Examination of the Current Status of

Volkswagen
Prepared for

Dr. Pricilla Berry

Professor of Professional Communication of Business ENC 3202

Prepared by

Allyson Shilling

February 25th, 2020

EXAMINATION OF CURRENT STATUS OF VOLKSWAGEN 2

Letter of Transmittal

TO: Dr. Priscilla Berry, Professor of Professional Communication of Business

FROM: Allyson Shilling, student

DATE: February 25th, 2020

SUBJECT: Report on the current status of Volkswagen

Here is the report on the current status of Volkswagen that you authorized on February .

The report outlines a brief history of the company, difficulties during scandals within the

company, a SWOT and a PESTLE analysis, and a detailed outline on how Volkswagen has still

remained successful company after a huge scandal.

Within this document, you will find both the failures, successes, and challenges that Volkswagen

has faced. Volkswagen has overcome a reputation breaking scandal, economic shifts in the car

industry, and technological advances throughout the industryas well. The car industry is ever

changing, so innovation and advancing is not always an easy or quick process.

Thank you for giving me the opportunity to share my insight on Volkswagen and its current

status after a massive scandal. I hope you see the strength within the company and can see the

furture success and potential Volkswagen still has.

EXAMINATION OF CURRENT STATUS OF VOLKSWAGEN 3

Table of Contents

Executive Summary 4

Introduction 4

Purpose and Methods 5

History 6

Mission Statement 7

Cultural Ethos 8

Current Status 10

Board of Directors and Corporate Structure 10

Sustainability and Environmental Standing 13

Going Forward 14

SWOT Analysis 15

PESTEL Analysis 16

References 19

Appendix 20
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EXECUTIVE SUMMARY

The objective of this proposal is to shed light on the current status of Volkswagen after

a reputation breaking scandal. I conducted a phone interview with former Chief

Operating Officer Mark McNabb. I also utilized secondary resources such as the

History Channel and the Volkswagen website. The results of this research were used to

identify the key issues that still lie within the company and how the company has

overcome the challenges of the scandal. This research solidified the efforts that

Volkswagen has been making, defines where the company’s strengths and weaknesses

lie, and how different outside factors play a vital role in the advancement in

Volkswagen’s future.

INTRODUCTION

Volkswagen is a longstanding company that has prided itself of being the car of the

people. Throughout the years, Volkswagen has faced challenges and successes as the

automotive industry has shifted and technology has advanced. Volkswagen’s challenges

have mostly stemmed from the emission scandal that broke in September 2015. Since

the early 1970’s, countries throughout the world have kept a serious eye on the

emissions that vehicles release into the atmosphere. Groups such as the Environmental

Protection Agency (EPA) were set in place to monitor and hold automotive companies

accountable and to keep to the standards set worldwide about allowable emissions from

cars. The fraudulent emissions committed by Volkswagen as a company violated

current standards of allowed emission set by these groups. This created immense
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backlash from consumers creating a cloud of doubt by many loyal customers and

rocked the future of the company. This goal of this paper is to highlight the successes of

Volkswagen leading up to the scandal, the failures, the scandal itself, and how the

company has moved forward after.

PURPOSE AND METHODS

Purpose

The purpose of this paper is to examine the current status of Volkswagen, understanding

their strengths and weaknesses in light of the scandal, and determining key factors

Answers to the following questions will be answered within the report.

1. When and how did Volkswagen become a company?

2. What is Volkswagen’s mission as a company?

3. What was the sole purpose of Volkswagen?

4. Who was the founder of Volkswagen?

5. How was the company leading up to the big scandal in 2015?

6. How did Volkswagen handle the emissions scandal?

7. What were the repercussions that Volkswagen faced after the scandal?

8. How did the company grow and move past the scandal?

9. What do the SWOT and PESTEL analysis tell about the company?

Methods
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Research was conducted through sources such as personal communication with a

former chief operating officer. Also, utilizing resources such as the Volkswagen website

and the history channel website.

