The Volkswagen emissions scandal, also known as “Dieselgate,” was a major environmental scandal involving Volkswagen AG and its use of software to cheat federal emissions tests on diesel vehicles. The scandal was first revealed in September 2015, when the US Environmental Protection Agency (EPA) issued a Notice of Violation to Volkswagen for installing software that allowed their diesel vehicles to emit up to 40 times the acceptable level of nitrogen oxide emissions.
The scandal resulted in Volkswagen being ordered to recall 11 million vehicles worldwide and pay billions of dollars in fines, compensation, and other costs. The scandal has had a lasting impact on the automotive industry, leading to increased scrutiny of emissions tests and the adoption of stricter emission standards. The scandal has also significantly affected Volkswagen, leading to a decline in sales and a substantial drop in its stock price.
The root cause of the Volkswagen emissions scandal was a deliberate decision by Volkswagen to install software in their diesel vehicles that allowed them to emit up to 40 times the acceptable level of nitrogen oxide emissions. This software was designed to deceive emissions tests by detecting when it was being tested and reducing emissions output accordingly. This software allowed Volkswagen to falsely certify that their vehicles met emissions standards when emitting much higher levels of pollutants.
In response to the scandal, Volkswagen implemented a comprehensive crisis management strategy . This included a public apology, a commitment to fully cooperate with the investigations, a recall of the affected vehicles, and a responsibility to change its corporate culture to ensure compliance with environmental regulations.
Volkswagen also implemented a comprehensive compensation program for affected customers, offering cash payments and buy-back options. The company also implemented an extensive internal investigation to identify the root causes of the scandal and took steps to strengthen its compliance and oversight procedures. Finally, the company created a €20 billion fund to invest in green technologies and ensure its future vehicles meet the highest environmental protection standards.
Volkswagen’s crisis management strategy was largely effective. The company’s public apology, compensation program, and commitment to cooperate with authorities helped mitigate the scandal’s reputational damage. The company avoided criminal prosecution, and fines were significantly lower than initially expected. Finally, the company’s efforts to address the root causes of the scandal and implement more robust compliance and oversight procedures were viewed positively by consumers, investors, and regulators.
The Volkswagen board failed in this crisis by not taking earlier action to address the issues that led to the scandal. The board had been aware of the software since at least 2006, yet they failed to take any action to address the problem or to ensure that the company complied with emissions standards. This lack of oversight allowed the scandal to be undetected for nearly a decade before the US EPA uncovered it. Since the scandal, the Volkswagen board has made many changes to ensure that similar issues do not arise again. This includes implementing stricter oversight and compliance procedures, creating a new position of Chief Compliance Officer, and launching an internal investigation into the scandal. The board has also taken steps to improve its corporate governance structure, including increasing the size of the board and creating a separate board of directors to oversee the company’s operations. Finally, the board has committed to a comprehensive compliance program to ensure the company adheres to all applicable laws and regulations.