TheVolkswagenEmissionsScandalEoinDick11387401

ExecutiveSummaryKeyLearningsFromTheScandal:• Thebrand imageofVolkswagenatanalltimelow.

• Thecheating occurred duetopressuretoovercometechnical hurdles surround engineemissions.

• Therisksandconsequences wereeitherpoorly understood orunderstood andtakenanyway.IneithercaseVWriskmanagementstructures wereinsufficient.

• ThescandalisanethicaldisasterforVolkswagen.

• Acceptableethical frameworkswerenot inplace.

• VWValuesarepoorly defined

• ManagementCulture atVWwaslargelyresponsible

• Lackofverticalcommunications prevented theproblem fromreachingthehigher levelsofmanagement.

• Seriousreform isneededatVolkswagentoregainconsumerconfidence, andavoidfurther scandals.

Recommendations:• Endthecontinuing badpressthrough fulldisclosure ofallrelevantinformation relating tothescandal.

• Changethemanagementculture atVWbyreducing barriers toverticalcommunication.

• Appoint AHighLevelExecutiveResponsible ForEthics, SustainabilityAndEnvironmentalIssues.PreferablyFromOutsideOfVWWithAStrongTrackRecordOnTheseIssues.

• Draftacomprehensive environmental charter.

• Createanethicaldecision makingframework,similartothatusedbythePMI

• Consider divestingfromfossilfuelsinthefuture.

• FocusonPHEVsintheinterim period andEVsinthefuture.

• UseTesla’sopensourcebatterytechnology.

• Consider constructing a‘Gigafactory’ reducecostsofEVandbatteryproduction.

2

TheVolkswagenemissionsscandalisoneofthe largestcorporatescandalsinrecentmemory.Thisreportisdesignedtouncovertherootcausesbehindthescandal,andexaminewaysthattheVolkswagengroupcanlearnfrom,andavoidsuchmistakesinthefuture.Forthepurposes ofthisreport,theprojectwillbeconsideredas:thedesign,developmentandconstructionofVWgroupdieselengineswhichwereimplicatedinthescandal.Thereportfocusesonfourkey lenseswhichofferinsightintothefailingsatVW.Theseare:RiskManagement,Ethics,LeadershipandProjectFailure.Fromtheanalysis,itisclearthattherewereseriousshortcomingsineachofthesefourareas.ManyofthecausesforthefailureofthisprojectstemfromthemanagementcultureatVolkswagen.Itisthehighestlevelofmanagementthatsetsthestandardforacompany,andultimatelytheyareresponsible.Inthetablesacross,thekeylearningstotakeawayfromtheprojectareoutlined,asaresomerecommendationsforVolkswagenonhowtobestlearnfrom,andmoveonfromthescandal.WhilstVolkswagenstillhastheabilitytoremainagiantintheautoindustry,therearemanyhardlessonstobelearnedandseriousreformisneeded.Thiswillrequireastrongandcommittedleadershipmovingforward.

TableOfContents

3

Executive Summary 2

Introduction 4

TheFallout 5

RiskManagement 6

Ethics 11

Leadership 15

ProjectFailure 20

Recommendations 25

Conclusions 33

References 34

Bibliography 35

AntiPlagiarismStatement 39

AboutTheAuthor 40

IntroductionTheVolkswagenemissionsscandalisoneofthelargestcorporatescandalsinrecentmemory.Thisreportisdesignedtouncovertherootcausesbehindthescandal,andexaminewaysthattheVolkswagengroupcanlearnfrom,andavoidsuchmistakesinthefuture.Forthepurposesofthisreport,theprojectwillbeconsideredas:thedesign,developmentandconstructionofVWgroupdieselengineswhichwereimplicated inthescandal.Althoughtheoriginal scandalfocusedononeenginetype,specifically EA189dieselengines, ithassincegrowntoincludeotherenginetypes.Astheyaresoclosely interlinked, theyshallbeconsideredasoneprojectforthepurposeofthisreport.ItisimportanttonotethattheVolkswagengroupencompassesseveralbrands,withthesametechnology,andcarsfromAudi,Seat,SkodaandPorschehavealsobeenimplicated inthescandal.Thereaction fromtheVolkswagentothisscandalshallalsobeincluded inthescopeofthisreport.

