Volkswagen case study | How VW BUSTED | Strategy 2018 | Rise & Fall of VW | The Emission Scandal

Summary

This video explores Volkswagen's infamous emissions scandal, tracing how the automaker's ambitious Strategy 2018 led to the development of 'clean diesel' cars that secretly bypassed U.S. emissions tests. Engineers installed software to cheat regulations, causing millions of vehicles to emit nitrogen oxides far above legal limits. The scandal, exposed in 2015, resulted in executive resignations, billions in fines, global investigations, and significant environmental and health impacts. Despite the crisis, Volkswagen showed resilience through non-diesel sales, highlighting the dangers of aggressive corporate targets, ethical lapses, and the importance of compliance and transparency in global business operations.

Takeaways

• 😀 Volkswagen launched Strategy 2018 in 2007 with the goal of becoming the world's largest automaker, targeting 10 million car sales per year.
• 😀 CEO Martin Winterkorn and chairman Ferdinand Piëch pushed aggressive growth goals, creating high-pressure management environments.
• 😀 Volkswagen aimed to popularize diesel engines in the U.S. to appeal to environmentally conscious consumers.
• 😀 Engineers faced technical challenges in meeting U.S. emission standards without compromising performance or cost.
• 😀 The company implemented a 'defeat device'—software that cheated emissions tests by adjusting engine controls depending on whether the car was tested in a lab or driven on the road.
• 😀 The clean diesel marketing campaign portrayed diesel engines as eco-friendly, despite their excessive real-world emissions.
• 😀 The scandal was uncovered after West Virginia University students discovered discrepancies in diesel emissions during real-world testing in 2013.
• 😀 Volkswagen admitted in 2015 that 11 million cars worldwide contained defeat devices, leading to recalls, fines, lawsuits, and a stock price crash.
• 😀 Health and environmental impacts of excess nitrogen oxide emissions included respiratory issues, heart disease, cancer, and thousands of premature deaths in Europe and the U.S.
• 😀 Leadership failures, lack of transparency, and attempts to shift blame onto engineers highlighted serious corporate governance and ethical shortcomings.
• 😀 Despite the scandal, Volkswagen recovered global sales through non-diesel vehicles, achieving record sales in China by 2016.
• 😀 Other manufacturers, such as Daimler, upgraded their diesel emission systems to avoid similar penalties, reflecting industry-wide regulatory scrutiny.

Q & A

What was Volkswagen's Strategy 2018 and what were its main objectives?

Strategy 2018, launched in 2007, aimed for Volkswagen to become the world's largest automaker by selling 10 million cars annually, with a focus on expanding sales in the U.S., Russia, and China, and promoting clean diesel engines to environmentally conscious customers.

Who were the key executives responsible for Volkswagen's ambitious goals?

CEO Martin Winterkorn and Chairman Ferdinand Piëch were the main figures driving Volkswagen's Strategy 2018 and the push for global market dominance.

Why did Volkswagen focus on diesel engines in the U.S. market?

Volkswagen aimed to market clean diesel engines as an environmentally friendly alternative, hoping to appeal to eco-conscious American consumers and compete with hybrid vehicles like the Toyota Prius.

What technical problem led to the creation of the 'defeat device'?

The EA-189 diesel engine could not meet U.S. NOx emission standards without reducing fuel efficiency or adding costly emission equipment. Engineers created a software 'defeat device' to cheat emissions tests rather than solving the underlying problem.

How did the defeat device work?

The software detected when the car was undergoing an emissions test and activated full emission controls during testing. On the road, the controls were reduced, allowing the car to emit up to 40 times the legal limit of nitrogen oxides.

Who first discovered that Volkswagen cars were emitting excess pollution?

Students from West Virginia University discovered the discrepancy in 2013 while testing diesel emissions using on-road devices, which showed that Volkswagen cars performed poorly outside laboratory conditions.

What were the immediate consequences for Volkswagen after the scandal became public?

Volkswagen faced massive legal, financial, and reputational damage, including a 37% stock drop, over $30 billion in fines, penalties, reimbursements, and vehicle recalls affecting 11 million cars worldwide.

How did Volkswagen's management respond to allegations of cheating?

Top executives, including Winterkorn and Piëch, denied knowledge of the defeat devices, attributing the deception to a few 'rogue engineers,' while internal investigations were delayed or withheld from the public.

What were the environmental and public health impacts of Volkswagen's excess diesel emissions?

Excess nitrogen oxide emissions contributed to smog, acid rain, and respiratory problems, with studies estimating 1,200 premature deaths in Europe and 60 in the U.S. linked to Volkswagen's non-compliant diesel vehicles.

How did Volkswagen attempt to recover from the Dieselgate scandal?

Volkswagen focused on non-diesel vehicles, particularly in China, achieving record global sales by 2016. The company also restructured compliance and integrity processes, although challenges in transparency persisted.

What lessons can businesses learn from Volkswagen's emissions scandal?

The scandal highlights the dangers of setting overly ambitious goals without ethical boundaries, the importance of regulatory compliance, the need for corporate transparency and accountability, and the long-term costs of unethical decisions.