Dieselgate Scandal

“Dieselgate” as the scandal came to be known as one of the biggest business scandal faced in the automobile industry in the world. Volkswagen was established in 1937 to help more people own cars as at that moment, and the market consisted of high-end luxury vehicles. The brand has been selling cars all over the world since then, and it has been competing with other recognized brands (Manfred, 2008). The scandal started on the 18th of September 2015 when the company was issued with a violation notice by the United States Environmental Protection Agency (EPA) (EPA, 2015).  In between 2004 and 2008, rules on emissions were drafted and in 2007, Volkswagen had suspended the sale of diesel cars as they waited for technology that would meet the new standards. In 2008, the company announced that they had clean diesel cars, but that was not the case. They used the technology to prove to EPA that they were compliant while the vehicles that were sold to the people all over the world showed that was not the case. Before the scandal was unearthed, the clean diesel technology had won some major environmental awards, the company received tax reliefs, and the sales in the United States increased at an excellent rate. 

Despite knowing that they were lying, the company used the strategy as a marketing campaign elaborating to the customers that the car had low emissions and was approved by EPA. Volkswagen had duped the EPA and over 11 million customers all over the world who had already bought their vehicles between 2008 and 2015 (Jordans, 2015).  Based on the test from 2015 before unearthing of the scandal indicated that the cars discharged nitrogen oxide pollutants which were 40 times more than what was accorded in the United States. The scandal had affected the cultural, social, political, financial and economic factors of the customers, company, and countries. The company said it would offer United States customers buyback offers and compensation, pleaded guilty to the scandal on emission, some officials were charged and penalties amounting to approximately $4.3 billion would be paid (Shepardson, 2016). It was wrong for the company to rig tests so that they can get approval by EPA for sale of diesel cars in the United States and all over the world.

Ethical Issues.

The scandal had dented the image of the company, and at the moment they are working around to correct their mistakes by taking the appropriate measures. The culture, financial, political and social context of the company has been affected. The brand is usually built on trust, integrity, quality service and the right ethics maintained at every level of production. One of the ethical issues is who knew about the problem, at what time and why they chose to stay silent on the matter. There was a reason behind the decision, and it was wrong for the company to continue production of cars while they knew there was an issue. I believe it is the culture of the company that resulted in the crisis since it so focused on performance and success that they forgot about maintaining ethics. Changing the culture of the company will be beneficial to ensure that all the stakeholders are involved in decision making to avoid such a scandal in the future. To move past the scandal, it will take Volkswagen some time, and they need a leader who will ensure the ethics and the culture of the company are maintained to ensure transparency in their operations. In her article about the scandal, Lynch highlights three factors that contributed to the ethical breakdown in the company. The factors are pressure, opportunity and rationalization and the decision were majorly to protect the interests of the company rather than of all the other stakeholders (Luann, 2016).

The company also needs to realign its vision and values and ensure they are following what the stakeholders want and believe in. The will make the management to ensure that the employees work according to the right ethics and that they will not be caught up in trying to manage the scandal and forget to run the company. It will take time for the brand to be what it used to be, what customers are happy to buy from, employees will be glad to work for and for the community to appreciate and welcome them back. Ethical issues in a company are as important as the business itself as they guide the decisions made that is going to affect the company in future. For the case of Volkswagen, since ethics of the decision makers caused the company to experience the crisis, decision making should be devolved. This will ensure that decisions go through various stages before they are implemented, and it will ensure some of the problems will not be faced again in the future. 

Investigation of facts.

Between 2004 and 2008, laws were passed in the United States that would ensure cars are fitted with devices that would reduce emissions of carbon dioxide in cars. It was also a requirement in the European Union countries that cars should be tested to ensure that they conform to the rules before being given the go-ahead to be used in the country. Volkswagen installed “defeat devices” in the form of software that would change the performance of the diesel engines to improve the results hence pass the emission tests set by the EPA and other regulatory bodies around the world. The software used could sense various conditions hence be able to monitor the operation of the engine, monitoring speed, air pressure among others (Hotten, 2015). In 2014, it was unearthed that the company used the “defeat devices” for cars used during testing but not on cars sold to the people hence violating environmental standards. It is approximated that a total of 11 million cars produced by the company have been reported to have defects. The diesel engines for cars produced by Volkswagen were stated to contain pollutants having nitrogen oxide which was against the laws stipulated in the United States (Jordans, 2015). The decision led to ethical issues that affected the company in a significant way as managers and employees were prosecuted, sales went down, the brand was tainted, and the company faced substantial financial penalties.

Examination of context.

Financial context.

