What does the VW story suggest in terms of risk management

Reference no: EM132311246

Managing the Legal Environment - Case Study - VW Emissions Scandal

Introduction: For several decades, diesel-powered vehicles have been spruiked by manufacturers and governments as a solution to the issue of harmful vehicle emissions and their impact on the environment and contribution to climate change. Partly in response to this perception, the range and supply of diesel-powered passenger cars has grown markedly in recent years while the data on their polluting emissions seemed to bear out the assertions and claims as to their relative benefit compared to petrol.

In September 2015, the US Environmental Protection Agency publicly accused VW of cheating on emissions testing for diesel cars (a test to certify the particulates (nitrogen oxide) emitted from engines did not exceed maximum levels). The accusation blew the whole tawdry story apart. A mere 4 days later, VW admitted installing defeat devices in 11 million vehicles. The CEO resigned, denying he knew of the fraud. Other brands from the VW stable (Audi and Skoda for 2) then came under the spotlight, while other makers also came under scrutiny, these including Suzuki, Nissan, Peugeot, Citroen, Fiat Chrysler, GM, Renault, Daimler, BMW and Porsche. Investor and Government legal action against VW (that led to VW committing to pay more than US$ 22 billion in fines and compensation. Fraud charges were laid by the US against Executive Oliver Schmidt.

Concerns arose not only in terms of the financial loss suffered by buyers and investors but around the health and environmental impacts of "dirty" cars. The EU introduced tougher tests and France and the UK declared an intention to phase out the sale of diesel cars by 2040.

Questions:

1. What likely motivations drove VW (and others) to cheat on the tests over an extended period?

2. What were the likely results of this cheating on the social and market perceptions of VW and its products?

3. What are the long and short term implications for VW (and others) as a result of the publicity around the manipulations?

4. What impact do you think these implications have on their strategy and governance?

5. What does the VW story suggest in terms of risk management?

Reference no: EM132311246

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