Profile of Volkswagen and its Operations
Explains the emission scandal that was occurred in Volkswagen Company.
The primary objective of this task is to provide brief information about the emission scandal that was occurred in Volkswagen Group in September 2015. The profile of the company and key actors that were involved in this emission scandal has been discussed in the task. The paper outlines that how the company overcome this emission scandal. Here is the discussion about the factors that were contributing in this scandal. It discusses how this emission scandal have impacted on the worth and revenue of the shareholders. More detail of the task has been detailed below.
Volkswagen group is a German automaker company that was established on 28th May 1937 by the German labor front under Adolf Hitler. There are approx 642,292 employees working in the organization. It has been found that various financial services including customer financing, leasing, banking, insurance activities, financial services and fleet management are being provided by the company in the international market. It is measured by sales that Volkswagen group is one of the biggest and leading automakers in the marketplace. It has been analyzed that Volkswagen has operations in more than 150 countries and on the other hand, it also operates approx 100 production facilities across 27 countries.
Volkswagen scandal erupted in September 2015 when the company accepted that around 600,000 cars sold in the United States were fitted with defeat services created and designed to circumvent emission tests. This scandal could affect the financial image and goodwill of the company adversely in the international market. Due to this scandal, the cost of the legal action by shareholder and car owners cannot be predetermined at the current time. This scandal also affected the profitability and market share of the firm adversely. It has been analyzed from the various analysis that cost of the entire dieselgate scandal for the company including private settlements, government settlements and finance, recall expense, and future loss of sales could be up to $34.5 billion.
The emission scandal influenced the success and growth of the firm adversely in the competitive market. The corporate culture of the company became toxic due to this scandal. Due to this scandal, Martin Winterkorn who was the CEO of the company gave his resignation in September 2015. Martin Winterkorn said that he was not aware about this scandal. It was the bad situation for the company at that time. This scandal also affected the life and health of the people. This scandal also polluted the environment of the country. The pollutants that Volkswagen failed to effectively and efficiently control are nitrogen dioxide and nitric oxide that are called as NOx. Along with this, NO2 is a dangerous that can cause respiratory damages. This scandal also affected the shareholders worth and financial position of the company negatively. In today’s era, managers and leaders are striving to adapt to the German carmaker’s drive to improve and enhance the accountability after its diesel emission fraud and on the other hand, its CEO said that it can take several years to establish and build a new corporate culture within the organization. Along with this, the company’s technology and resources were failed to meet the essential emission standards and norms. On the other hand, Volkswagen group covered up the issue by installing software in 11 million diesel powered vehicles in all over the world including around 500,000 in the United States. It has been stated that CEO Martin Winterkorn was very demanding who was not focused on the needs and requirements of the employees. Authoritarian leadership was used by Martin Winterkorn which was fostering a climate of fear at the workplace. Due to this scandal, the employees were started to leave the company and found the new jobs in the global market. This scandal also had put several impacts on the surrounding environment. Besides this, some executives ensured that the firm needs to change its strategy and approach. The culture of the company was not unique and effective as compared to BMW and Daimler.
Overview of Emission Scandal
Volkswagen has admitted for the first time that diesel emission scandal was the outcome of a collection of failures within the company. Some researchers believed that the company was actively involved in the cheating emission tests. The chairman of the company told that scandal was the output of a combination of individual mistakes and misconduct in one and effective part of the business process but this scandal was considered the rule breaking event. It has been revealed that the organization is trying to avoid and reduce similar crisis and scandals in the near future by overhauling its internal and infrastructure system in the workplace. At the time of emission scandal, the company had less than independent directors. Half of the members were the aforementioned labor reps. The causes of Volkswagen group emission scandal were myriad but is seen that its less than conventional approach or strategy to corporate governance did not help matters. It is further analyzed that employee pay was a big and effective feature in Hohn’s critique of Volkswagen Group. It has been suggested that lack of transparency and desired long term incentives were main causes of the emission scandal in Volkswagen Group. Poor and ineffective management behavior was also contributed to the emission scandal. The organizational structure of the company was not good at the time of emission scandal. The corporate governance is the system of rules, processes and practices by which a company is managed and controlled. The emission scandal may also influence the corporate governance and corporate social responsibility of the company.
