100%(2)2 out of 2 people found this document helpful
This preview shows page 7 - 9 out of 34 pages.
“From there, all hell broke loose. Volkswagen had pulled its TDIs from the website, tree-huggers started leaving nasty notes on Volkswagen TDI owners’ windshields, and owners and dealers alike started suing Volkswagen for damages. It’s been one of the most devastating crises to happen to any corporation in years” (Tracy, 2016). Although this scandal started in the U.S., the UK, Italy, France, South Korea, Canada and, Germany, have opened similar investigations. Throughout the world, politicians, regulators, and environmental groups are questioning the legitimacy of Volkswagen's emissions testing. One year later, in October 2016, the U.S. Department of Justice and Volkswagen agreed on a proposed settlement that will cost the automaker an unprecedented $14.7 billion. An extensive $10 billion buyback and compensation program was rolled out for the customers. Customers can either have the automaker buy back their vehicles under government negotiated prices or can receive cash payments for diminished resale value plus a free emissions fix if they wish to keep their vehicles. In addition, the company created a “Customer Goodwill” package which offered additional cash payments, visa gift cards, and free 24 hour roadside assistance for three years for all customers who registered for the program by April 2016 (Atiyeh, 2017). As if matters were not worse enough already, in early January of 2017, the U.S. Department of Justice announced an additional $4.3 billion in criminal and civil penalties. Six Volkswagen executives were arrested for their alleged connection with the scandal. Furthermore, a “corporate compliance monitor” will be watching Volkswagen for three years into the future under the terms of its probation. Volkswagen must buy back at least 85% of all cars affected by June 2019 or face even more federal fines. Additional civil penalties, a criminal settlement, and further state-level fines have not been determined but could add billions more to Volkswagen’s balance sheet (Atiyeh, 2017). There is no doubt that Volkswagen hurt its brand image around the world.
7 | P a g e Crafting a Global Response The scale and geographic breadth of Volkswagen’s emission scandal makes it highly unique. Usually, large corporate crises were focused on a single market i.e. BPs Gulf of Mexico Spill or Google’s battle with European regulators over data privacy. Volkswagen though, which includes international brands such as Audi, Porsche, and Lamborghini, faces a crisis which traverses the globe, making it difficult to craft a proper response across many national borders and cultures. For example, although the company has been making good-will payments and effort to American customers, the company has claimed that the same illegal behavior that got them into this mess was not in fact illegal under European Union (EU) rules. As a result, Volkswagen is not making similar good-will payments and efforts to its European customers even though cars are being recalled throughout the EU (Hakim, 2016).