HISTORY

On May 28, 1937 Germany and its government was under the regime of Adolf Hitler

and the National Socialist Party also known as the Nazi Party. Adolf Hitler and the

government formed a state-owned automobile company that later became Volkswagen,

or “The People’s Car Company.” Hitler’s mission when beginning the company was to

create a car that could reach top speeds but was still affordable for the time period.

Utilizing his resources during this period of time, Adolf called on Austrian engineer

Ferdinand Porsche to help construct and design these automobiles that fit his

specifications. This is how the first models of Volkswagen which at the time was named

Gesellschaft zur Vorbereitung des Deutschen Volkswagens mbH, were born. The

KdF(Kraft-durch-Freude)-Wagen which translates to strength through joy car was the

first model released by Volkswagen and made its premier at the Berlin Motor Show in

late months of 1939. Shortly after being revealed to the people of Germany, World War

II broke out which essentially halted all production and creation of Volkswagen

vehicles. Years later after the war was over and Germany was left in ruins including the

factory where the cars were being manufactured. The Volkswagen company was then

continued by the Allies. Their main goal when continuing the Volkswagen company

was to try to relaunch Germany’s automotive industry.

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Due to its dark past of being started by the Nazi Party, the Volkswagen company had a

slow start in parts of the world especially the United States. This was until a relaunch

around the Volkswagen Beetle by a well-known advertising agency sent Volkswagen to

the top of the charts passing Ford Motor Company. Volkswagen now is a worldwide

brand that has been surging within the automotive industry, that is until September

2015. In September, it was made public that Volkswagen had implanted a technology

that would detect when the car was being tested on its emissions of carbon dioxide in a

little over 11 million vehicles worldwide. This “defeat device” was implanted in various

Volkswagen’s diesel models such as the Jetta, Golf, Passat, and Beetle. Volkswagen

was also accused of placing this software in some of the 3-liter diesel engines in its

subsidiaries such as the Audi A3 model and some Porsche models as well.

MISSION STATEMENT

Previously in 2013, before the light of the emission scandal Volkswagen’s mission

statement expressed the goal of the company. Stated on their company website, “The

Group’s goal is to offer attractive, safe and environmentally sound vehicles which can

compete in an increasingly tough market and set world standards in their respective

class.” Recently, Volkswagen has since revised its mission to a simple yet effective

phrase that expresses its goal for the next 5 years, “goTOzero.” Oliver Blume, a

member of the group board of management explains what the new motto means and

how Volkswagen is embracing its faults and using it as a stepping stone to push

boundaries further within the industry. "With the new Group Environmental Policy, the
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Group is giving itself and its stakeholders a clear orientation. Our efforts to improve

environmental protection cover the entire product cycle, from development, production

and operation to the subsequent recycling of our vehicles and administration. We also

involve our suppliers. Only together can we achieve our goals"(O. Blume, 2019). This

ideology of “goTozero” stems from their strategy of “TOGETHER- Strategy 2025+,”

which is the company’s plan over the next 5 plus years to create a more sustainable

company concentrating on four main actions: climate change, resource, air quality, and

environmental compliance.

CULTURAL ETHOS

Volkswagen as a company since 2015, has been rebranding and reinventing itself

focusing on shaping the environment and creating a new level of integrity and values

that the consumer can relate with and want to stand behind. The company is trying to

“shape mobility- for generations to come” as stated in Figure 1 below. As displayed in

the image, Volkswagen lists out five key components that they intend to act on.

Launched in 2019, the CEO Dr. Herbert Diess outlines a new cultural ethos for

Volkswagen the Together4Integrity movement. This movement which is standard

across all regions of the Volkswagen Company lists out specifics for what this new

cultural ethos entails.

 We take on responsibility for the environment and society.

 We are honest and speak up when something is wrong.

 We break new ground.

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 We live diversity.

 We are proud of the work we do.

 WE not me.

 We keep our word.

These key points listed out by the CEO reiterate the company’s massive shift towards

becoming a more sustainable and ethically responsible company again.

FIGURE 1

Values and Integrity. (n.d.) Created June 2019.

