Original Post by Tori McCune:
I agree with the combination of criminal and civil action that is being taken against Volkswagen. Not only did the top officials of the company conspire illegally to beat the emissions standards, but they also violated all trust with consumers. Many consumers purchased VW cars with the understanding that diesel was going to be better for the environment, yet unknowingly they were emitting vast amounts of NOx each time they took a drive. NOx being a serious human and environmental health concern. The consumers that were driven to make positive changes were deceived and the cars they invested in quickly lost value placing them in a financial situation. Volkswagen clearly violated the Clean Air Act when they installed the software that allowed them to emit up to 40 times more pollution than allowed (EPA, n.d.). While states like Colorado are investing their payouts from VW into programs that are set to reduce air pollution and NOx pollution, many of the “Dieselgate” vehicles are still on the road. As mentioned, these vehicles are emitting much higher amounts of pollution than allowed.
Jail time and civil payments for a high-profile company and high-profile case set an example for other companies in the same or similar industry. The negative exposure this has given VW will hurt its reputation and financial future, and will be an expensive endeavor to try to come even close to what their reputation once was. The EPA set an example by exposing VW in the US. The cases brought against VW in the US were public, settled over $14.7 billion in claims with customers, and jailed two managers. Germany cases were fewer, more private, and involved no jail time. It was concerning those vehicles were not caught until 2014-2015 after being on the roads for a few years. But by penalizing managers and enforcing hefty fines and payouts, the Clean Air Act proved that there are big consequences for violating air quality standards.
Riley, Charles. 2018. “Germany Fines Volkswagen $1.2 Billion Over Diesel Scandal.” CNN Business. Accessed April 22, 2020. https://money.cnn.com/2018/06/13/investing/volkswagen-fine-germany/index.html (Links to an external site.)
EPA. n.d. “Learn About Volkswagen Violations.” Accessed April 21, 2020. https://www.epa.gov/vw/learn-about-volkswagen-violations (Links to an external site.).
Colorado Department of Public Health and Environment. n.d. “Volkswagen Diesel Emissions Settlement.” Accessed April 21, 2020. https://www.colorado.gov/pacific/cdphe/VW (Links to an external site.).
Wheels 24. 2018. “Six Things To Know About Volkswagen’s Latest Court Case.” Accessed April 21, 2020. https://www.wheels24.co.za/News/Industry_News/six-things-to-know-about-volkswagens-latest-court-case-20180907
While it’s clear violating trust with a customer base is not strategic for a multi-national corporation, I am curious about the degree to which the changed brand perception impacts future sales. It interests me considering the company is already so massive along with all of VW’s renewable energy goals (see my post for specifics) set in place during September 2018. How else can VW restore its trust in people besides fulfilling all the punishments and creating these zero-emission initiatives? Is it possible VW is going to invest a substantial amount to create the new products only to see it not returned to them in sales totals? Did violating the trust with its once loyal customer base who was willing to try a diesel that was going to be better for the environment ruin its potential to profit from our world’s transition to renewable energy?
The examples posted in this discussion about cases with other automotive companies show VW is not the only company deceiving people about emissions. So, how can a customer be certain selecting to support a different provider won’t put them in the situation of additional financial loss? Also does brand perception play a stronger role when a company’s aiming to move from start-up to mid-size as opposed to one already leading the industry? How may violating trust in the case of cheating on the emissions test be different for a small car company instead of this industry powerhouse considering brand perception and customer loyalty in terms of environmental ethics and deception? Does the fact stock share prices soared after management changes were made provide any insight regarding whether trust can be restored amongst VW’s actual car buyer population?
The questions are relevant in determining whether any particular Clean Air Act enforcement strategy provides a strong deterrent effect for VW and other car companies. While the shareholder actions were dependent on the management team being replaced, the investors wouldn’t be silenced without a fight in terms of proving executives were aware of the defeat device and didn’t share the information. Either way, I am glad you’re focusing on trust violation because financial penalties are very recoverable for a multi-national corporation such as this one. In order to stop this from continuously happening, it’s important to understand, and better yet, communicate to the public elements of this scandal that result in companies taking a hard hit for cheating on emissions tests. Perhaps, it involves showing the public the amount a car loses value when a car company deceives its customers.