Volkswagen Scandal Discussion
Volkswagen Scandal Discussion
Volkswagen, which is a Germany based corporation, is the world’s largest automaker producing over 3,000 vehicles everyday with a more than 600,000 workers (Campbell, Rauwald, ; Reiter, 2018). However, this multi billion corporation was at a risk of collapse after it was faced with one of largest scandals in the motor industry in September 2015. The scandal involved a process to cheat emission tests (Campbell, Rauwald, ; Reiter, 2018). The organization had developed a system that indicated their diesel vehicles appear cleaner than they were. Their cars produced 10 to 40 times the legal required level of smog-causing nitrogen oxide (Campbell, Rauwald, ; Reiter, 2018). This scandal resulted to the resigning of Martin Winterkorn one of the longest serving chief executive officer negatively affecting its reputation in the automotive industry. Muller took over from Martin as the chief executive officer (Campbell, Rauwald, ; Reiter, 2018).
This pollution was estimated to contribute to the number of premature deaths with an estimation of more than 1200 deaths worldwide (Campbell, Rauwald, ; Reiter, 2018). However, Chancellor Angela Merkel came to its rescue as this scandal would impact the automotive industry (Campbell, Rauwald, ; Reiter, 2018). This involved 30 billion dollars compensation and repair costs for the 11 million affected vehicles. In spite of this scandal, Volkswagen has been able to bounce back to its position with most of its brands, which include Porsche and Bentley defending their sales in the global market against Toyota, which is also a giant in the automotive industry. It has also been accepted back in the United States with its profits and shares recovering from the scandal (Campbell, Rauwald, ; Reiter, 2018).
To prevent this from ever happening again, the organization has implemented strategies, which are aimed at improving and decreasing emissions produced by their vehicles (Campbell, Rauwald, ; Reiter, 2018). One of the strategies include implementation of the electrification program which involves developing battery powered or hybrid variants which will be able to incorporate electricity power to power the vehicles (Campbell, Rauwald, ; Reiter, 2018). However, the organization is still facing lawsuits from customers as well as investors who were affected by the scandal, which is making it a challenge in the implementation of the reforms (Campbell, Rauwald, ; Reiter, 2018).
Despite the negative effects the organization faced due to the dieses crisis, the company is in a much better position than it was. This scandal resulted in the management changing their perspectives of the industry and come up with better strategies that has helped the company to remain competitive (Campbell, Rauwald, ; Reiter, 2018). This will also enable the company to survive many challenging factors predicted to affect the automotive industry in the 21st century. The management took advantage of the crisis as a wakeup call and a warning in preparation for the future leading to the change. Volkswagen Corporation is almost done with the process of repair of all affected vehicles to comply with the enacted rules (Campbell, Rauwald, ; Reiter, 2018).
Strategic responses to extreme crises by corporations include laying off some of their workers. Due to the costs related with scandals, which include lawyer fees and compensations, corporeations, reduce their number of employees to sustain the company (Coombs, 2013). With reduced personnel, it is easy to manage and maintain production while at the same time addressing the negative effects resulting from a crisis (Coombs, 2013). Volkswagen discharged 30,000 of its employees to sustain the budget and use the funds to pay the required compensation (Campbell, Rauwald, ; Reiter, 2018).
Another response to extreme crises includes terminating production of some of the corporation’s products (Coombs, 2013). This can include the product largely affected as well as the product with a minimal customer base. This helps the organization to reduce increased effects caused by the affected product as well as cost control in the production of certain types of products (Coombs, 2013). Volkswagen eliminated the manufacturing of the Phaeton, which is a luxury sedan, which did not have much gain on the corporation in terms of sales (Campbell, Rauwald, & Reiter, 2018).
Campbell, M., Rauwald, C., & Reiter, C. (2018, March 29). How Volkswagen Walked Away From a Near-Fatal Crash. Bloomberg Business week. Retrieved from https://www.bloomberg.com/news/features/2018-03-29/how-volkswagen-walked-away-from-a-near-fatal-crash
Coombs, W. T. (2013). Applied crisis communication and crisis management: Cases and exercises. Thousand Oaks: SAGE Publications, Inc.