Volkswagen vs. EPA (2015)

Abstract

As one of the most well-known car companies in the world Volkswagen faces an important task of molding, maintaining an ethical and successful image in order for its company to stay on top. Foresight must be continually implemented to ensure confidence during any crisis situation. A comprehensive response is one of the most important parts of a company’s protective measures when dealing with a crisis. In September 2015, The EPA (Environmental Protection Agency) accused Volkswagen of tampering with its engine controls so it’s vehicles would be able to pass laboratory emissions tests.

This was a very serious accusation by the EPA and effectively accused Volkswagen of violating multiple requirements of EPA standards such as the Clean Air Act as well as violating customer trust. These were customers who believed their emissions to be safer for the environment than they actually were. Volkswagen has since received fierce criticism for its deceitful behavior and has seen a strong backlash including Its Ex-CEO being indicted on fraud and conspiracy.

This case will analyze the public, and Volkswagens responses to the scandal, and how Volkswagen has been able to withstand the heat of public scrutiny.

Situational analysis

On September 3, 2015 after many years of questionable announcements of exceptional emissions tests by Volkswagen and after independent studies corroborating the notices of violation The EPA threatens to not certify VW’s 2016 diesel engines; Volkswagen responds by admitting it’s software was programmed to cheat the testing results. These vehicles apparently contained a device that switches on the car’s pollution emission controls during emission testing and shuts it off during normal operation (EPA, 2015).

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The EPA came out with detailed information on the affected models which included the Audi A3, Jetta, Jetta SportWagen, Beetle, Beetle Convertible, Golf SportWagen, and the Passat ranging from model years 2009-2015. The Volkswagen emissions scandal was covered by media around the world when word broke of the scandal news spread rapidly on social media networks like Twitter where it began trending. As discussed Volkswagen is extremely well known and is an important organization to investigate as it is the second largest carmaker in the world (Bowler, 2015).

Often in times of crisis people look to social media and online outlets to stay informed. Organizations rely on the media to share the information about a crisis they give them but an organization can’t always be sure the direction the press will take. Criticism of the engagement an organization has with the issue is popular when media outlets are relaying information about a crisis. With communication interweaving with social media and being transferred at exorbitant rates we can understand why deceit can lead to an explosive issue very quickly for any company. Nothing is harder than controlling the outburst of public outcry over a newly garnered perception. Volkswagen which is out of Wolfsburg, Germany, accounts for 12.9 percent of the world’s passenger car market and its goal is to provide consumers with environmentally friendly vehicles (Volkswagen, 2014).

Very quickly backlash grew after the EPA released its violation notices many people taking to twitter angry at Volkswagen after what has been implicated against them. Immediately following the incident most people were very skeptical and questioned the company’s ethics. Volkswagen did not help its case along the way and handled the scandal in a contradictory fashion many began to consider their response increasingly inconsistent as the story unfolded. Originally it was claimed the heads of the company didn’t know about the cheating, until just a couple days later where it became known that this was untrue.

Organization Background

History of Volkswagen

Volkswagen is a German car manufacturer founded in 1937 by the German Labor Front in Berlin. Today VW is the largest automaker by worldwide sales and is owned by parent group Volkswagen Group a multinational automotive manufacturing company. VW is known for its luxury models and superior fuel efficiency cars which are also affordable. Volkswagen sales in the United States were at first slower than in other places around the world, due to the car’s historic Nazi connections as well as its small size and unusual shape (History, 2009). Regardless of its earlier downfalls VW has long been admired for its craftiness and innovative style. However even though It was one of the first companies to introduce a three-way catalytic converter, they still could not fully shake the image thereafter brought on by U.S. Emission standards of the 1970’s leading up to today.

