VW 2015 Emission scandle

Volkswagen PR Crisis 2015 2

Determine your argument, provide supporting facts

Volkswagen (VW) is one of the world's leading car manufacturers with an excellent reputation in the industry, but when facing challenges, how far is their leadership willing to go the protect their reputation from a public relation (pr) crisis. The slow unraveling of the 2015 scandal devastated the company, but VW was able to recover from good PR practices. Let us look deeper at the mistakes VW leadership made that unfolded the scandal and how they were able to recover.

In 2014 U.S. and German researchers conduct tests on diesel model Volkswagens to identify if the clean air technology was clean. The International Council on Clean Transportation (ICCT) had begun to investigate for several years if VW was violating the clean air act. According to The Volkswagen Scandal (2016) article, ICCT looking for alternative testing partnered with West Virginia University (WVU); while, California Air Resources Board (CARB) was conducting their tests. ICCT & WVU focused on road tests from real driving conditions, and the CARB performs lab test lab. The results from the vehicles on the road test claimed that Jetta had exceeded U.S. emissions by 15 to 35 times the upper limit, and Passat 5 to 20, however, the same vehicles CARB tested pass emissions (Blackwelder et al., 2016). VW immediately denied any wrongdoing on their part, and this had to be a mistake.

Following the series of research events in 2014, passing emission testing became a significant concern for the company. The CEO stated he was not involved or had knowledge that the company has done anything to manipulate testing. According to The Volkswagen Scandal (2016) article, the automaker stalled long enough and later admitting to the environmental protection agency (EPA) that they deliberately installed a defeat device to cheat the emission test. Their leadership openly admitting to this caused a public relations nightmare and made things worse for the corporation. Experts say, their leadership should have responded faster, and the slow reaction allowed the crisis to spiral out of control (Garcia, 2015). Customers started raising their concerns, questioning how long VW has been hiding this and is there anything else they are keeping from them. From 2009 to 2015 the company manufactured over 11 million automobiles across different brands with a defeat device to pass the emissions test. According to The Volkswagen Scandal (2016) article, in December 2014, the company attempted to cover up the scandal by issuing a voluntary recall for 500,000 vehicles in the United States, claiming there was a software glitch causing the emission test problem and they have a software patch to fix it.

VW leadership did not successfully prepare for a public relation response to the scandal. Based on Deloitte surveys, most corporations are not prepared to face a storm of this magnitude. The Deloitte survey interviewed 300 board and management members from various companies, and more than half stated they have not engaged in monitoring communications to detect trouble within their companies and responding to a pr crisis (Clark, 2017). VW leadership stalling when asked questions regarding the scandal was a clear sign that they had not prepared for potential PR crises. Therefore, VW released information and made an initial statement saying that only a few car models had the defeat devices (Clark, 2017). Although an answer was needed, VW did not gather any of their facts, and their cover-up blown.

Unfortunately, VW customers responded to the negative outcome of the organization, and the company back was again the wall looking for a quick solution to the madness. They claimed nine software engineering installed a device to cheat the emission test. The CEO then said it was a mistake of a few bad people within the company (Hakim, 2016). At this point, they have already made them self’s look guilty by the quickly denying, but now they are blaming nine individuals for creating and installing the devices in the vehicles.

As the scandal continued to unfold, VW customers became discouraged with a significant amount of them turning to other automakers affecting the companies market value. The New York Times (2016) argues a Harris Poll of Americans rank Volkswagen dead last of the 100 most visible companies. A brand intelligence company, BrandIndex, tracks consumer perceptions and measures it through buzz score. The ranges of the buzz score go from negative 100 to positive 100 with zero being neutral. Before the scandal, the public felt good about VW, and its Buzz score in it was positive 14, and after the scandal, it drops to an all-time low of negative 46 (Clark, 2017). Meaning 14% of people would have purchased a VW brand vehicle before, and after the scandal, 46% of people would not.

VW is a German based company with an interesting history dating back to the 1930s. Its name translates to “people’s automobile,” and its original mission was to provide affordable auto transportation for the masses. This mission was actively supported by Adolf Hitler and Nazi Germany; they wanted German citizens to have the same access to automobiles as the citizens within the United States. VW grew to be one of the world’s largest automakers, with recorded revenues of nearly $240 billion (U.S.) in 2014. Prior to the Dieselgate, VW was one of the most well-respected and coveted brands in the world. They ranked ahead of household names such as Ford, Audi, Sony, Facebook, and Adidas in the annual brand value report from Interbrand (Ranking the Brands, 2013). VW confessed the use of a software algorithm in a few of its diesel-powered vehicles that act as a "defect device"; the software detects when the car is experiencing compliance testing and initiates specific contamination control signals to lessen tailpipe emissions. Federal regulators and the European Union (EU) have analyzed the utilization of this product and found that about 11 million motor vehicles around the world had this device installed.

