Volkswagen case study

1. Volkswagen’s emissions 'cheat' software scandal
Group 7

2. Volkswagen Crisis
German automaker Volkswagen AG rigged US emissions tests so it would appear that its diesel-powered
cars were emitting fewer nitrogen oxides, which can contribute to ozone build up and respiratory illness
Volkswagen installed software in roughly 482,000 diesel passenger cars sold in the U.S. since 2008,
according to the U.S. Environmental Protection Agency.

3. Volkswagen Crisis
Volkswagen, has admitted that up to 11 million diesel cars worldwide are fitted with defeat
devices in the engine management systems on the modern Volkswagen 2.0-litre diesel engine
that can switch on pollution controls when they detect the car is undergoing testing.
They then switch off the controls when the car is on the road, allowing it to spew out harmful
levels of emissions.(40 times higher )
Chief executive Matthias Mueller, took over the Volkswagen steering wheel (Since former
chairman Martin Winterkorn stepped down)

4. Why would Volkswagen do this?
Volkswagen may have wanted to avoid the cost of additional hardware to meet tough U.S. emissions
standards, so it came up with a cheaper software fix.
The software also would have helped the cars’ fuel economy numbers, since they get better gas mileage
when the emissions control system is turned off.

5. What could happen to Volkswagen now?
The US authorities have the power to levy a fine as high as $37,500 per vehicle affected.
That means a total of $18 billion
So far VW - and Audi, it should be pointed out - have agreed to recall 482,000 four-cylinder
Jettas, Beetles, Golfs, Passats and A3s sold since 2008.
It must remove the 'defeat device' and clean up the NOx emissions on all the affected cars in the
US.

6. Analysts' reaction
The scandal is a major setback for VW:
This is not an usual recall issue, an error in calibration or even a serious safety flaw. All of the
former can be attributed to bad luck or bad execution .
This is quite different - the accusation is that VW deliberately set out to mislead regulators with
a cleverly hidden piece of software.

7. Crisis Management
GM, Ford, Honda have earlier been caught for installation of defeat devices
Own up to the situation, accept your mistakes, try and restore faith in minds of people
Give statements to media stating that VW cares for the environment and welfare of the people
and will go to any lengths to correct their mistakes
Assist US EPA in their investigation
Form an investigation committee with help of third party to find out the people responsible for
installing the cheat code and taking necessary action against them
Pay fines, tax evaded due to cheat code and interest
VW has kept aside $6 billion to tackle the crisis, but analysts have estimated the cost may rise to
$18 billion
VW must immediately increase its crisis fund accordingly

8. Existing Customers
Existing customers confused about what will happen to their existing cars, cater to questions
raised by them
Assure them that VW will ensure that they will not bear the consequences
Few loyal VW customers still have faith in the car giant and hope for compensation
Recall faulty cars with immediate effect and replace faulty parts with good parts
Such actions will help restore faith in stakeholders

9. Target Audience
Reach out to – Media Personnel, Opinion Leaders, Target Audience
Media: Print, Radio and Television Journalists – By giving statements, making investment in cleaner
technology for cars, investing in university researches and own company for cleaner fuels, starting
sustainability projects, launching new models which are environmental friendly and superior in
technology
Opinion Leaders: Government Officials, Senior Bureaucrats Trade Associations (CII, FICCI), Industry
Bodies that influenced Policy Making
Target Audience: SEC AB, both male and female aged 25 years or more in major cities

10. Advertising
Two phased advertising –
◦ 1st Phase: Should remind of past association like Nestle
◦ 2nd Phase: Introduce cleaner technologies of new car models introduced and how it benefits
environment
Advertisements should be in form of posters, TV Commercials
Statements and ads should be placed in business newspapers, advertisements on TV (specially
news, sports, Drama Channels), car magazines, daily newspapers
Also places where SEC A,B Section of society frequent like flights and car showrooms

11. THANK YOU!!