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CURRENT STATUS

Currently Volkswagen is surging forward again. In 2017, just two years after the

scandal made headway sales began to rise. Volkswagen brand vehicles were up 12

percent in sales in October 2017 (N. Boudette, 2017). This was a huge leap considering

in the year prior sales were so slow. According to Jeff Williams, a Volkswagen

dealership owner in Lansing Michigan, there were days were not a single person would

come in to the dealership (N. Boudette, 2017). This rapid decline in sales caused many

to lose their jobs and even for some their dealership businesses.

CORPORATE STRUCTURE AND BOARD OF DIRECTORS

Volkswagens corporate structure has remained the same for several years, but in 2012

Volkswagen decided to buy majority share of Porsche SE. This purchase created the

super power brand of Volkswagen overall. Now under the Volkswagen umbrella of

ownership is Volkswagen, and Volkswagen Commercial which is Volkswagens line of

commercial trucks and carriers. Also included are huge luxury car brands Audi,

Bentley, Bugatti, Lamborghini, and now Porsche shown below in Figure 2.

Volkswagen has a matrix corporate structure, meaning that the chain of power is from

top down. Within the Board of Directors, the chain breaks down as following:

  Dr. Herbert Diess, Chairman of the Board of Management of Volkswagen

AG and Chairman of the Board of Management of the Volkswagen Passenger

Cars brand
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Members of the Board of Management of Volkswagen AG

  Oliver Blume, ‘ Brand Group ‚Sport & Luxury ‘

  Gunnar Kilian, Functional Responsibility ‘Human Resources’

  Andreas Renschler, Brand Group ‘Truck & Bus’

  Abraham Schot, Brand Group ‘Premium’

  Dr. Stefan Sommer, Functional Responsibility ‘Components and

Procurement’

  Hiltrud Dorothea Werner, Functional Responsibility ‘Integrity and Legal

Affairs’

  Frank Witter, Functional Responsibility ‘Finance and IT’

Members of the Supervisory Board

  Hans Dieter Pötsch, Chairman

  Dr. Hussain Ali Al Abdulla, Board Member of Qatar Investment Authority

  Dr. Hessa Sultan Al Jaber, Former Minister of Information and

Communications Technology, Qatar

  Dr. Bernd Althusmann, Minister of Economic Affairs, Labor, Transport and

Digitalisation for the Federal State of Lower Saxony

  Dr. Hans-Peter Fischer, Chairman of the Board of Management of

Volkswagen Management Association (VMA)

  Marianne Heiß, CEO of BBDO Group Germany GmbH

  Jörg Hofmann, IG Metall

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  Johan Järvklo, Secretary-General of the European and Global Group Works

Council of Volkswagen AG

  Ulrike Jakob, Deputy Chairman of the Works Council at the Volkswagen AG

Kassel plant

  Dr. Louise Kiesling, Entrepreneur

  Peter Mosch, Chairman of the General Works Council of AUDI AG

  Bertina Murkovic, Chairman of the Works Council of Volkswagen

Commercial Vehicles

  Bernd Osterloh, Chairman of the General and Group Works Councils of

Volkswagen AG

  Dr. jur. Hans Michel Piëch, Lawyer in private practice

  Dr. jur. Ferdinand Oliver Porsche, Member of the Board of Management of

Familie Porsche AG Beteiligungsgesellschaft

  Dr. rer. comm. Wolfgang Porsche, Chairman of the Supervisory Board of

Porsche Automobil Holding SE and Chairman of the Supervisory Board of Dr.

Ing. h. c. F. Porsche AG

  Conny Schönhardt, trade union secretary for the IG Metall Board of

Management in the unit for Strategic and Political Planning

  Athanasios Stimoniaris, Chairman of the Group Works Council of MAN SE

and of TRATON SE

  Stephan Weil, Minister-President of the Federal State of Lower Saxony

EXAMINATION OF CURRENT STATUS OF VOLKSWAGEN 13

  Werner Weresch, Chairman of the General Works Council and Group Works

Council of Dr. Ing. h.c. F. Porsche AG

Figure 2

Structure after Porsche Transaction. (n.d.). Created 2012.

