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Volkswagen Emissions Scandal

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Arsalan Noorafkan

on 17 November 2015

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Transcript of Volkswagen Emissions Scandal

Introduction
TOPIC
Case Description
Ethical Analysis
Thank you for listening
Stay Ethical
Volkswagen 2015 Emissions Scandal
BY: ARSALAN NOORAKFAN IVAN ZILBERAY HARDEEP AULAKH JASPREET SHOKER
ISSUE
SIGNIFICANCE
BACKGROUND
HISTORY
Case Description
CURRENT ISSUES
ETHICAL ISSUES
PRINCIPLES
THEORY CONCEPTS
RATIONALIZATION
Impact on Stakeholders
SOCIAL IMPACT
ENVIRONMENTAL IMPACT
Conclusion
FUTURE IMPROVEMENT
SUGGESTED ETHICS PROGRAMS
We are now open to Q&A!
1) Deontology (Actions)– Installed the defeat device software in their vehicles in order to sell their self-proclaimed, “fuel efficient cars”.
2) Character Virtue Ethics (Agents) – The main agents were the CEO, Martin Winterkorn and the engineers who made the defeat device software. Other people who were acting in the situation were employees who knew and did not speak up.
3) Consequentialism (Utilitarianism/Goals) – End goal in mind was to increase market share and position themselves as a green leader in the automotive industry.

1. Beneficence – Only benefit themselves and shareholders. They did not benefit or help consumers.
2. Nonmaleficence - Did the exact opposite as their cars emit 40 times the maximum amount of emissions allowed.
3. Autonomy – Manufacturers of the device were not free to make their own ethical decisions because of pressures from management.
4. Justice – Consumers were cheating as they paid a premium for cars that let out fewer emissions. Instead, they received cars that let out 40 times more
5. Responsibility – As a result of their mission statement, society had an expectation from Volkswagen and the company did not fulfill this responsibility.

1) The Publicity Test = FAIL
• Could not defend his choices when made public and resigned.
2) The Reversibility Test = FAIL
• CEO wouldn’t pay a premium to buy a car that did not offer the features that it claims to have.
3) The Generalizability Test = FAIL
• Volkswagen would not want this decision to be acceptable because then competitors would steal their market share by also faking emissions tests.

Business Strategies Toward the Environment
• The 2013 mission statement positioned Volkswagen under the Stakeholder Green Principle.
• The current mission statement positioned Volkswagen under the Market Green Principle. After the scandal, they have put an emphasis on retaining customer relationships.

Environmental Debate
Doomsayers vs. Cornucopian Mindset

Initially the public thought that Volkswagen had a Doomsayer mindset. After the scandal, it was revealed that they had a Cornucopian mindset

Environment – “Volkswagen’s rigging of emissions tests for 11m cars means they may be responsible for nearly 1m tonnes of air pollution every year, roughly the same as the UK’s combined emissions for all power stations, vehicles, industry and agriculture…” – The Guardian
Consumers – Betrayed, recalls on vehicles, own a brand with a tarnished image.
Shareholders – Financial losses due to drops in stock price. Key shareholders are affected such as Porsche.
Competitors – Must be prepared for closer inspections in the future. Consumers will expect more transparency.

- Volkswagen is the 2nd biggest car manufacturer after Toyota
- They promote Diesel as a “cleaner” alternative
- Diesel Engines:
Emits Nitrogen Oxides which causes health problems
Supposed to Emit lower Carbon Monoxide, Carbon Dioxide
Diesel requires less refining and gives better mileage
1937: Founded in Wolfsburg, Germany
State owned and called Volkswagenwerk, or “The People’s Car Company”
1939: Shifted to military vehicles during WWII
1945: Chosen to resurrect the German automobile industry
1960: Company goes public
1973: Shifted from the “Beetle” to new generation

LESSONS LEARNED
Sep 2015: EPA found software that cheats during Emission tests
Software automatically reduces performance during an Emission test
Normal conditions: increase acceleration, torque, and fuel economy
Nitrogen Oxides were 40 times higher than permitted
Estimated Volkswagen cars are polluting more than the entire United Kingdom put together
CEO Martin Winterkorn said he was “deeply sorry” and resigned
Recalls:
500,000 cars in the United States
8,500,000 cars in Europe
2,000,000 extra worldwide
Cost of Scandal:
$6.7 Billion Euro Contingency
Could be fined $18 Billion by the EPA
Cost will rise for lawsuits and compensation
Suffered first lost in 15 years
Shares have decreased over 30%

Volkswagen cheated on its emission testing to manufacture a cost efficient and high performing vehicle
It goes against their own values of creating a “greener vehicle”
Stakeholders impacted:
Shareholders
Management
Employees
Volkswagen car owners
Diesel industry

Diesel engines
Volkswagen equipped its diesel vehicles with a software
Defeat device
VW cheated emissions tests in order to market their vehicles as eco-friendly, and keep costs low
The actual emission rates of the cars
Legal spotlight
CEO resignation
40% drop in company stock
Product recall
Penalties, fines, and criminal charges
Defeat device enabled VW to cheat emissions test
Started a wave of investigations
Revealed that 11 million cars are effected worldwide
Vehicles were emitting up to 40 times more harmful particles than emission test results
Management failed to justify their decision under the three rationalization tests
This scandal impacts customers, general population, investors, employees, governments, and competitors
Implement codes of conduct guided by three core assumptions of:
The Principle of Connectedness
The Principle of Freedom & Responsibility
The Principle of Effects
Design and implement tailored ethical standards across all levels of operations; appoint a designated supervisor to monitor and enforce
Human resources focus on attracting effective and efficient employees and executives
Triple Bottom Line strategy
Innovation
Environment
Financial
Full transcript