The Volkswagen company created 11 million diesel powered vehicles that were affected by software used to cheat U.S. emissions tests. Under the U.S. Clean Air Act the company could face as much as 18 billion in fines.
It is the same thing that happened to General Motor's safety crisis, where the company did not follow federal safety rules and 124 people ended up dead, and now they are paying for that dearly.
Link:
http://www.forbes.com/sites/joannmuller/2015/09/22/vws-7-billion-screw-up-a-lesson-in-how-to-destroy-a-brand/
8 comments:
I've been briefly following this story, and boy, is it messed up. I think the fact that VW is planning on setting aside $7.27 BILLION is very telling about how horrible this problem is. But, the company can be faced with $18 billion in fines by the US.
I think this will impact a lot of European-made cars and their accessibility in the US. I wonder if the US will put a limit on which European car companies can export cars/stricter limitations. This is huge news in the car industry.
It is extremely worrisome, especially to consumers, that a huge company, such as Volkswagen would be able to get away with soliciting false information for over seven years. Not only did Volkswagen dig a grave for themselves when they decided to deceive loyal customers, but they also lost all future credibility for themselves and other large (auto) dealers. Volkswagen risked the life of the firm, as well as the financial health of investors. Due to the bad PR, the VW stock is taking a serious fall. Only negative things can be predicted for the future of VW's company, stock, and reputation.
While I do think that VW is in it for the llong-haul while dealing with this bad PR, their stock did not plummet as much as expected over the past couple days. At the height of the crisis, VW stock dropped to $95.51 a share and today, the market closed with VW stock coming in at $111.50 per share. This abrupt change can be attributed to CEO, Martin Winterkorn, resigning from his position. While only negative things can be predicted for the future of VW's company, stock, and reputation, this is a great first step for them although I agree with Sophia that it is still very worrisome to consumers. I am anxious to see how VW will handle this situation in the coming days, but am not hopeful that it will be a good outcome.
The irony behind this whole situation is that although the CEO of VWwas readily aware of this situation, he is still receiving a $32M severance package. Although this might be guaranteed in his contract, this should not be a provision that VW follows for someone who has been involved in a major scandal. Not only is the stock down a significant amount, but sharehodler money is being given to a fraudulent man which is sickening.
Maybe this is the moral person in me, but I find it astonishing that such a large company tried to get away with such a large deceptive act. It wasn't just a "whoops we didn't catch that mistake", it was "let's install a software specifically designed to deceive the emissions tests." Not only does this action betray the trust of customers, but I believe I read in another article that the vehicles were releasing up to 40 times the US legal limit of emissions. Whether you choose to believe in climate change or not, there is still a sufficient amount of evidence of the negative effects of vehicle emissions on the environment. While I would like to believe that this would severely affect the purchase of vehicles from VW, I think that customers still believe in the value of a VW car and will continue to buy them in the long run.
It is extremely pathetic to see what Volkswagen did. Not only are they going to lose a lot of their customer base, but also they might be facing serious regulatory actions from the US government. This might in fact put a halt or reduce automobile imports from Europe in general that would hurt some of those European nations. If Volkswagen cannot come with a solution to quickly react to this massacre, it will not be too late for the car-lovers to bid farewell to this automobile giant.
This is a huge screw up on multiple levels. With the current technology that Volkswagen has as well as other competitors, I do not see this being the quick fix solution that Volkswagen desperately needs right now. Even competitors such as Honda had specifically asked Volkswagen how they were able to still comply with the regulations to which they had no comment. Because of this I think the company will lose many of its customers. I think the US customers rely heavily on companies they can trust and I think with this breach of their trust they will be very hesitant for a while to purchase any of their products until they prove themselves again.
Volkswagen thought that they would not be caught and that they would be saving costs by not developing the low emissions engine they needed to. Not only is it affecting their sales and heavy fines, but their image is tainted. A lot of people will not want to buy Volkswagen anymore because they see them as liars.
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