SUSTAINABILITY AND ENVIRONMENTAL STANDING

After the scandal the last company thought of when it comes to environmental and

sustainability would be Volkswagen. In lieu of the emissions scandal, one repercussion

was that Volkswagen pour money into creating a company that specifically dealt with
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the rising issue of lack of convenience for new electric cars. Thus, Electrify America

was created. Electrify America, headed by chief executive officer Mark McNabb who

was former chief operating officer of Volkswagen after the scandal was created to

essentially set up charging stations across the United States. In combination with

creating Electrify America, Volkswagen also revised their environmental mission

statement. “We want to deliver mobility for everyone around the world and, as we do

so, to minimize the impact on the environment. Here on this site you’ll find lots of

examples of current projects through which we’re pursuing this goal” (H. Diess, 2019).

This statement was introduced under the ideology of the goTOzero movement

established by chairman and chief operating officer Herbert Diess. Along with new

goals of reshaping their impact on the environment, Volkswagen also paid for every

single car that was effected by the emissions scandal. Billions of dollars were poured

into recapturing all the affected cars and into making strides to make it better with

creating Electrify America.

GOING FORWARD

“We put many new processes in a place including

a hotline, trust but verify (4 eyes principal),

ethics workshops, ethics guidelines”

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Since the scandal, Volkswagen has taken immense steps to reconcile its consumers and

keep its word on the future. The company intends to continue to stride itself of

sustainability and ethical behavior after the scandal. Mark McNabb, former chief

operating officer of Volkswagen made statements expressing how Volkswagen as a

company intends to continue to surge forward after the reputation breaking scandal.

McNabb who was specifically in charge of settling and reconciling after the scandal

made headway. Volkswagen continues to try to reconcile with the scandal and use it as

a stepping stone towards the future.

SWOT ANALYSIS

STRENGTHS

 Connection between all owned brands

 Widest brand portfolio compared to competition

 Excellent diversification strategy

 TOGETHER – 2025 and goTOzero strategies

WEAKNESSES

 Negative image still in lieu of the scandal

 Highest recall rate in U.S market ever

 Immense market share drop in the U.S automotive market

 Behind technologically compared to other companies in electric car technology

OPPORTUNITIES
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 Increased expectancy of fuel prices

 Demand for self-driving cars

 Weakening euro exchange rate

 Focus on increasing sustainability to solve damaged brand reputation

THREATS

 Immense and intense competition

 Continuous fines and penalties from scandal

 Stricter and increased government regulations

PESTLE ANALYSIS

POLITICAL:

Trade Tariffs

Since cracking down on the amount of importation we do here in the United States,

increased trade tariffs amongst the United States and United Kingdom markets threaten

the automotive market. “Until now, the automotive industry has not been subject to

these tariffs, but there’s a very real risk that might change. As for the United Kingdom,

its much-debated decision to leave the European Union may result in additional charges

being placed on the import of Volkswagen Group vehicles” (T. Bush, 2019).
EXAMINATION OF CURRENT STATUS OF VOLKSWAGEN 17

ECONOMIC

Expanding Consumer Spending

Across the globe, consumer spending is at an all time high. The automotive industry

relies solely on consumers, and when the consumers are willing to spend brands such as

Volkswagen that own a variety of luxury and affordable brand names truly benefit.

SOCIOCULTURAL

Shifts within the driving market

With consumer awareness at an all-time high, ride-sharing apps such as Lyft and Uber

have become extremely popular. This presents a problem for the automotive industry

and brands like Volkswagen. Many individuals and consumers are giving up their

vehicles due to the expensive upkeep. These ride-sharing apps give consumers an

alternative option to getting from place to place.

TECHNOLOGICAL

Autonomous Advanaces

The innovation of autonomous cars and fully electric car brands such as Tesla have

taken off. Many advances in the industry such as self-parking features, back-up cameras

and sensors, and hardware constraints are now standard features within every vehicle.

Volkswagen having a strong financial standing gives the company an advantage at

being able to develop and have the necessary research to further enhance themselves in

this area. With autonomous technological advances also comes the advances in green

technology or the environmentally friendly and efficient battery operated vehicles. The
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Volkswagen group has shown potential in this area of green technology within their

Audi and Porsche models. Audi especially has shown advancements in hydrogen fuel

cells for use with electric cars.