In 2015, Martin Winterkorn Volkswagen CEO resigned, and investigations found that nine managers headlined this scandal and were all suspended, while the CEO claimed unawareness of the number of employees and a detailed that this was not corporate decision (Boston, Varnholt, & Sloat, 2015). The Jones Day law firm, external investigator of Volkswagen, conducted their internal investigation and found that 50 members of staff confessed that they were completely aware of emission scandal. The VW human resource practices pave the ground for management demand their employees to consider what's at stake, and if you are not capable of finding a solution or of performing your tasks; other candidates are efficient enough to perform your job. Therefore, forcing the hands of the employees of Volkswagen into a situation where if maintaining their employment is the concern, there is no choice (Sherk, 2014). This details that their only concern was profit and had no regard to damage this action would cause to the environment.

This scandal occurred because of technology shortcoming of most stringent emission standards imposed by the United States EPA, which prompted Volkswagen to cheat in emission test (Boston, Varnholt, & Sloat, 2015). Among endeavors to fix associations with the key partners influenced by the outrage, the organization has pulled back its diesel vehicles from the market. From 2008 to 2015, approximately 428,000 Volkswagen and Audi diesel cars pumped out nitrogen oxide by nearly forty times more than what was allowed by the Clean Air Act. (Selin, 2015b). In accordance with one of Volkswagen executives, the rewarding system of VW is one of the main reasons employees preferred to keep quiet. This rewarding system applies to the entire workforce to include but not limited to positions such as assembly line to more senior levels such as chief executives (Elson, Ferrere, & Goossen, 2015).

On April 21, 2016, a judge in California declared that Volkswagen had offered a concrete plan which has been supported by United States government agencies and environmental protection agency to solve and finalize the case. Based on the Kelly Blue Book, it costs VW more than $7 billion to buy back all the affected vehicles (Goodman et al., 2016a). This proposed deal included a considerable compensation for car owners of 2-liter diesel and also offers a fund for proper remediation hardship for any harmful environmental effects caused by the vehicles exceeding pollutions to the environment. This was a great opportunity to bring out significant changes to the automobile industry by requiring VW to concentrate solely on electric vehicles. VW pleaded guilty and agreed to pay $4.3 billion in fines and penalties. Among the guilty, two executives, Oliver Schmidt an engineer and former Volkswagen AG executive, was sentenced to seven years of prison and James Liang former engineer was sentenced to 40 months in prison in violation of the Clean Air Act.

This scandal exposed unethical and deceptive practices at Volkswagen and damaged its brand tremendously. For customers affected by the scandal, VW issued what they determined to be a “Goodwill Package” which included gift cards, credits for service/product, and a three-year extension of the company offered roadside assistance plan. Although Volkswagen’s major competitors have also been socially irresponsible in the past, they have all seemed to recover and rebranded themselves with the mind changing features that add value to the vehicles in an attempt to overshadow and/or create a cloud of judgment based off the now rather than the past. All of which most considered this scandal to be the downfall of the upcoming removal of the VW Beetle with rumors of a revamped return in 2020, which is hard to believe based off their current ranking of 27 for 2019.

References

Blackwelder, B., Coleman, K., Colunga-Santoyo, S., Harrison, J., & Wozniak, D. (2016). The Volkswagen Scandal. Case Study. University of Richmond: Robins School of Business, 2016.

Clark, S. (2017). What brands can learn from the Volkswagen pr crisis? SpinSucks. Retrieved from https://spinsucks.com/communication/volkswagen-pr-crisis/

Garcia, T. (2015). Volkswagen’s pr response made problems worse, experts say. Marketwatch.com. Retrieved from https://www.marketwatch.com/story/volkswagens-pr-response-made-problems-worse-experts-say-2015-09-25

Hakim, D. (2016). VW’s crisis: forward, reverse, u-turn. The New Times. Retrieved from https://www.nytimes.com/2016/02/28/business/international/vws-crisis-strategy-forward-reverse-u-turn.html

Goodman, McGrath, & Leah, (2016a, April 24). VOLKSWAGEN, EPA REACH 'CONCRETE PLAN' IN VEHICLE SOFTWARE CHEAT SCANDAL, Newsweek. Retrieved from http://www.newsweek.com/buyback-offers- possible-fix-volkswagen-owners-deal-judge-450789

Boston, W., Varnholt, H., & Sloat, S. (2015, December 10). Volkswagen Blames ‘Chain of Mistakes’ for Emissions Scandal, The Wall Street Journal. Retrieved from http://www.wsj.com/articles/vw-shares-up-ahead-of- emissions-findings-1449740759.

Sherk, J. (2014). Expand Employee Participation in the Workplace. The Heritage Foundation, March, 13.