Notice of Violation of the Clean Air Act

It was alleged by the EPA in early September 2015 that it has reasonable evidence to believe that four-cylinder Volkswagens and Audi cars from 2009-2015 include software that allows certain air pollutants to find their way around EPA emission testing. Cynthia Giles, Assistant Administrator for the Office of Enforcement and Compliance Assurance stated ‘Using a defeat device in cars to evade clean air standards is illegal and a threat to public health,’ and that ‘Working closely with the California Air Resources Board, EPA is committed to making sure that all automakers play by the same rules. EPA will continue to investigate these very serious matters'(EPA, 2015). The seriousness of these matters comes from the sophistication of software which was created to deceive the EPA. It seems the standard emissions of these cars could have been as high as 40 times what is allowed by the EPA but was only displaying these level of emissions when they were not being tested.

Acceptable Emissions vs. VW Violation

The Clean Air Act (CAA) is a federal law that has the goal of regulating air emissions in order to address public health concerns. This law authorizes the EPA to establish National Ambient Air Quality Standards to protect public health and public welfare and to regulate emissions of hazardous air pollutants (EPA, 2017). Every vehicle manufacturer must certify to the EPA their products meet federal standards. Although currently waivers grant by the EPA that allow stricter standards are being reexamined by the current EPA administration we see a trend in Cleaner Quality emission standards across the United States. It was estimated by the EPA that 11 million vehicles worldwide were effect by the violation and that potentially all of which had many times over the permissible amount of nitrogen oxide for each vehicle (Stanford, 2017). The detrimental health and environmental effects linked to nitrogen oxide led the EPA to take swift action. Understanding the need for federal government policy in regards to the safety of the environment and public health particularly against such heinous violations as what had been alleged of Volkswagen at the time.

Communications Campaign

Rocky Reputation with Recalls

Despite a dismal second half of the year Volkswagen surprisingly enough still managed to make some profit over the full year. With £4.8bn ($538million US) set aside to cover recalls VW still admits the cost will be must greater than that over time. A £720m ($96million US) investment per year cut will be an added result of the emissions scandal over the next few years (Horrell, 2015). The response of Volkswagen was less than desirable as the company set out to recall millions of vehicles, they planned to reimburse some, but not all. Many people have argued the previous recall did not address the high on-road Nitrogen Oxide (NOx) emission and ‘Despite the fix, the car(s) showed higher than expected NOx emissions.’ (Warrick, 2015). Since the emissions incident, VW has ranked near last in company visibility, while only now more recently trying to preach a message that seems more environmentally aware.

Unusually Universal

The size of The Volkswagen Group makes this case particularly interesting, and unusual. Many of the larger corporations that have experienced such chaotic crises such as BP with its massive oil spill, or the more recent Big Tech privacy/censorship issues plaguing Google have not had the outreach of this case (Hakim, 2018). VW is one of the largest businesses let alone car companies in the world. They produce and manufacture products in almost every country with a competing GDP to the United States. The Emissions scandal was chalked up to just be the mistakes of a few, while this may or may not be true we know that those little mistakes have a reverberating impact because of the colossal size of the business. It is seen as a really low point VW’s history as the discovery of the illegal devices comes at a time emissions regulations have become a much more serious matter around the world.

Going Through Changes

After such a PR nightmare the question is can you rebuild. As we’ve seen with other companies in the past almost no incident can completely bar you from continuing as a hugely profitable company. Quickly as is recommended in such scenarios VW took the first step of getting a new CEO after the resignation of form Volkswagen CEO Martin Winterkorn. The former CEO’s resignation was one that may have saved VW as he produced a public admission of guilt saying quote: ‘I accept responsibility for the irregularities that have been found in diesel engines’. At the time this was obviously taken with disgust that anyone would do such a thing, but as time went on people began to look at VW with a new sense of leadership compelling consumers to be less afraid of such an incident from happening again.