It has been found from the various analysis that some of the employees at Volkswagen involved in the emission scandal. CEO Martin Winterkorn resigned from his post due to this scandal. Some employees believed that CEO Martin Winterkorn was involved in this scandal. As CEO, Martin Winterkorn accepted that he is responsible for the irregularities that have been identified and found in diesel engines and scandal. According to the new media, Rupert Stadler who was the head of the Audi division also involved in this emission scandal. Along with this, Wolfgang Bernhard, the head of the trucks division at Daimler who was the top manager at Volkswagen also a part of the emission scandal. Mr. Winterkorn argued that he had no knowledge and information about the manipulation of emission data and facts. All these actors involved in emission scandal. All these things also affected the progress and success of the company adversely.
Impacts on Company’s Image and Worth
It is noted that Volkswagen group is responsible to handle and reduce the negative impact of emission scandal that put the direct impact on the outputs. The organization modified and recalled more than 24,000 A7 and A8 models built and developed between 2009 to 2013. Along with this, modification in software and technology had been done by the company to reduce the adverse impact of scandal. In addition, talented and skilled employees were appointed by Volkswagen Company. Moreover, the firm is doing much better at another pillar of scandal management as quickly as possible. Compensation was given to the customers who had been affected from this emission scandal. Nine out of the 10 Volkswagen drivers in Britain influenced by the diesel emissions scandal as they believed that should receive compensation from the company. The company should set out an urgent timetable for redress to the owner of the influenced vehicles.
It has been revealed that two lessons can be learned from this emission scandal: firstly, the less senior managers are paid for their decisions. Some new technologies were implemented to provide benefits to the stakeholders. Secondary, it is analyzed that Martin Winterkorn knew about the people who were truly responsible for this emission scandal. However, they were not identified that time. Volkswagen group is an iconic company that employs more than 600,000 people globally. The company wanted to become no 1 automaker firm in the world. The environment and car buyers are the leading and biggest losers from Volkswagen scandal. Various problems were dealt by the shareholders also due to this emission scandal. Along with this, this emission scandal was an effective and good example of why credit analysts must consider and focus environmental, governance and social risks to a firm. This scandal also damaged the goodwill and financial position of the firm adversely.
This scandal also affected the worth and returns of the shareholders adversely. Dozens of large shareholders in the company plan to sue the carmaker in a German court searching compensation and benefits for the plunge in its share due to its emission scandal. The shareholders of the company have blamed its executives of overseeing demanded changes to the organizational structure in the first annual meeting since the automaker became entangled in a diesel emission scandal. The investors used meetings to handle the emission scandal. It is noted that poor corporate structure is always dangerous for the company. The company appointed an independent chief executive and chairman to lead the group during the emission scandal.
Corporate Culture and Governance Issues
Various steps can be taken to reduce such types of emission scandal in near future. The company should focus on the corporate structure and on the other hand it should also focus on the activities and operations of the employees to handle the future scandal. The company should check the software before using it. The firms should be held responsible to their actions. In addition, the firm should focus on the high employee turnover and absenteeism to reduce and handle the future scandals. The causes of emission scandal should be identified and analyzed by the managers and leader to gain competitive benefits in the international market. A agency and committee shall be appointed by the company to focus on the future scandal, activities and functions of the workers.
Conclusion
On the above mentioned limelight event it has been evaluated that emission scandal affect the profitability and outcomes of the firm adversely. Here is the discussion about the emission scandal that occurred in Volkswagen Company. This scandal occurred in the company due to lack of transparency and poor organizational structure. This scandal was the dangerous issue in front of Volkswagen Group that affected its image in a large extent. The paper explains the outcomes of this scandal and along with this it also discusses that how Volkswagen group prevents this emission scandal. At the end, some recommendations have been given to reduce and prevent the future scandals within the organization.
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