The Volkswagen Emissions Scandal

Professional Ethics and Responsibilities: The Volkswagen Emissions Scandal

In what was deemed a major blunder on the part of VW’s executives, and a blot to the long-term reputation of the Volkswagen Company, the Volkswagen emissions scandal was uncovered by the Environmental Protection Agency (EPA) which had found out that “many VW cars being sold in America had a ‘defeat device’ – or software – in diesel engines that could detect when they were being tested, changing the performance accordingly to improve the results” (Hotten, 2015). Thanks to the emissions scandal, the company has had to contend with various costs – ranging from loss of confidence on the part of its customers, to actual monetary losses, to much more.

It should be noted, from the onset, that the automaker may have lost the confidence of many of its loyal customers following the scandal. From the scandal, it emerged that VW was ready to cut corners so as to enhance its bottom-line. Towards this end, it is inevitable that prospective consumers of the company’s products would query the company’s ethical bearing. If the company could deliberately put the environment at risk through blatant disregard for environmental and emission regulations, what would prevent the same company from compromising on car safety so as to further enhance its profitability? In that regard, therefore, the scandal could have cost the company both present and future business. As a matter of fact, when the scandal came to light, Martin Winterkorn, the CEO of the VW group at the time, was of the opinion that his company’s actions had broken not only the trust of its customers, but also the trust of the general public (Hotten, 2015).

The scandal also cost the automaker greatly on the financial front. As of September of 2017, the total cost of the scandal to VW was approximated to have hit $30 billion (Schwartz and Bryan, 2017). According to Schwartz and Bryan (2017), towards the last bit of last year’s second half, the company took “another $3 billion charge to fix diesel engines in the United States, lifting the total bill for its emissions-test cheating scandal to around $30 billion.” The company’s stock also took a hit following the emissions scandal. According to Stash (2016) the announcement of the scandal effectively led to 30% drop in VW’s stock price in a single day. Also, in the author’s own words, “the ‘Defeat Device’ scandal shaved $20 billion off of the company’s market cap… overnight.” It is important to note that in recent times, the company’s stock has made some laudable recovery. However, the stock is still susceptible to occasional shocks linked to the emissions scandal, as was the case when the company’s stock lost 3% after it was announced that it would be “taking another $3 billion charge to fix diesel engines in the United States…” (Schwartz and Bryan, 2017).

Thanks to the scandal, the company could also have lost a number of talented and brilliant employees that could have been instrumental to its long-term success. While some employees could have left out of their own free will, others are subject to investigations and could be jailed for their role in the scandal. Employees and officers of the company who have been detained in recent times as investigations into the scandal continue include, but they are not limited to, a former board member of Porsche and a former VW engineer. Those who leave the company out of their own volition could do so because they may not want to be associated with an unethical company. This talent hemorrhage could cost the company its competitiveness in an industry where the skill as well as competence of employees are of essence. In the final analysis, it should be noted that although the company has in recent times been on a consistent recovery path, uncertainty bounds on exactly how the emission scandal will affect the automaker in the long-term.

References
Hotten, R. (2015). Volkswagen: The scandal explained. Retrieved from http://www.bbc.com/news/business-34324772
Schwartz, J. & Bryan, V. (2017). VW's Dieselgate Bill Hits $30 bln After Another Charge. Retrieved from https://www.reuters.com/article/legal-uk-volkswagen-emissions/vws-dieselgate-bill-hits-30-bln-after-another-charge-idUSKCN1C4271
Stash (2016). VW Scandal: How Has It Impacted Volkswagen’s Stock? (VLKAY). Retrieved from https://www.investopedia.com/news/vw-scandal-how-has-it-impacted-volkswagens-stock-vlkay/