<<Author>>
<<Purpose of the Paper>>
Volkswagen Ethics
Hotten. R. (2015). Volkswagen: The Scandal Explained. BBCNews.com.
Retrieved from: http://www.bbc.com/news/business-34324772
Volkswagen Ethics
The Automobile industry like many others prides itself in its quality manufacturing processes, adherence to compliance norms, innovation and customer satisfaction. However, over the last few decades the industry is plagued with myriad cases of ethical misdemeanors. Some of the unethical behavior probably arises from pressures of business, profits, shareholder value and competition (Bazerman and Tenbrunsel, 2011).
In some cases, leaders turn a blind eye to unethical practices. In one of the older cases from the 1970s, the Ford Pinto was a compact car which exploded in flames due to rear collisions. Many people were hurt or killed but the Ford Company took a long time to accept the problem and recall the cars.
Further investigation revealed that the Pinto was rushed into manufacturing to compete with small car brands like Volkswagen. Ford had encountered the danger of leaking fuel tanks during the crash tests but did not see the need to stop production.
Another recent case in the news pertained to General Motors. The faulty ignition keys would automatically switch off, resulting in many accidents and deaths. The defect pertained to GM models from 2004 but it took them 10 years to issue a recall. This raises many questions on the ethicality of the issue and the involvement of senior management. Similarly, Toyota faced problems in 2009, with their accelerator pedals.
The main story that we will cover here is the latest among the auto industry brands - Volkswagen. Volkswagen has been selling diesel cars in the United States for decades. The U.S. Environmental Protection Agency (EPA) is the premier body to enforce policies on emission standards and environmental protection.
During the testing of Volkswagen diesel cars in September 2015, the EPA found that the car engines were fitted with a sophisticated software device, which could recognize the testing phase and lower the emission performance (Hotten, 2015).
As we know, emissions of nitrogen oxides from cars result in around 58,00 deaths in the U.S. annually (The Economist, 2015). NOx emission standards are stricter in the U.S. than in Europe. Many Japanese brands like Honda and Mazda have also found it difficult to meet these standards.
Volkswagen saw this as an opportunity to convince American buyers on the benefits of clean diesel. Volkswagen was selling diesel cars in the U.S. market with the promise of low car emissions.
As per VW’s strategy to conquer the American share, the selling proposition was about clean diesel engines. This was the central point of the CEO’s strategy for U.S., to help beat competition from Toyota.
Major models which had the defeat device included Audi A3, VW Jetta, Beetle, Golf and Passat. The EPA had tested about 480,000 cars in the U.S. However, once the scandal broke out, Volkswagen admitted to fitting their cars with the software.
It was also revealed that more than 11 million cars across the globe with eight million in Europe were also fitted with the same software. Further revelations also involved the use of the device in some Porsche and more Audi models.
Once the bad news was out Volkswagen carried out some of its own tests and in the month of November 2015, admitted that there were some issues with carbon dioxide emissions in 800,000 cars in Europe. Again in December, it released a statement that this affected only 36,000 cars and not 800,000, as mentioned earlier.
According to the EPA, Volkswagen had manipulated the workings of the engine with the defeat device. They had programmed the engines to sense the test phase due to constant speed, engine acceleration, air pressure and fixed position of the steering wheel.
On a test conveyor belt, the engines would sense that they are operating in lab conditions and automatically shift to a safe mode with low power, performance and therefore lower emissions. Under real road conditions, EPA estimated that the engines were actually emitting nitrogen oxide forty times above the legal limit in the United States.
When confronted by the EPA and media, the company had no option but to own up to the fact that it had indeed made these unethical decisions. As a consequence of the actions, the group’s chief executive Martin Winterkorn resigned and was succeeded by Matthias Mueller. The task for the new CEO was clear – to restore trust in the brand and ensure customer satisfaction.
The Winners and Losers
The company would have managed to sell many such defective cars during the time and earn revenue. This would have obviously helped the greed of top management, achievement of sales numbers, rewards for managers and shareholders.
