save costs and time for the environmental protection agencies that could have been used in finding systems for controlling emission tests. There is a need for organizations to comply with set rules and regulations, as noncompliance might lead to adverse impacts which are uncalled for. All organizations are legally obligated to practice ethics in promoting the common good through what they offer. A market leader and reputable company, Volkswagen should lead by example in fostering corporate compliance. Based on the circumstances described above, it is right to draw the conclusion that the Volkswagen emissions scandal is a significant corporate compliance issue in which all ethical principles have been violated, and profit maximization has been the primary motivation. The installed cheat devices are illegally accused of manipulating values in violation of EPA standards. Through ethical decision-making, ethical values, and ethical leadership, Volkswagen could avoid these ethical issues in the future.
References
Dura, C. (2017). The Volkswagen Emissions Scandal-A Case Study on Unethical Business Practices. Annals of the University of Petrosani, Economics, 17(2), 69-78.
Mansouri, N. (2016). A case study of Volkswagen unethical practice in diesel emission test. International Journal of Science and Engineering Applications, 5(4), 211-216.
Pries, L., & Wäcken, N. (2020). The 2015 Volkswagen ‘diesel-gate’and its impact on German carmakers. In New Frontiers of the Automobile Industry (pp. 89-111). Palgrave Macmillan, Cham.
Rogerson, S. (2018). Ethics omission increases gases emission. Communications of the ACM, 61(3), 30-32.
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