LEGAL

Emissions Scandal

The most known legal factor affecting the Volkswagen group would be the emission

scandal that broke light in September 2015. The software installed in millions of cars

across the globe was used to cheat diesel engine emissions tests conducted by the

Environmental Protection Agency. Numerous lawsuits and legal cases resulting in

settlement have been brought to light as well as the company having to buy back every

affected vehicle it could get its hands on. Since the scandal, Volkswagen has vowed to

abide by the law and has made its corporate mission to regain the trust of the

consumers.

ENVIRONMENTAL

Green Technology

All electric cars have made headway in the automotive industry. This green technology

has directly affected the Volkswagen group. While the consumer shift in becoming

more environmentally conscious has been part of the reason for advancements in green

technology, the real reason for these advancements is to keep up with environmental

standards set by groups such as the Environmental Protection Agency.

EXAMINATION OF CURRENT STATUS OF VOLKSWAGEN 19

REFERENCES

Boudette, N. E. (2017, November 1). Volkswagen Sales in U.S. Rebound After Diesel
Scandal. Retrieved from
https://www.nytimes.com/2017/11/01/business/volkswagen-sales-diesel.html

Buss, D. (2012, July 6). Porsche Deal is Crowning Achievement for Ambitious VW.
Retrieved from https://www.brandchannel.com/2012/07/06/porsche-deal-is-
crowning-achievement-for-ambitious-vw/

Environment. (2020, February 20). Retrieved from

https://www.volkswagenag.com/en/sustainability/environment.html

Executive Bodies. (n.d.). Retrieved from

https://www.volkswagenag.com/en/group/executive-bodies.html

Hotten, R. (2015, December 10). Volkswagen: The scandal explained. Retrieved from
https://www.bbc.com/news/business-34324772

Jurevicius, O. (2013, September 14). Volkswagen mission statement 2013. Retrieved

from https://strategicmanagementinsight.com/mission-statements/volkswagen-
mission-statement.html

Strategy: Volkswagen Group. (2019, June). Retrieved from

https://www.volkswagenag.com/en/group/strategy.html

Vellequette, L. P. (2018, May 2). VW's Electrify America subsidiary replaces McNabb
as CEO. Retrieved from
https://www.autonews.com/article/20180502/OEM02/180509947/vw-s-
electrify-america-subsidiary-replaces-mcnabb-as-ceo

Volkswagen is founded. (2009, November 13). Retrieved from

https://www.history.com/this-day-in-history/volkswagen-is-founded

Volkswagen with New Corporate Mission Statement Environment. (2019, July 10).
Retrieved from
https://www.volkswagenag.com/en/news/2019/07/goTOzero.html#
EXAMINATION OF CURRENT STATUS OF VOLKSWAGEN 20

APPENDIX

Phone Interview Mark McNabb, former chief operating officer of Volkswagen

1. How did Volkswagen change their ethical behavior after the scandal?

“We put many new processes in a place including a hotline, trust but verify (4

eyes principal), ethics workshops, ethics guidelines”

2. What steps did you as Chief operating officer implement to insure the trust back

of consumers?

“Hired a consulting firm to help us identify the problem/ provide solutions

including how to fix an emissions issue

I was actually in charge of the settlement. We took several steps including $500

apology knowing that we would not get to apply that against any class action

settlement.

Built an offer to either fix or buyback every single buyback regardless of the

condition which ended up with a 98 percent participation rate. This had to be

done as a class because it would ensure it was an opt out program and opt in.

We hired a staff of over 2000 people in two months to help us process all the

necessary buybacks

Hired an outside law firm to investigate the TDI matter both in a Germany/US

Settled a class action with dealers to ensure they would administer the terms of

the consumer class”.

EXAMINATION OF CURRENT STATUS OF VOLKSWAGEN 21

3. Before you stepped down after Electrify America was introduced did you all see

a jump in sales within Volkswagen?

“We increased our spend on incentives by over $1000 per unit Sales actually

increased year over year during the 6 months after we were notified by EPA and

and DOJ. We felt that we needed to keep the customers and dealers excited

about the deals until we could figure out what happened.”