Chapter 1, Problem 1EA

Ethics Activity

Historically, diesel cars have not been big sellers in the U.S. auto market, mainly because their engines couldn't pass the strict emissions standards set up the Environmental Protection Agency and the California Air Resources Board. But that all changed in 2005, when German automaker Volkswagen make a decided push to develop "clean diesel" engines, specifically manufactured to meet strict U.S. emissions standards.

By 2010, VW had introduced several models of diesel cars in the United States, and their sales helped propel Volkswagen to the number two slot in global auto sales, after Toyota and ahead of GM. While VW was receiving major media attention for its clean diesel models, researchers from West Virginia University discovered that these so-called clean engines had been constructed with a "defeat device" −software that could actually tell when the car was being tested off road for emissions and lower the level of emissions that harm the environment.

By December 2014, Volkswagen agreed to voluntarily recall more than a half-million clean diesel cars in the United States to address the emissions issues. But the scandal continued to escalate, with accusations that senior management knew about the rigged engines, and VW's CEO resigned and several other executives were fired.

Class-action lawsuits and other litigation followed, and in April 2017, VW agreed to a $4.3 billion settlement, which included a criminal fine of $2.8 billion, as well as various buyback plans for the affected diesel cars. In addition, over the last several years, VW has experienced a significant decline in U.S. sales and it now trying to win back customers.

Using a web search tool, locate information about this topic, and then write responses to the following questions. Be sure to support your arguments and cite your sources.

Ethical Dilemma: How can VW ensure that its diesel now comply with U.S. emissions standards? What can VW do to regain consumers' confidence after this worldwide scandal? Do you agree with the billions of dollars in fines that VW will have to pay to move beyond the emissions debacle?

Source: "VW Diesel Crisis: Timeline of Events," https://www.cars.com, May 19, 2017; Jack Ewing, "Inside VW's Campaign of Trickery," The New York Times, https://www.nytimes.com, May 7, 2017; Christoph Rauwald, "How a Top-Secret Deal Could Have Stopped VW's Diesel Scandal." Bloomberg, https://www.bloomberg.com, January 12, 2017; "6 VW Excecs Indicated as Carmaker Agrees to $4.3 Billion Diesel Cheat Settlement," Fortune, https://fortune.com, January 12, 2017; Geoffrey Smith and Roger Parloff, "Hoaxwagen: Inside Volkswagen's Diesel Fraud," Fortune, https://fortune.com, March 7, 2016.

Summary Introduction

To explain:

The way company can ensure that the cars comply with the emission standards of the U.S. The way company can regain the confidence of consumers after this scandal and whether the amount of fine is justified.

Introduction:

The concept of ethics stands in between the two extremes of codified law and personal freedom. It refers to what is considered to be as correct behavior based on the societies interpretation. When the society interprets things differently, what was once the standard for ethics can change over time, for example, slavery in the 18^th century or smoking in the 19^th century.

Explanation of Solution

VW has always been a trusted brand in vehicle manufacturing. They have positioned themselves as company that is in the forefront of European vehicle manufacturing with superior technology and luxury through reputed brands.

However, there is no doubt that they broke the law and were highly unethical in their practices which forced the customers to move away from the brand. Even though VW has admitted to the wrong doing and has paid fines of billions of dollars they are yet to fix the problem of customer trust. In the minds of the customer, VW is a company that has rigged regulatory bodies to gain sale advantages.

There are several things that VW can do to regain customer trust. Firstly, they must be open about what took place in the organization through an unbiased investigation and make those details available for the public. Secondly, they can obtain 3^rd party certifications about the emission results and prove that they are not harmful. Finally,they can invest in CSR activities that amends the image of VW by showing that they care about the environment and the society and not just the bottom line.

The fines imposed on VW is a first step in bring the organization on track. However 4.8 billion dollars is not a major loss for a company like VW. Therefore, there should be more strict legal action such as criminal charges against executives involved, regulatory scrutiny on VW activity and embargos to send out a stronger message.