Case Questions 44. What does the case suggest about the value of ethical behavior? Do you think WW was penalized enough for its wrongdoing? Why or why not? What does VW gain through its efforts to introduce a culture that is rooted in integrity and responsible behavior? 4-5. Most countries lack sufficient laws or enforcement to adequately protect the natural environment. What are the consequences of this? What can nations do to better protect the environment? 4-6. Who should be held responsible for the WW emission scandal: VW senior management, engineers, or government regulators? Justify your answer. 4-7. What steps can VW take to prevent similar incidents from occurring in the future? CLOSING CASE Scandal at Volkswagen Us Environment Procton Agency A E down the produced Wood Once the Hagu of the wir so that enabled them to cheaton Douton e com on tests Authories found the software was able to detect out became subsector ensson rests by monitoring speed engine operations, and other The Von Group was founded factors when such foting was detected the software and tored in Wolfsburg, Germany ww amor aby sted voices to aout mode, and the engine would run million currucand van only Wom below normal power and performance in this way totod 150 countries with recent and even in 2500 on Theutomotive industry domates Gomas The Vehicles avereidings of otte in pollutants. Once back combined revenues of Ww. Dund Bamoubout on the road the software switched the vehicle out of test mode percent of Germany's gross domestic bouches In this wax ww was able to systematically wade environmental como avength rooted in the belief that Gaman promos protections in the United States retable and trustworthy with superior engineer towers The vosive software vo VW a competitive advantage over its rivals in the larges car market Engineering sports initially discovered the emissions et inconsistences. The experts were Background on the Scandal surprised to find that the itsel vehicles were omitting pollutants investigators attempted to find out Wich have Several times above the limit prescribed by us law. Subsequent sought to cheat on emissions tests. Some suggested them was investigation revealed that some 11 million diselaars had been seeking to increase its presence in the compete U.S. marvel and quipped with the software doarently for the purpose of provide the ability to perform well on emissions tests may have helped com og deceptively post results on a ssion tests trol costs as sales of WW sport tay vehicles increased Others noted that cheating had become prevalent in the auto industry and misleading once the emissions scandal broke on social medias that other top automakers such as Ford, Toyota, and General Motors consumers claimed the scandal affected the trust they not to had been implicated ward WW and expressed concems about the health consequences Automakers face a tension between profit-making goals and so of many polution-emitting vehicles on the road cial responsibility Rather than emphasizing the triple bottom line of Despite the negative publicity, however, many consumers were people, planet, and protit, W may have put too much emphasis on unaware of the scandal, and market surveys in Germany, the Unie financial profits. Some suggested that was betting on the trade- ed States, and elsewhere suggested that most consumers conto off between potential punishment for cheating versus prospects for ued to trust the brand. Profits have remained strong, and the im big profits in the US market. For large-scale sales of defective and recently became the global leader in automotive volume sales dangerous vehicles, General Motors and Toyota each were fined only about $1 bilion, a small sum compared to these firms annual sales Other Consequences WW management might have calculated that the potential loss of a scandal would be less than potential market gains from selling ve In the days following revelation of the scandal, CEO Martin Winter hicles equipped with defeat devices in the large US market korn stepped down and WW suspended the high-ranking exec. tives. Some top engineers were arrested. In the meantime, the firm announced plans to launch a line of all-clectric vehicles, aiming to Impact of the Scandal position itself as a leader in green transportation. Before the scan WW experienced various losses from the scandal Initially the firm'sdal, W's corporate culture had been descnbed as "aggressive stock price tumbled by more than 30 percent from about $160 The firm set ambitious goals and pushed managers to achieve to $110 per share. Many months passed before WW's stock price success. After the scandal, newly appointed CEO Matthias Mueller returned to earlier levels. In addition, WW had to pay a $43 billion stated that changes would require us following the sonous set settlement to the US government WW made plans to spend up to back as a result of the diese issue to learn from mistakes made $25 billion to address claims from owners, dealers, regulators, and rectify shortcomings and establish a corporate culture that is open states and to buy back about 500,000 polluting vehicles. Costs of value-driven and rooted in integrity the scandal were unexpectedly high, and complying with the settle w plans to streamline operations to reduce costs incurred ments proved complex and time-consuming. The governments of by the scandal Management will downsize the firm's components Canada, France Germany, Italy, South Korea, and the United King business and reduce its worldorce by 30.000 people. However w dom opened investigations to check if ww was cheating on emis expects to create 9.000 new jobs by producing more electric cars sions tests in their countnes too. The firm had to reduce its workforce The scandal has intensified regulatory scrutiny of the auto in by thousands of employees to cover the costs of the scandal, an dustry, especially environmental standards. Automakers worldwide outcome that affected the of countless people continue to confront the tension between strict environmental con Ww had positioned its vehicles as attractive, sale, and en trols, intense global competition, and the relentless drive for profit vironmentally sound, but such marketing campaigns seemed ability