‘TOGETHER- 2025 strategy’

The largest effort of the company to shed a bad image is a strategy announced by the new CEO Matthias Mueller. This campaign ‘TOGETHER- 2025 strategy’ is one built on the grounds of electric cars as well as another popular brand the hybrid’s/plug-in models (ProactivePR, 2016). Many people view this a strong attempt to amend the bad image of the emissions scandal, but sure enough, many people have discussed the image overhaul of VW and are pleased with the direction they have taken. Volkswagen has a lot of bad image problems to work on, and even these large-scale changes to the company may never be enough to take Volkwagens back to the top. The biggest and most helpful change to the company was by far its transparency and how upfront it was in its support of the internal investigation, by doing this VW protected themselves from much of the negative publicity.

Other company’s violation issues

As we can see big companies are not always much different than one another. The corporations that own much of the auto industry seem to share in an understanding of how to evade much of the new acts installed by the EPA. A more recent issue was noticed in Fiat Chrysler’s light-duty model’s Jeep Grand Cherokees and Dodge Ram 1500 trucks with 3.0-liter diesel engines sold in the US (Smith, 2017). On January 12, 2016, the EPA issued a notice of violation to Fiat Chrysler Automobiles for a similar alleged violation to that of Volkswagen. The software installed in these devices support and anti-Clean Air Act environmental danger and has promoted federal authorities to get involved. Even know the scale of this violation is not nearly as large as with Volkswagen we can see many similarities. It is also a good sign to see the fast response of governmental officials on this topic. The collaborations of law enforcement and government federal authorities due to the Volkswagen scandal has made the lives of these workers easier when similar cases appear. It is now known much better how to deal with these violations and how to handle them all as an effect of the Volkswagen Emissions Scandal.

References

1. Bowler, Tim. ‘Volkswagen: From the Third Reich to Emissions Scandal.’ BBC News, BBC, 2 Oct. 2015, www.bbc.com/news/business-34358783.
2. ‘EPA, California Notify Volkswagen of Clean Air Act Violations / Carmaker Allegedly Used Software That Circumvents Emissions Testing for Certain Air Pollutants.’ EPA, Environmental Protection Agency, 18 Apr. 2016, 19january2017snapshot.epa.gov/newsreleases/epa-california-notify-volkswagen- clean-air-act-violations-carmaker-allegedly-used_.html.
3. ‘Volkswagen Is Founded.’ History.com, A&E Television Networks, www.history.com/this-day-in- history/Volkswagen-is-founded.
4. ‘Volkswagen Group.’ Volkswagen, 2014 www.volkswagenag.com/content/vwcorp/content/en/the_group.html.
5. ‘Summary of the Clean Air Act.’ EPA, Environmental Protection Agency, 24 Aug. 2017, www.epa.gov/laws-regulations/summary-clean-air-act.
6. Diesel Vehicles and the Volkswagen Emissions Scandal, large.stanford.edu/courses/2017/ph240/caballero2/.
7. Horrell, Paul. ‘Here’s How VW Is Responding to Its Big Diesel Emissions Scandal.’ Top Gear, Top Gear, 30 Oct. 2015, www.topgear.com/car-news/insider/heres-how- VW-responding-its-big-diesel-emissions-scandal.
8. Warrick, Joby. ‘Anatomy of Volkswagen’s deception: The recall that never fixed any cars.’ (2015, September 22). Retrieved from https://www.washingtonpost.com/news/wonk/wp/2015/09/22/anatomy-of- Volkswagon-deception-the-recall-that-never-fixed-any-cars/? noredirect=on&utm_term=.601236f04e6f
9. Hakim, D. (2018, January 19). VW’s Crisis Strategy: Forward, Reverse, U-Turn. Retrieved from https://www.nytimes.com/2016/02/28/business/international/vws- crisis-strategy-forward- reverse-u-turn.html
10. Is Volkswagen’s new strategy enough to rebuild its reputation? (2016, November 24). Retrieved from http://proactive-pr.com/volkswagens-new-strategy-enough- rebuild-reputation/
11. Smith, S. (2017, January 12). Fiat Chrysler Accused of Clean Air Act Violations 
by EPA. Retrieved from https://www.ehstoday.com/environment/fiat-chrysler-accused- clean-air-act-violations-ep