Case 6 Volkswagen Charts a New Course
Case 6 Volkswagen Charts a New Course: The Road to SustainabilityIntroduction
Volkswagen (VW) Group is the world’s largest automaker in car production with twelve European brands: Volkswagen Passenger Cars, Audi, SEAT, ŠKODA, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Volkswagen
Commercial Vehicles, Scania, and MAN. In 2018, VW set an all-time record of delivering more than 10.8 million
vehicles, resulting in €235.8 billion (about $262.7 billion) in sales revenue. This placed VW as the ninth largest company in the world. Nearly 40 percent of deliveries were in China, where VW is steadily increasing their share of the passenger car market. The automaker has continued to grow globally despite the diesel emissions scandal that tarnished their image in the United States.
In early 2017, the automaker pled guilty to three criminal felony charges related to defrauding the U.S. government, violating environmental regulations, obstructing justice, engaging in wire fraud, and violating import regulations. The company agreed to pay $2.8 billion in criminal charges—only a small portion of the total costs they will have to pay to resolve this scheme. Other costs include product fixes, legal fees, buy back costs, and more. Worse still, VW’s reputation has been dealt such a blow that it will likely take years to recover. As a global firm, VW has lost the trust of regulators, which will be a major obstacle in building future global relationships.
Volkswagen was founded in 1937 by the German government, which was at the time controlled by Adolf
Hitler. As his “pet project,” he desired to develop an affordable and practical car. In fact, Volkswagen translates to “the people’s car.” Headquartered in Wolfsburg, Germany, the automaker’s existence was precarious after Germany was defeated in the war. However, a British major opted to keep Volkswagen open, and the firm continued to grow.
Sales of Volkswagen Beetles were slower in the United States than in other areas because of the company’s origin. However, the vehicle’s small size and odd shape, which was originally a turnoff for U.S. consumers, became the main selling points in a 1959 campaign. Volkswagen Beetle sales skyrocketed. Soon the Beetle had become the best-selling car import in the United States. (Excerpt)Questions for Discussion
1. Explain how the culture of Volkswagen created this ethical scandal?
2. Since Volkswagen claimed to support ethics and sustainability, how can they recover from this ethical disaster?
3. Do you believe this scandal will lead to tougher scrutiny of companies’ environmental claims in the future? Why or why not?