Volkswagen Case Study
Volkswagen Case Study
Volkswagen Case Study
Andreia Contreiras
Mateusz Krawczyski
Yen Hai Pham
Volkswagen emissions
scandal explained
Overview of the scandal
In September 2015, the Environmental Protection Agency (EPA) found out
that many Volkswagen cars had software in diesel engines that could detect
when they were being tested, changing the performance accordingly to
improve results. When not being tested, the cars would emit up to 40 times
the allowable levels of pollution. Therefore, EPA issued a notice of violation of
the Clean Air Act to German automaker Volkswagen Group.
The EPA's findings cover 482,000 cars in the US only, including the VWmanufactured Audi A3, and the VW models Jetta, Beetle, Golf and Passat. But
VW has admitted that about 11 million cars worldwide, including eight million
in Europe, are using this so-called "defeat device". The company has also
been accused by the EPA of modifying software on the 3-litre-diesel engines
in some Porsche and Audi as well as VW models. VW has denied the claims,
which affect at least 10,000 vehicles. Later on, in November, VW said it had
found "irregularities" in tests to measure carbon dioxide emissions
levels that could affect about 800,000 cars in Europe - including petrol
vehicles.
Company description
Volkswagen is a German car manufacturer headquartered in Wolfsburg,
Lower Saxony, Germany. Established in 1937, Volkswagen is the top-selling
and namesake marque of the Volkswagen Group, the holding company
created in 1975, and is now the second-largest automaker in the world. Their
cars are sold worldwide in 153 countries. In 1934, Ferdinand Porsche
presented a German government project of new car legendary Beetle. It
was response for Hitlers expectations, who demanded a cheap and family
car. Then cornerstone for building a factory was held. Hitler christened this
vehicle as a German folks car.
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effort than only adding some code to the engine software, as the code also
had to be validated. The West Virginia scientists did not identify the failure
device, but they reported their findings in a study they presented directly to
the EPA in May 2014.
Influence of the scandal
Volkswagen put this programming in about eleven million cars worldwide.
The most affected countries were: Germany (2.800.000), United Kingdom
(1.200.000), France (984.064), Belgium and United States (500.000 each) as
we can see in the graphic below from International Business Times (see
Appendix 2).
Environmental and health consequences
The scandal raised awareness over the higher levels of pollution being
emitted by all vehicles built by a wide range of car makers, which under real
world driving conditions are prone to exceed legal emission limits.
According to Scientific American EPA now suspects that these cars
emitted 10 to 40 times more nitrogen oxidea pollutant that can harm
human healththan standards allow. Many news organizations were quick to
jump on this number. The Guardian ran its own analysis, claiming that the
scandal may have caused nearly one million extra metric tons of pollution
yearly. But experts remain skeptical.
Still, experts agree that nitrogen oxide is a nasty pollutant. Once released
into the air it quickly converts into nitrogen dioxide and then absorbs
sunlight to transform into the yellow-brown haze that blankets cities. It is this
smog that can exacerbate dozens of respiratory problems like asthma,
bronchitis and emphysema. Nitrogen oxides also amplify the effect of fine
particulate soot that causes heart problem.
Also, it can be washed into the ground in the form of acid rain, which can kill
plants and animals. Once the damage is done there is no antidote, says
Yiannis Levendis, an engineering professor at North-eastern University who
focuses on diesel emissions.
Governmental/ NGO reactions
The issue with Volkswagen (VW) cheating on emissions test has resulted in
an increase in political pressure. EU Commission has requested for responses
from VW upon this scandal.
testing, on-the-road testing. To make things worse, this scandal has brought
Volkswagen to the list of most-hated companies by NGOs in UK, followed by
Shell and several other oil and gas companies.
Reactions from automotive industry
The revelation of VWs illegal act has influenced largely on Germany
automakers and auto industry in general. Most diesel car manufacturers
have been questioned about their compliance to standard testing
procedures. Soon after the controversy was publicized, these competitor
automakers have announced their reactions as below.
Toyota: Toyota does not engage in any practice that would seek to
enhance emissions performance of its engines during regulated
emissions testing or homologation cycles, nor does it use any
practice that would make engine performance different during these
tests."
PSA Peugeot Citroen: "PSA's Research & Development Department
reaffirms that PSA complies with the approval procedures in effect in
all countries where it operates, and that engine settings, assuming
the same conditions of use, are identical whether for approval
procedures or in real life.
Daimler: "We heard of the EPA's [US Environmental Protection
Agency] accusations against VW from the press. The issue
described by the press does not apply to Mercedes-Benz Cars."
Renault: "Renault complies with all regulations and legislation for
the markets in which it operates. Its vehicles are not equipped with
defeat devices designed to alter the results of regulatory emissions
tests.
These companies might have to apply new test standards from the
governmental organizations, but up to now, this is indeed their opportunity
to gain customer trust over VW in the competition. On the other hand, this
scandal also raised a question over whether consumers would lose belief in
such so-called green technologies. Tesla Motors founder, Elon Musk, takes
this issue to a different aspect: What Volkswagen is really showing is that
weve reached the limit of whats possible with diesel and gasoline. The time
has come to move to a new generation of technology. Musk was of course
referring to EV (electric vehicles) and the prospects of this area.
Volkswagen responses to the controversy
The VW group's chief executive at the time, Martin Winterkorn, said his
company had "broken the trust of our customers and the public". Mr
Winterkorn resigned as a direct result of the scandal and was replaced by
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Matthias Mueller, the former boss of Porsche. VW has set aside 6.7 billion to
cover the costs for fixing this issue, which resulted in its first quarterly loss
for 15 years of 2.5 billion in late October 2015. But besides that, VW is still
likely to face a maximum of $18 billion fined by EPA, not to mention other
class-action lawsuits.
There are two options so far for VW: remaining the scandal cars on road
while paying hefty fines, or buy back all those cars. According to analysts, in
order to fix all cars that were fitted with the software-based defeat devices, it
would take VW approximately 4.4 billion (see Appendix 3). However, there
has not been any perfect fix for these cars, since its not only an
engineering problem anymore. But on the other hand, buying back is not
only the most expensive option, but can also raise huge issues with
precedent VW owners demanding the same treatments. Up to now, VW has
asked US court to extend the deadline for this fix until April 21, 2016, since
they couldnt come up with any on the last deadline on March 24.
Conclusion
Since the scandal of VW, sustainable development has never been so hotly
debated. Some developed countries, including the Netherlands, are even
considering banning all diesel cars and even hybrid vehicles. Testing
procedures and standards are going to be adjusted as well, since the current
ones have been proved to be flawed and not as reliable as on-the-road tests.
In addition, the rising potential of electric cars has been changing consumer
attitudes towards environmental issues.
References
Bansal, T., King, M., & Seijts, G. (2015, September 26). The Volkswagen
emissions scandal: A case study in corporate misbehaviour. Retrieved from
http://www.theglobeandmail.com/report-on-business/rob-commentary/thevw-emissions-scandala-case-study-in-what-not-to-do/article26550100/
Bird, M. (2015, September 23). 'The Lance Armstrong of Automakers' is going
to slam the brakes on the whole car industry for years. Retrieved from
http://uk.businessinsider.com/volkswagen-emissions-scandal-could-set-backentire-car-industry-say-analysts-2015-9
Gates, G., Ewing, J., Russell, K., & Watkins, D. (2016, April 22). Explaining
Volkswagens Emissions Scandal. Retrieved from
http://www.nytimes.com/interactive/2015/business/international/vw-dieselemissions-scandal-explained.html?_r=0
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