The “dieselgate scandal” has affected the financial situation of the Volkswagen. First, it is the amount of money that the company is supposed to pay concerning penalties which are rising every day due to the lawsuits filed against the company. The scandal also affected the shareholders of the company including those who had wanted to purchase stocks in the company. After the revelation of the scandal, the stock prices went down as some of the shareholders felt discontented in their investment in the company, and the sold their shares. Thirdly, since the integrity and brand of the company are compromised, most of the customers would not want to purchase their products which will make the company lose the revenue that they were collecting from improved sales in the past years. 

Economic context.

The “dieselgate scandal” affected the economy of the countries in which they were operating. Improved sales mean that more money will be generated regarding tax, hence the government’s will be able to use the revenue to fund projects that will help the economy to grow. Slow growth of the economy because of the scandal will lead to more problems such as lack of job opportunities for the people and absence of the better provision of services. People were also affected as some lost their jobs hence losing their source of revenue and more will lose their jobs if the sales of the company will reduce the economy of the country consequently end up being affected. 

Social context.

Care for the environment has been an emphasis on both the government and other non-governmental organizations. Unearthing the scandal will put other companies on the radar and ensure that the products they produce do not affect the environment negatively. The consequences of the scandal have led to the loss of job for employees and other people who depended on the brand for revenue such as the dealers. This means that their families will also be affected since they depend on the resources earned by working for the company.

Cultural context.

The “dieselgate scandal” affected the culture of Volkswagen and other companies especially those in the automobile industry. Compromise of ethics by the company affected the company and all the stakeholders who include investors, customers, employees among others. The scandal is reported to be the biggest ever to be faced by an automobile company in the world, and this will put the other automobiles under scrutiny too especially those who rely on diesel engines. Integrity is what makes a customer to be attracted to a brand, and since the integrity of Volkswagen was affected, there will be the need for culture change in the company. 

Political context.

The “dieselgate scandal” affected the political context of the company and of countries such as Germany, United States, and others. Being the largest automobile company in the world, the scandal made Toyota to surpass it and become the most significant automobile. The company generates a lot of revenue for Germany, and since it is affected, politics were also affected. The rising political pressure is making the company to conduct its investigation but the European Union has already stated that action should be taken against the company and the testing procedure should be revamped for the automobile industry.

Personal ethical perspective.

Businesses who value their customers do not behave the way Volkswagen did, and the deception was a breach of trust. It was wrong for Volkswagen to have lied to all the stakeholders about the situation in the first place. The decision makers in the company who include the board of directors and engineers who were part of the test are the ones liable for the mistake. Admitting to the mistake was an essential step by the company which shows they were severe to fix the problem. For my perspective, I see that the company was more focused on making sales than in producing quality vehicles that would not have a negative impact on the environment. Spending more time and money to invest in the research would have helped them to provide quality vehicles was enough for them to avoid such scandals. The integrity and other ethical virtues that the company has sought to uphold was sacrificed hence the image of the company was destroyed, and now the company will be dealing with the aftermath for some time now. The wrong ethical decision made by a few people hence affected all the other stakeholders who include the government, manufacturers, dealers, environment, shareholders, employees, and customers among others. The environment was polluted, brand destroyed, stock prices reduced, and jobs were lost because of the ethical issues. Decisions we make every day usually influence how tomorrow will be. From the “Dieselgate Scandal,” I have learned that it is essential to think through a decision hence be able to make the right ethical decision. The scandal should also be a lesson to other businesses around the world who do not uphold the proper ethics in what they do. It was also right for EPA to prosecute Volkswagen for violating the rules on emission as they seek to protect the environment to ensure that the coming generations will not be affected by the wrong decisions we make today.

Outcomes of the scandal.

The scandal led to the loss of jobs by a lot of people especially those in managerial positions since they were the ones who approved the decision to cheat during the testing. Some of the employees were charged in the law courts with some fined and others handed jail terms. Volkswagen also faces a financial burden due to the penalties incurred which will be due to recalling millions of cars around the world, fines from EPA and other costs incurred in legal cases filed by people (Hotten, 2015). The Financial impact made the company to record a loss in its quarterly records and sales went down because of the scandal. The ethical issue will also affect all the stakeholders and the most affected will be the employees, dealers, and shareholders as the stock prices of the company have dropped. The tainted image brought by the scandal has also resulted in sales to go down all over the world which will affect the financial position of the company. It also led to other carmakers in the United States to be investigated to ensure that the results of the testing were correct. For the European Union, the scandal made it tighten its rules for testing or cars to ensure that they conform to the set standards. It was also a big blow to the diesel market as it was widely believed that they were better for the environment but scientific research after the scandal shows that was not the case and some cities and countries are planning to limit diesel cars which will affect the automobile industry (Hotten, 2015). To a more positive perspective, Volkswagen has used the opportunity to correct its flaws such as changing the culture and creating a more positive brand that will attract customers and ensure the right ethics will be maintained now and in the future.

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