Case Study onVolkswagen Emission Crisis

Introduction to Company:• Established in 1937• Volkswagen is a German car manufacturer

headquartered in Wolfsburg, Lower Saxony, Germany

• The word Volkswagen means "People's car" in German

• Its current CEO is Matthias Muller• Volkswagen surpassed Toyota as the world's

largest automaker in the first half of 2015• Volkswagen sold 5.04 million vehicles in the first

six months of the year, edging Toyota's 5.02 million

Did You Know:• Ironically, the idea for the Volkswagen, 'People's car', came from Adolf

Hitler.• One of the Volkswagen car Beetlewas produced from 1938 up to 2003.

That's astonishing 65 years!• By 1972 more then 15 million VW Beetles had been sold, making it the

most popular vehicle ever sold in the world. The product number passed the previous best selling Ford Model-T.

• Volkswagen owns many companies or you can say these companies are using VW name as their base:

Audi Skoda Porsche Bentley Buggati Scannia Seat

History Of Volkswagen Scandal

2009

• Volkswagen started installing Defeat devices

2013

• Abnormalities found in test by Researchers from the International Council on Clean Transportation and West Virginia University.

2014

• Environmental Protection Agency Investigation begins.

2015

Sept 3• Volkswagen admits that it has used sophisticated

software to trick regulators. 

Sept 18

• Environmental Protection Agency makes Volkswagen deception public

Sept 23

• Volkswagen CEO Martin Winterkorn resigns

What’s This Device or Software ?• This device or software is called as “Defeat Device”. This device or software is being installed by

Volkswagen in their 2.0L diesel TDI engines.

• This device is used in the VW-manufactured Audi A3, and the VW models Jetta, Beetle, Golf and Passat. VW has admitted that about 11 million cars worldwide, including eight million in Europe, are fitted with the so-called "defeat device".

• This Defeat Device is purely digital it’s a matter of coding. This device can detect itself when the car is being under emission testing and allows it to pass the test.

• According to the EPA the defeat device knows whether or not to activate based on various inputs including the steering wheel position, vehicle speed, duration of engine operation, and barometric pressure.

• Once on the road, the engines switched out of this test mode and  engines emitted nitrogen oxide pollutants up to 40 times above what is allowed in the US.

Starting of Crisis• It's been dubbed the "diesel dupe”.

• The German car giant has admitted cheating emissions tests in the US.

• According to EPA(United States Environment Protection Agency), some cars being sold in America had devices in diesel engines that could detect when they were being tested, changing the performance accordingly to improve results.

• VW has had a major push to sell diesel cars in the US, backed by a huge marketing campaign trumpeting its cars' low emissions. The EPA's findings cover 482,000 cars in US only.

• VW has admitted that about 11 million cars worldwide are fitted with the so-called "defeat device".

Continue….• The EPA said that the engines had computer software

that could sense test scenarios by monitoring speed, engine operation, air pressure and even the position of the steering wheel.

• When the cars were operating under controlled laboratory conditions the device appears to have put the vehicle into a sort of safety mode in which the engine ran below normal power and performance. Once on the road, the engines switched from this test mode.

• The results were engines emitted nitrogen oxide pollutants up to 40 times above what is allowed in the US.

• Continue…. • With VW recalling almost 500,000 cars in the US

alone, it has set aside €6.5bn to cover costs. But that's unlikely to be the end of the financial impact.

• The EPA has the power to fine a company up to $37,500 for each vehicle that breaches standards - a maximum fine of about $18bn.

• Legal action from consumers and shareholders may follow, and there is speculation that the US Justice Department will launch a criminal probe.

Strategies :• Social Media Engagement or Crisis Management Strategy.

• Volkswagen to refit cars affected by emissions scandal.

• More authority will be given to individual brands and regions.

• Special Group created , in an effort to repair its reputation in the market. • Pairing of brands , to have centralization and strict monitoring.

• Increase in the Hierarchical structure.

• PR stratergies – Video Apology to the Customers on twitter.

• Offer of Incentives to attract customers and offset lost sales

Future Outlook:• Volkswagen will now come under extreme scrutiny, with the company issuing its own

external investigation in addition to investigations by the U.S. and German governments.

• European standards are not as strict as those in the US, consequences are likely to be a change in the test cycle rather than legal action and fines.

• Volkswagen Canada is offering incentives to attract customers and offset lost sales.

• Until Nov. 2, Volkswagen says it is offering a choice of:

1. Finance interest rates as low as zero per cent for up to 84 months, depending on the model 2. Customers can opt for lease rates as low as 0.9 per cent for up to 48 months, depending on the model, or up to $6,000 cash back.

• "The revelations are likely to lead to a sharp fall in demand for diesel engine cars," said an expert at consultants Vendigital

Continue…• In the US, the diesel car market currently represents around 1% of all new car sales

and this is unlikely to increase in the short to medium term.

• In Europe the impact could be much more significant, leading to a large tranche of the market switching to petrol engine cars virtually overnight.

• The carmaker will launch country-specific websites where customers can enter details of their vehicles to find out if they're affected.

• New chief executive Matthais Mueller sent a letter to staff promising “relentless” efforts to investigate the scandal and promote the “strongest compliance and governance standards in the industry”.

• The Obama administration has been racketing up fuel economy standards in the United States, which puts a higher premium on mileage

Recommendations:• VW should initiate contact with customers with the concern

of repair of their cars.

• Consumers could be entitled to seek compensation for any increased fuel costs, depreciation of vehicle value, out of pocket expenses and costs associated with future repair including potential increases in Road Tax.

• Those drivers who were charged more for the ‘clean diesel’ version of a vehicle could also be entitled to a refund of the difference in price

Thank you !!