MGT525 Business Values and Ethics
A number of vehicle manufacturers have been found guilty of falsifying their data on car emissions in order to make the vehicle appear to meet vehicle emission standards set by their governments. This means that the cars were emitting more pollutants that are damaging to the environment than scientists had previously thought.
Using the VW case study from the recommended textbook and/or the related documentary Hard NOx (Dirty Money), answer the following questions:
Outline the main points of the emissions scandal. What role could issue regarding moral intensity have played in the decision making that led to the scandal?
Analyze, using Rest’s four stage model of ethical decision-making, at what stage VW deviated from the model in its decision-making processes regarding the attempted cover-up.
What context-related factors could have influenced executives and engineers at VW not to whistle blow on the fraudulent activities?
Do you think that VW’s senior management handled the scandal well? Could earlier admission of the fraudulent activities have reduced the negative impact on the firm?
How can the theories of Utilitarianism (Jeremy Bentham) and moral duties (Immanuel Kant) be applied to this case?
How could VW seek to improve their approach to ethics management in the future? Can claims that the firm has so quickly changed its culture stand up to scrutiny?
VW Emissions Case Study
This case examines the (un)ethical decision -making of the Volkswagen Group leading up to the 2015 emissions scandal, as well as the attempted cover-up. The case focuses on the details of the scandal, its context and eventual discovery, as well as subsequent investigation and actions taken by Volkswagen. It draws upon a range of themes, particularly influences on ethical decision-making, moral development, and organizational culture.
Founded in Wolfsburg, Germany in 1937 as a military vehicle manufacturer, The Volkswagen Group or ‘VW’, grew over the course of the 20th century into a mass manufacturer of card, motorbikes and commercial vehicles, its fame grew with the introduction of classic models such as the beetle, Gold and Polo. And it thrived due to the acquisition of and investment in a growing number of other well- known brands, most notably Audi, Seat and Skoda.
By the beginning of the 21st century, the VW group had not only become a global automotive giant but one of the biggest companies in the world. In 2014 it employed 590,000 employees, generated sales of Euro 202.5 billion and delivered more than 10 million vehicles to its customers, Alongside its core mass market brands. It boasted a stable of luxury, iconic brands from Porsche and Bentley to Bugatti and Lamborghini. It was feted for its social and environmental credentials, emphasizing that it believed in championing responsible business, with a long-term focus on the benefit of its customers, employees, the environment, and society.
Yet by the end of 2015, it had become clear that VW had pro-actively engaged in cheating US legislation concerning vehicle emissions through the manipulation of software in 11 million cars worldwide. Beyond the environmental damage caused, in due course the scandal would come to cost the company at least $25 billion, a drop in the company’s share of the European car market, an almost 50% drop in share price, the resignation of Martin Winterkorn, Chief Executive of the US division, and the arrest of Rupert Stadler, AUDI CEO.
The origins of “Emissions gate”
A swath of environmental legislation was formulated and implemented at the turn of the 21st century, for example the Environmental Protection Act was passed in Demark in 1992, while the Environmental Act was passed in the UK in 1995, and the Canadian Environmental Protection Act was introduced in 1999. This new legislation included in many cases, heightened scrutiny and control of the environmental impact of automobiles. This was perhaps most apparent in the US, where the introduction of the 1990 Clean Air Act Amendments precipitated a tightening of light-duty vehicle emission standards designed to reduce environmentally damaging emissions, such as carbon and nitrogen. When introduced in the noughties, this legislative shift led to pressure on a automotive manufactures for a new generation of vehicles which adhered to new emissions standards. However, commercial pressures necessitated that such alterations would not compromise on performance and efficiency, which would heighten the running cost and [potentially impact sales.
VW, at a presentation to US regulators in September 2008, promoted their response to the legislation: a generation of re-designed diesel automobiles, which met the country’s pollution laws, thus minimizing the smog, soot, and harmful emissions long attributed to diesel
engines, while not compromising on performance. Regulators satisfied, this new generation of diesel cars were put on sales to the general public by VW, who were hoping to finally crack the US car market.
However, unbeknownst to US regulators, this new generation of vehicles did not meet the newly imposed emissions legislation as it had proved too difficult to design vehicles which would allow the required balance between emissions and performance. Instead, VW engineers had designed ‘defeat devices’, which ensured that, when fitted to VW’s cars, the vehicles passed the regulatory, lab-based emissions test. These defeat devices could detect when such a test was being performed through the measurement of factors such as steering patterns, atmospheric pressures and engine use, and would accordingly alter emissions controls to switch on fume cleaning technology. However, when used on public roads, some models would pump out nitrogen at up to 409 times the legal limit.
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