study case

BACKGROUND: During the past few months there has been a flurry of news articles

regarding a major scandel involving Volkswagen diesel automobiles.

A few years ago, VW had been honored with a pretigious industry recognition award known as the "Green Car Award" for their pioneering work in fuel efficient and low pollluting diesel vehicles (ref: 2009 Award for VW Jetta TDI and 2010 Award for Audi A3 TDI)

However, recent studies alledge that Volkswagen deliberately developed and installed intelligent software controls within their on-board computer systems that could detect when a vehicle was undergoing a smog test and modify system performance.

Thus, when the vehicle sensed that a smog test was in progress, the vehicles performance was manipulated to be compliant with pollution control laws.

However, when not sensing a smog test the vehicle's computer optimized other automotive performance values at the expense of smog performance characterisistics.

The resulting scandel has become a multi-national issue....resulting in several top level management resignations at Volkswagen.

VW's prestigious Green Car of the Year Awards have been rescinded. Reference info that you may find interesting: ▪ 29 SEP 2015 - Letter from Michael Horn, President and

CEO VW Group of America, Inc. to Owners of Affected VW Automobiles (...see attached file...)

▪ 30 SEP 2015 - Auto Blog: "VW Stripped of Green car Awards for Jetta and A3 Diesels" / http://www.autoblog.com/2015/09/30/vw-stripped-of- green-car-of-the-year-awards-for-jetta-a3-diesel/

▪ 08 OCT 2015 - CSPAN: "Michael Horn, President & CEO VW Group of America, Inc.....testimony to U.S." / http://www.c-span.org/video/?328599- 1/hearing-volkswagen-emissions-violations

▪ 09 OCT 2015 - The Guardian: "Four More Car Makers Join Diesel Emissions row" / http://www.theguardian.com/environment/2015/oct/09/ mercedes-honda-mazda-mitsubishi-diesel-emissions- row

▪ 10 OCT 2015 - LA Times: "VW Blames 'a Couple of Rogue Engineers' for Emissions Scandal"

/ http://www.latimes.com/business/autos/la-fi-hy-vw- hearing-20151009-story.html

QUESTIONS - "....OPPORTUNITIES FOR CRITICAL THINKING...": What are the motivations for developing and marketing a diesel

automobile ( or truck ) to the U.S. automotive market place? Have there been other historical instances of automotive

manufacturers cheating on pollution requirements tests ? Is the current diesel pollution levels problem limited to automobiles

only produced by VW ? What is the scope of the problem that VW faces ( vis a vis...how many

automobiles may be involved world-wide and in the U.S. ) ? How long would could it take for VW to retrofit the affected

automobiles in the U.S. ? Why would an engineer deliberately develop and implement a system

to circumvent pollution level verification testing ? Helpful hint: You may wish to consider thoughts from the following

article: 10 OCT 2015 - Reuter's: "Fear and Respect VW's Culture Under Winterkorn" / http://finance.yahoo.com/news/fear-respect-vws-culture-under- 142205903.html

Presuming the allegations of wrong-doing are correct, what are the actual and potential consequences associated with this scandel ?

Helpful hint: Consider the full spectrum of consequences...from various stakeholder perspectives....e.g. financial impacts, criminal prosecution, fines, world wide green house gas emissions, reputaton, customer loyalty, opportunity losses....et al

What should VW management have done to mitigate and /or eliminate the risk associated with this problem ?

Bonus Questions - What does the term "market capitalizaton"

(aka. market cap) mean.....and what impact has VW seen to it's market cap numbers ? Why does a company care about it's "market cap" numbers ?

Helpful hint: Market Capitalization YCharts - interactive information / https://ycharts.com/companies/VLKPY/market_cap