The immediate impact of this was very clearly seen across the world. Many countries like the U.K., Italy, Canada, Germany and Korea began their own investigations in VW cars. The furor that was created around the world was immense. Many politicians, compliance groups and environmentalists began asking questions about VW’s testing methods and also other auto industry methods. For instance it was well known that during auto testing, the companies usually remove the side mirrors and use duct tape to cover gaps in the door panels. This is done to reduce drag and show lesser emissions. Many such practices are still being carried out.
Although the company was forced to recall 8.5 million cars from Europe and around half a million from U.S, the damage done to the reputation of the brand and the country (Germany) will last quite a while.
The immediate impact was seen in the stock markets. Volkswagen shares fell by 33% after the scandal broke. Volkswagen had to recall millions of cars resulting in a cost implication of €6.7bn (£4.8bn). The company posted its first quarterly loss of €2.5bn for the first time in more than a decade.
In addition, the EPA may impose a fine of $37,500 per vehicle sold which will add up to $18 billion. The risk of consumers initiating class action suits or other legal action is also possible (The Economist, 2015). VW has not only managed to erode the trust in their brand, but also in the diesel engines and the auto industry in general. It has also added thousands of tons of NOx to the atmosphere, affecting thousands of Americans, without their knowledge. It is still working with the EPA to correct 600,000 diesel cars (Boston, 2016).
The Virtues Involved
Volkswagen took a big risk by indulging in unethical practices. They have violated many Virtues of Character that an organization or individual must possess.
Accountability: Till the EPA conducted its investigations, Volkswagen did not care for displaying any accountability – to its customers, local laws or community.
Civic-mindedness: It is clear that VW did not display any commitment to community care or the environment.
Dependability: VW did not meet any performance or other obligations. Environmentalism: They conducted themselves in ways which did not show care for the environment in which they operate and their customers live.
Fairness: They did not act fairly to the country or to the industry.
Honesty: They were dishonest in their dealings with EPA.
Humaneness: Volkswagen’s actions showed a clear disregard for humanity and environmental considerations.
Lawfulness: They were abiding by law by sending their cars for testing BUT did not act in an Ethical manner.
Reliability: The VW brand has lost all its reliability.
Respectfulness: It showed scant respect for its stakeholders.
Principle: VW comes across as a company with no principles or scruples. Professionalism: The unethical behavior is a result of their unprofessional practices.
The Auto industry is known to display its unethical behavior since the rules and regulations permit them to do so and punitive measures are monetary. In addition, the rules governing environment and quality are different in each country. But we are tackling a global environmental problem, so why should these emission norms be different across the world? Automobile companies must be forced to comply under a global regulation brought about by the U.N. with help from bodies like EPA and others. Whether it’s the quality of its seatbelts, air bags, accelerators, brake pedals or emissions – all quality parameters must be global. The punitive measures must include imprisonment and a ban on the sale of cars. References
Bazerman. M. H. and Tenbrunsel. A.E. (2011). Ethical Breakdowns. HBR Review.
Retrieved from: https://hbr.org/2011/04/ethical-breakdowns
Boston. W. (2016). Volkswagen’s Quality Issues Widen With Latest Recalls.
Wall Street Journal. Retrieved from: http://www.wsj.com/articles/volkswagens-quality-issues-widen-with-latest-recalls-1459256441
Hotten. R. (2015). Volkswagen: The Scandal Explained. BBCNews.com.
Retrieved from: http://www.bbc.com/news/business-34324772
The Economist (2015). A Mucky Business. economist.com.
Retrieved from: http://www.economist.com/news/briefing/21667918-systematic-fraud-
worlds-biggest-carmaker-threatens-engulf-entire-industry-and
The Economist (2015). Dirty Secrets. economist.com.
Retrieved from: http://www.economist.com/news/leaders/21666226-volkswagens-
falsification-pollution-tests-opens-door-very-different-car