4

TheFalloutFromTheScandalThefalloutformthescandalisbroadMillionsofconsumersareaffected.IntheUKalonethereisamassrecallofaffectedcars,withover400,000needingnewinjectors.(Odell,2015)Volkswagenemployeesandemployeesfromtheir subsidiariesandsuppliersfacejobuncertaintyasaresult.ThehealthofthegeneralpublicisalsoeffectedbytheincreasedNitrousOxideemissions,ofwhichsomecarswerefoundtoemitove 40timesthelegallimit.NitrogenOxidecanhaveseriousnegativehealtheffects.“ItisestimatedthattheeffectsofNO2onmortalityareequivalent to23,500deathsannuallyintheUK.”(DEFRA,2015)TheknockoneffecthasreachesoutsideofVW“AccordingtoareportbyBankofAmerica, itsworst-casescenarioforthecrisiswouldseeHungaryandCzechRepublic lose1-1.5percentagepointsfromtheirGDPgrowth,witha0.5percentagepointhitinPolandandRomania.”(FoyandPoliti,2015)Ithasalsopromptedregulators,suchastheEPAintheUStoinvestigateothercarbrandsforcheatingemissions tests.(JopsonandWright,2015)MostimportantlyforVolkswagen,whichhaslongbeenregardedasoneofthemostresponsibleandtrustworthybrandsintheautoindustry,consumerconfidenceandtrustinVWhasbeenshakentoitscore.Whichwill takeyears,ifnotdecadestorestore.Thatisifitisevenpossible,asscandalssuchasthiscanleavescars,longafterthescandalhaspassed.Itisthereforeessential toactasrapidlyandcomprehensivelyaspossibletomitigatetheimpactofthescandal,andputintoplacemechanismstopreventitfromeverhappeningagain.Inordertodothis,theprojectwillbeassessedinfourkeyareas.Thoseare:RiskManagement,Ethics,LeadershipandProjectFailure.

5

RiskManagement

6

Whatisarisk?Inordertounderstandtheimplicationsofriskmanagementregardingthiscase,itisimportanttounderstandwhatisarisk?TheProjectManagementBodyofKnowledge(PMBOK)definesprojectriskas:“anuncertaineventorconditionthat,ifitoccurs,hasapositiveornegativeeffectononeormoreprojectobjectivessuchasscope,schedule, costandquality.”(ProjectManagementInstitute,2013)

Asthefocusofthisreportisonboththemanipulationofemissionsfiguresthroughvariousmeansdiscussedabove,andthediscoveryofthismanipulation.Focusingonnegativeriskswillbethepriority.

“Ariskisapotentialnegativeconsequenceevent.”(Houghton2015)

InthecaseofVolkswagen,themanagementofnegativeriskswasfarfromadequateorevenacceptable.

7

Whatwastheriskinthiscase?Tosaytheriskwasthescandalitselfwouldbeanoversimplification.Ultimatelythenegativeriskwasthediscoveryofthemanipulation, through bothdefeatdevicesandalsosoftwarecode.Theissuearosefromthemanagementofthisrisk.Topreventtheriskfromcoming intoplayseveralthingscouldandshouldhavebeendonedifferently.Firstofall,thedevicesshouldneverhavebeeninstalled norshould thecomputercode.OnceitwasdiscoveredbyVWthentheyshouldhaveimmediatelyinvestigatedandopenly fixedtheissue.Thiswouldhaveshowedthemasproactiveandmitigatedsomeofthefalloutfromthescandal.Itwasafoolish risktotake,fromthecomplexityandquantityofmanipulation, knowledgeofthiswouldhavehadtobewidespreadatVW.Itwouldbenaïvethatsuchmanipulationwouldremainasecret.Therewillalwaysbewhistle-blowers.Clearlyfromanalysistheriskswereeitherpoorlyunderstood,miscalculatedorevencalculatedandtakenanyway,whichismosttroubling aspectforVW.

8

Whattypeofriskwasit?Fromthematrixacross,itisclear thattheriskwasahighimpactrisk,borderingperhapsatveryhigh.Thisisobviousfromthefollowing:Cost:Theprojecthasgreatlyexceeded itsoriginal costandwillendupcostingbillionsmorethanoriginally planned.Time:Theprojectshouldhavebeenclosed longagoyetithasbeenreopened.Itishardtoquantifytimeonthisscale,astheprojecthasbeenreopenedafterclose inordertorectifyitsissues.However,theneedforrecalls inordertomakesoftwareorhardwarechangesimpact significantlyonthetimerequiredofresourcesfromnumerousdepartmentsincluding: servicing legal,marketingandothers.Thereforeitisreasonable toclassifytheextensionoftimespentontheproject.ScopeTheprojecthasgreatlyexceeded itsscope.Whilstatthistimeperiod theprojectshouldbelongclosed,itisnowreopenedandfarmoreworkisrequired inordertobringthecarsuptotherequiredstandards.Quality:Thequalityofthefinalprojectisfarfromwhatwasexpected, thecarsarenotasfuelefficientorenvironmentallyfriendlyasplanned.Thereforethisriskhasalargeimpactonquality.

