The Investigation into the Volkswagen's Emission Scandal

Introduction

The report would investigate and research the Volkswagen (VW) diesel car scandal that was reported worldwide in the late summer, early autumn of 2015. Upon analysis of the case scenario, the researcher would identify the legal, social, ethical and professional issues associated with the car scandal (Blackwelder et al. 2016). A personal development plan would be developed to demonstrate the changed thoughts of the learner on social, legal, professional and ethical issues, which would keep him up to date about such occurrences in the mere future.

Legal Issues

The prosecutors of Germany instigated an investigation into the “former Volkswagen Boss Martin Winterkorn” regarding the rigging of vehicle emission tests, as the carmaker evacuated three engineers with an attempt to handle the chaotic situation (Coghlan, 2015). The former owner of Volkswagen received several criticisms for allegedly selling carts with manipulated emissions data. The brand was under huge legal pressure due to the disastrous scandal committed in their “78-year history”. While getting involved in the lawsuit, the organization approached to a US Law Firm to conduct a thorough investigation on the scandal.

The German Automakers felt under serious legal trouble, which included criminal charges. The criminal charges were brought under notice as the brand sold “11 million diesel cars” worldwide, containing software, which assisted in cheating emission tests (Oldenkamp, van Zelm & Huijbregts, 2016). The “Clean Air Act” probed for fine up to “$37500” for each of the “482000” -suspected Volkswagen cars distributed in the United States. The total fine summed up to “$18 billion” approximately. There was also a probability of class-action lawsuits by the furious owners of Volkswagen.

“William Carter”, the “former general counsel of the California Environmental Protection agency” stated that the brand would face a series of “state” and “federal”, “administrative”, “civil” and “criminal charges”. The brand also became the victim for Fraud charges as they used the medium of internet and the e-mail to implement the deceptive procedure. There were also queries arising about the money laundering acts as investigators suspected that Volkswagen launched illegal proceedings in the overseas market (Pearce, 2015). The legal authorities yielded gigantic fines for the rising concerns related the safety of the cars due to the scandal.

The profit margin and the cash reserves of the brand suffered immensely due to the massive fines imposed on them. The internal auditing left the organization with further legal trouble leading to termination, restructuring and other corporate alterations. On 9 September 2015, the department of Justice launched a policy memorandum, which ordered prosecution of company executives involved in the fraud case of car scandal (Hankel, 2015). The investigators took active participation in examining the root of the issues, which also highlighted several unfamiliar faces in the rigging case.

Volkswagen was not the only brand, which came under the limelight of “US criminal investigation”. “Toyota” and “General Motors” have also experienced the same music at an earlier stage. However, the two brands entered the “Deferred Prosecution Agreements”, which gave them stipulated time duration to put their organization into a particular order by dropping the criminal charges to a later date (CMA, 2016). The agreement turned out to be an attractive option for the brand to neutralize the chaotic situation in an effective manner. Germany had to transfer its nationals within the “EU” under the “European Arrest Warrant Scheme”.

“Bob Clifford”, a partner at “Clifford Law Offices” launched a class action on behalf of the Volkswagen consumers. The Volkswagen dealers also initiated group actions for the contract breach, resulting into suing of the shareholders due to loss of shares in the competitive market (Carvalho, 2016). The environmental authorities also accused the brand for the number of asthma patients suffering by the poisonous emissions of the Volkswagen cars.

Social Issues

The Brand was an absolute failure in terms of corporate social responsibility. The brand intentionally planned a circumvent emissions control with the objective of giving an unfair advantage to the brand over its competitors. The ploy made Volkswagen the leading brand in the world in terms of supposedly environment friendly cars, elsewhere; it was poisoning and polluting the atmosphere in reality (Wolf, 2016). The resignation of the higher authorities clearly signified the fact that the CSR department of Volkswagen was aware of the unethical acts. Volkswagen did everything under their control to avoid the contaminating effects of the cars.

In accordance to Volkswagen, CSR was a marketing exercise. The lust of enhancing the profit margins of the organization ultimately affected its social image in the competitive market. The organization did not bother about the fact that the cars are poisoning the atmosphere by emitting 40 times the legal limit of Nitrogen Oxide, as long they were in the top of the charts amongst the competitor brands (Zar et al. 2016). The ignorant approach towards the well-being of human population resulted in causing several health hazards. The brand preferred organizational sustainability in contrast to that of the planet, which lost several lives every year due to respiratory diseases.

