What is the ‘dieselgate scandal’ against

Volkswagen?
It was in 2015 that Volkswagen admitted to having installed emissions-cheating devices in its
vehicles, which cost the company over $33 billion in vehicle refits and regulatory fines, mostly in
the United States. The scandal is often dubbed as the “dieselgate scandal” and Volkswagen has
since admitted the device affects over 11 million cars worldwide.

What was the “dieselgate scandal”?

In September 2015, the US Environmental Protection Agency (EPA) found that in over 590,000
diesel motor vehicles, Volkswagen had violated the Clean Air Act as the vehicles were equipped
with “defeat devices” in the form of a computer software, which was designed to cheat on
federal emissions tests.

A defeat device is one that bypasses or renders inoperative a vehicle’s emission control system.
Essentially, software of this kind is designed to detect when the vehicle is undergoing an
emissions test and turns on full emissions controls during the testing period. In the course of
normal driving, the effectiveness of such devices is reduced.

In the notice issued by the EPA in September 2015, it alleged that Volkswagen installed these
devices in its 2009-2015 two-liter diesel vehicles, thereby violating EPA’s emissions standards
since these vehicles emit 40 times more pollution than the level permitted. Some of the affected
vehicles included Jetta (2009-2015), Beetle (2013-2015) and Passat (2012-2015) among
others. The major excess pollutant, in this case, were nitrogen oxides.

In November 2015, the EPA issued a separate notice of violation of the Clean Air Act to car
manufacturers Audi, Porsche and Volkswagen for producing and selling certain model year
2014-2016 three-litre diesel cars and SUVs that included a software device meant to circumvent
the emissions standards. These vehicles emitted nine times more pollution than the standards
allowed. Subsequently, Volkswagen informed the EPA that the defeat devices existed in all of
its US three-litre diesel models since 2009.

In January 2016, the Department of Justice filed a complaint on behalf of the EPA against
Volkswagen AG, Audi AG, Volkswagen Group of America, Inc., Volkswagen Group of America
Chattanooga Operations, LLC, Porsche AG, and Porsche Cars North America, Inc. for alleged
violations of the Clean Air Act. In January 2017, Volkswagen pleaded guilty to three criminal
felony counts and agreed to pay $2.8 billion as a criminal penalty. Further, as separate civil
resolutions of civil, environmental, customs and financial claims the company agreed to pay
$1.5 billion.
Who are the people involved in the Volkswagen
emissions scandal?
Winterkorn resigned in September 2015 after US authorities accused Volkswagen of using
illegal software to deliberately manipulate its cars to meet emissions standards during testing,
saying upon his resignation that he was "stunned that misconduct on such a scale was possible
in the Volkswagen Group" and he was "not aware of any wrongdoing" on his part.

The software helped decrease emissions when the car detected it was undergoing testing, but
would otherwise continue to pollute at amounts that were over the legal limit.

The Braunschweig action is one of many ongoing legal cases against Winterkorn and five other
leading executives involved in the Dieselgate scandal.

MARIANNE HONEY T. CUAJOTOR 3RD YR BS ENTREP

Questions:

Please answer briefly in a detailed, concise and easy to understand manner

1. Given that you are part of the decision-making board, do you believe that the company
should be restructured?

Yes, I think restructuring the company is needed because they violated

the clean air act and haven’t been transparent and were not owning their
problems. The problems or the scandal damaged the company’s reputation
because of their recklessness causing the stakeholders and the public in having
second thoughts of the company.

2. Identify the three main problems that the company is facing. Among the three, what is
the most important problem the company is facing? How would you recommend the
company address this public relations nightmare and regain sales traction? How would
you turn this company around? Provide your reasoning for your recommendation(s).

1. Volkswagen Reputation were damaged

2. Volkswagen Violated the Clean Air Act
3. Volkswagen’s Reckless Leaders

Best possible solutions for these are to change leaders. Having competent caring
leaders can bring out the best of the company and prevent a much bigger
problem in the near future002E
3. Based on the four fundamental principles of corporate governance, how is Volkswagen
affected in terms of:
● Transparency
○ They hid the fact that they installed defeat device in the car they
manufactured that remained undetected for years until the NGOs took
notice of this.
● Equality/ Equity
○ They were too focused on their own greediness or personal interest and
intentions and have failed or disregarded the public or people.
● Corporate Social Responsibility
○ CSR is a business model that helps companies be accountable to itself,
stakeholders and the public. However, the company focused solely on
profit rather than the being of the company, thus resulted failure in
applying or regulating the companies’ principles.
○
● Accountability
○ Even when prosecutors alleged Winterkorn guilty that he was aware of
the data manipulation, he still denied and covered up the problems and
were not taking accountability of the mistakes that’s been done.

4. Among the four listed principles, which principle is mostly affected? Which aspect is
least affected? Explain your answer.

I think that all the principle can greatly affect one another like a domino.
But if I need to choose, I think that CSR is mostly affected, this focuses in
regulating the company’s accountability and commitment in contributing to the
well being of the company itself, the stakeholders and the public and were
responsible to follow the law. Thus, violating the law will not only make the
company suffer but also the stakeholders and the public which can greatly result
in a loss. As for the last one, I think it is equity because this mostly focuses on a
certain individual and as I’ve said, all the principles can cause domino damage
thus all principles does greatly affect every problems that has been done.