The Outbreak

In September of 2015, the German car Company, Volkswagen, was caught in the act of a huge emissions fraud scandal which impacted the entire world. This fraud, beginning in 2008, lasted until 2015. It ended when America’s Environmental Protection Agency (EPA) discovered that Volkswagen had intentionally cheated emissions testing. The scandal erupted in September of that year and has greatly impacted economies throughout the world. While some of the impact was positive, such as more opportunities for American made cars, most of the results were negative, such as health and economic costs.

Summary of Actions

Briefly explained, Volkswagen implemented a software which improved their results in order to ensure their diesel engines passed emission tests. Basically, the software was designed to be able to tell when it was being tested versus when it wasn't’t, which enabled the car to change the results so it seemed to be releasing lower amounts of nitrogen oxides. After admitting they cheated, Volkswagen confessed that about 11 million cars had passed the emission tests unlawfully and will need to be worked on to remove the software (Hotten). Volkswagen’s fraud affected more than just Germany, it also affected the United States, Canada, South Korea, and many other countries across Europe.

Positives

Although the negatives outweigh the positives, it is important to recognize that when one market fails, another market usually has the chance to thrive. With the Volkswagen’s fraud, America’s car market has the opportunity to advance. America can execute on the pro to move forward with promoting environmentally friendly cars to help offset the damage that Volkswagen has caused. While the diesel cars make up for about 1% of America’s new car purchases, diesel cars dominant the market in Europe (Global). This gives America the opportunity to not only show the negatives of diesel cars, but they can endorse the American made cars that do not use diesel. Diesel cars are known for being more environmentally friendly, so with this scandal coming to light, it showed Europeans the damage that diesel engines can still do regardless of the knowledge they have been told for years. This is a perfect time for America to step in and show the positives of petrol cars.

Negatives

While the market for petrol cars in America may profit from Volkswagen’s fraud, there are many harmful effects. The most prominent is the environmental impact. Since Volkswagen lied on their emission tests, this allowed their cars to release Nitrogen Oxides (NOx) into the air for years at a time. Studies, conducted by the EPA, state that there could be as many as 50 premature deaths, 3,000 lost workdays, and $423 million in economic costs (Northwestern). Dr. Lifang Hou was quoted in an article published by Northwestern University saying, "It is well established in scientific literature that nitrogen oxides contribute to respiratory and cardiovascular disease leading to disability and death." Dr Hou’s statement brings to light the repercussions of Volkswagen’s actions when it comes to the public and the environment.

Another downside of this fraud is that it is slowly deteriorating the diesel market. Europe has relied on diesel engines for years and they have invested a great deal of money to a market that is slowly becoming less and less sustainable. This leaves Europe with a great deal of money that is going to waste.

The Results

Overall, Volkswagen came out with less charges than they could have. They took a $18.28-million-dollar loss, their stocks fell, and they suffered a sharp decline in their sales, but this is nothing compared to what was originally threatened. When a company comes out with a new car, they always set aside money to cover recalls and repairs. Volkswagen only set aside $7.41 million for this reason which only ended up covering about 41% of their actual charges (Wall Street). On top of this, Volkswagen was forced to reduce its 2015 dividends. These results took a toll on Volkswagen as a company but sent a lesson out to companies all across the world.