The “Corporate Social Responsibility” allowed the brand to parade their virtue and look promising, while the internal stands dipped down the line. The higher authorities manipulated the pollution level of its cars. The negative image earned by the brand would always mark a black spot in their success story. However, Volkswagen was named as the “11th best organization” in the World, in terms of corporate social responsibility. Hundreds of pages were written about their improvement policies and contributions towards society, until the time reality unleashed its evil deeds towards the society (Barrett et al. 2015). Despite alteration of the corporate culture and management, the brand is struggling to impress the consumers. The failure to address the social concerns could blur their existence from the competitive market.

Ethical Issues

Volkswagen was accused for disregarding the “EPA Laws” and restrictions and inventing software for avoiding them. The high percentage of “Nitrogen Oxides” emissions polluted the air of the United States at an alarming rate. Volkswagen took active participation in cheating the emissions test by reducing the torque and Nitrogen Oxides emissions. When the car was not under testing, then a separate program enhanced the “torque, acceleration and fuel economy” of the cars, thus resulting in humongous emissions of Nitrogen Oxides (Nieuwenhuijsen et al. 2016). It was a clever ploy until it did not came under the lamp light. However, the approach was unethical in nature.

A “European Non-Profit Organization”, “The International Council for Clean Transportation” was into a shock as Volkswagen was suddenly passing all the tests coming in their way. In order to address the particular concern, they contacted the “Center for Alternative Fuels and Engine Emissions (CAFEE)”. CAFEE detected the non-compliancy of the engines, even though the car brands passed the US emission tests. When the results were out in the year 2014, the brand tried to divert the issues by stating that technical problems were the main reasons behind the increasing emissions of the Volkswagen Cars (Hough, 2013). However, EPA was clever enough to state that the 2016 Volkswagen Diesel models would not get certifications until they give plausible answers. The ethical dilemma finally made the Volkswagen Owner to surrender their unethical act of installing defeat device in their engines.

The main culprit were the higher authorities who designed the scheme, that engineers intentionally signed off on code for avoiding the purposes of “EPA” and “Clean Air Act” Regulations. The cheating continued for seven long years, until the final detection came into effect. This kind of scenario could only take place that is ethically corrupted by nature. No one really suspected that Volkswagen would be indulged into unethical practice, which affected the integrity of the organization in a negative manner (Archer, 2015). The “corporate maleficience” caused several health hazards for the normal citizen s of the country such as asthma, lung infection, cardiac issues etc.

The Volkswagen car scandal was one of the biggest business ethics failures in relation to scales and reputational loss. Upon performing the ethical misconduct, the brand lost the trust of the consumers, thus affecting the revenue and profit margin of the organization. The Volkswagen emissions scandal not could shook the sector of “corporate governance” but also raised concerns against the assistance of risk management (Holland et al. 2015). The Volkswagen crisis is outcome of a “three-pronged governance” and cultural instability in “marketing, risk management and internal controls”. The ethical misconduct came into effect due to lack of interconnectivity amongst the three sections.

Professional Issues

The brand lost subsequent shares in their business dealings due to the car scandal issues, as it hampered the brand image and trust factor of the consumers in a negative manner (Boiten, 2013). The organization share was 19% lower in the fiscal year, which was a spot of bother for the business acquisitions of the brand in the competitive market. While coming under the scrutiny of “EPA and US criminal investigation”, the share of the brand continued to slide at regular intervals (Marshall, 2016). The Stock Market of the brand showed a huge dip since EPA made the announcements about the car scandals of Volkswagen. Volkswagen knew that it would require much more than changing leadership and corporate overhaul to clear the picture after it received criticisms due to cheating in US diesel emission tests.

Despite the falling profit margin of the brand, the concern for the new CEO of Volkswagen was to stabilize the chaotic atmosphere raised in the United States, which was then compared to the 2010 BP Oil Spill. Humility was the name of the game as there was display of contrition in the US advertising campaign about the brand (Simms, 2013). The brand was exposed to a number of “public and private lawsuits”, “government enquiry”, “compensation” and “recall expenses”, the accumulated cost of which would exceed 6.5 billion Euros ($7.28 billion) it has put aside.

The climate of fear was very much evidential bout the brands. The investors and suppliers were taking a step back, as the concealing atmosphere was mounting further pressure on the profit margin of the brand in the competitive market (Hopkins, 2013). The competitors of Volkswagen with likes of “Renault” and “PSA Peugeot Citroen” went ahead of the brand, thus hurting its brand image on a constant basis. The humiliation of Volkswagen would weaken the European pricing, “further eroding the core brand’s narrow margins and requiring still bigger cuts from the unions”. The brand was under serious pressure as their professional acquisitions were at stake.