Dieselgate: Heavy Fumes

Exhausting The Volkswagen Group

Case Overview
Volkswagen's Ambition - Aimed to be the world's largest
automaker, achieving significant growth, particularly in the US
market.
Deception Exposed - In 2015, the US EPA discovered Volkswagen's
diesel vehicles used illegal software to cheat emission tests.
Global Impact - Around 11 million vehicles worldwide had the
device, exceeding emission limits by up to 40 times.
Severe Consequences - This became the biggest auto-
emission scandal, damaging Volkswagen's brand image and
"Made in Germany" reputation.
Leadership Change - CEO stepped down, replaced by Matthias Mueller,
who knew the company well.
 Emission Standards

EUROPE US
Euro standards introduced in early 1990s with progressive Tier standards adopted in early
tightening, especially for diesel. 1990s with weight-based
Focus on pre-production certification testing. categories.
Individual member states can enact stricter measures. More emphasis on post-
T production testing, warranties, recalls, and defect production testing, warranties,
reporting. recalls, and defect reporting.

Key Differences Impact

Focus: US prioritizes NOx (acid rain, ozone) while EU Different standards create market barriers.
emphasizes CO2 (climate change). Cars legal in one region might be illegal in
another due to non-compliance.
Compliance: US standards considered stricter with
potentially more stringent technology requirements. Manufacturers may need significant
investment to modify vehicles for different
Approval Process: EU relies on UNECE standards, markets (e.g., Ford ECOnetic).
which some see as lagging behind the US.

Challenges: Consensus building in the EU can delay stricter

standards.
 The Scandal
In September 2015, the United States Environmental
Protection Agency (EPA) disclosed that Volkswagen had
installed defeat devices in diesel vehicles sold from 2009-
2015.
This software detected when vehicles were undergoing
emissions testing and altered performance to meet legal
standards, while significantly increasing emissions during
regular driving.
Volkswagen's stock price plummeted, and the scandal
damaged the company's reputation for reliability and
trustworthiness.
The scandal led to legal actions against Volkswagen
executives and increased regulatory scrutiny on diesel
emissions worldwide.
Sparked a global debate on the future of diesel vehicles and
accelerated the shift towards electric vehicles.
 Aftermath of Scandal

40 times more NOx than allowed in the

U.S. during normal operation 11 million vehicles affected worldwide A loss of $30billion globally including a
$2.8 billion criminal fine and $1.5 billion in a
civil lawsuit in the U.S.
 Volkswagen Response to Scandal

Pre-Crisis Phase During Crisis Phase Post Crisis Phase

Discrepancies between lab tests and VW admitted to using cheat Matthias Mueller became CEO vowing
real-world emissions noticed in 2013
devices under pressure from transparency and a thorough
Independent researchers alerted
regulators. investigation.
US authorities
CEO issued a public apology but New CFO and external appointments
VW initially claimed technical
denied personal knowledge Stock aimed to strengthen governance
issues and conducted a limited
Price plunged significantly Sales Whistleblower program to encourage
recall
of certain diesel models halted info sharing
Winterkorn resigned Public website setup to inform
consumers
Goodwill packages offered to US
owners of affected vehicles
SWOT Analysis Post Dieselgate

STRENGTHS WEAKNESSES
Strong Brand Portfolio Damaged Reputation
Financial Strain

S W
Established Global Presence
Complex Corporate Structure
Focus on Innovation

OPPORTUNITIES
Electric vehicle boom
Focus on Transparency
O T THREATS
Competition Stricter
Regulations
Emerging Markets Tech Lack of genuine cultural
advancements change Economic Downturn
 PESTEL ANALYSIS
Politica Economical Socia
Volkswagen faced financial penalties exceeding
Stricter l regulations
emissions in key $30 billion, including fines, vehicle buybacks,
A significant lossl of consumer trust in
markets,
especially the United States, which Volkswagen Volkswagen and diesel technology in general,
and compensations, significantly impacting
failed to meet legally. In some regions, leading to a shift in consumer preferences
its financial stability. The scandal affected
governments provided incentives for diesel towards petrol and electric vehicles. Increased
Volkswagen's sales and market position globally,
vehicles due to their lower CO2 emissions, public awareness and concern over air quality
with a notable drop in stock prices and
indirectly encouraging their and health impacts of NOx emissions from
consumer trust
adoption diesel vehicles

Technological Environmental Legal

The excess emissions of NOx by Volkswagen's numerous lawsuits from
The use of sophisticated software to Volkswagen faced
manipulate emissions tests and conceal the diesel vehicles contributed to air pollution, consumers, regulators, and governments
vehicles' actual emissions. The scandal posing risks to environmental health and public
worldwide, leading to significant legal costs
accelerated the automotive industry's shift safety. The scandal heightened awareness and
Post-scandal, there was a push for more
concern over the automotive industry's
towards electric vehicles as a cleaner stringent testing procedures and regulations to
environmental impact, pushing for faster
alternative to diesel engines prevent similar incidents, including real-world
adoption of sustainable mobility solutions
driving emissions (RDE) tests
 Recommendations
Prioritize rebuilding trust by implementing robust compliance programs to ensure ethical
conduct.

Strengthen corporate governance by implementing stricter controls to prevent similar scandals in

the future.

For a while try to focus more on the China Market by capturing the demand for budget SUVs as it
was least affected by the Dieselgate scandal.

Offer generous compensation programs to those effected by the scandal , for example the
VW group can for a while offer new cars to the effected customers in the US market.
Thank You