9

(ProjectManagement Institute,2013)

ChangestoRiskManagementatVolkswagen

Clearly,theriskmanagementforthisprojectfellshortofwhatwasneeded.Itremainsunclearatthispoint,howfarknowledgeofthismanipulationspreadinVW.Whatisclearisthatitwasanunacceptablerisktotake,asithadahighprobabilityofdiscoveryandaveryhighpotentialimpact.Inordertohaveavoidedtakingtherisk,abetteranalysisofthepotentialdiscoveryandimpactshouldhavebeentaken,ethicalissuesnotwithstanding.

10

11

TheEmissionsScandalHasBeenAnEthicalDisasterForVolkswagen.Thisseemstobeexactlywhathashappenedhere.TheuseofdefeatdevicesandsoftwaremanipulationhasallowedVWtosellmillionsofcards,yetinthelongrun,thisscandalcouldprovedisastrousforVolkswagenwithestimatesfromdifferentsourcesputtingitanywherebetween€6.5billionfromVolkswagento€78billion:AworstcasescenariofromCreditSuisse.(Petroff,2015)

NotablytheVWcodeofconductonlyhasahalfpagededicatedtotheenvironment.ThisclearlyshowsthattherewasnotsufficientemphasisonenvironmentalissuesatVW

Thereisalsonomentionofpublichealthissues,certainlythescandalhasanimpactonpublichealthasNitrogenOxideemissionsarebelievedtocauseapproximately23,500deathsintheUKalone.(DEFRA,2015)

Thistypeofethicalissue,wherethereisnovisibledamageandimmediatedamageisakintosmokinginapublicplace,whereothersareaffectedbysecondhandsmoke,buttheyarenotguaranteedtosufferconsequences,andeveniftheydiditwouldnotbeforalongtime,andfarfromviewofthesmoker.

“Unethicalbehaviourcanbeextremelyprofitableintheshortrun.Butabusinessissupposedtocreatelong-termvalueforitscustomersandshareholdersandthesetrickswillnotlastforthatlong.” (Karpe,2015)

12

TheTragedyoftheCommons

Fromanenvironmentalstandpoint,thecheatingonemissionsisreminiscentofHardin’s(1968)“TragedyoftheCommons”wherebyacommonresourceisexploitedbyall,untilultimatelyasthereisnosustainablemanagementstructureoverit,itisexpended.Theexcusethateveryoneisdoingit,isnolongervalidinmoderntimes.

NeglectingEthicalIssues

Manycorporationsoftenneglectethicalissuestotheirowndetriment.ThiswasclearlythecaseatVolkswagen.Certainlytheyarenowpayingaheavypricefortheirunethicalbehaviournow.Andwillcontinuetodoso,unlesstheydemonstrateseriouscommitmenttoreform.

Beingethicalisprofitable.

Inastudy“consumerswerewillingtopaymoreforethicalgoodsthanunethicalones,oronesaboutwhichtheyhadnoinformation.Likewise,negativeinformationhadamuchbiggerbearingonconsumerresponsethanpositiveinformation.”(Trudel andCotte,2008)

13

WhatCouldVWDoToImproveTheirEthicalPractices?CreateAnEthicalDecisionMakingFramework

VWcouldexplorecreatinganethical decisionmakingframeworksimilartothatbytheProjectManagement Institute. (ProjectManagement Institute, 2012)Openadoptionofthisframeworkwouldremovesomeambiguityaboutethicaldecisionandmakeiteasiertoavoidtheprocesseswhichledtotheinstallationofthedefeatdevices.

AppointAHighLevel ExecutiveResponsibleForEthics,SustainabilityAndEnvironmentalIssues. PreferablyFromOutsideOfVWWithAStrongTrackRecordOnTheseIssues.

WhilsttheappointmentofanewCEOisagoodstepininitiatingchangeoftheethicalcultureinVW.Thepossibilityofcreatingaseniorexecutivelevelpositionresponsibleforethics,sustainabilityandenvironmentalissuesshouldbeexplored.ThispersonshouldideallybeappointedfromoutsideofVolkswagenandhaveastrongtrackrecordontheseissues.ThiswouldnotonlyhelpVWimproveintheseareas,butprovetothepublicthattheyarecommittedtodoso,atatimewhereconfidenceisatanalltime low.

CreateAComprehensiveEnvironmentalCharter

Volkswagenistrulycommitted totheenvironmentandsustainabledevelopment, thenitshoulddraftacomprehensiveenvironmentalcharterwhichreaffirmsthisandreinforcesthegroupscorevalues.

DivestFromFossilFuels

Volkswagenmightbeginbydivestingfromfossilfuels. Itisnotonlymoreethical, asitwouldgoalongwaytoreducingtheimpacts ofclimatechangeifallcarmanufacturersmovedawayfromfossilfuels.Itwouldoffergreaterstrategicfitmovingforwards,asalongsiderisingoilprices,thereisnotaninfinitesupplyoffossilfuels.Theywilleventuallyrunout.Itwouldbeverydifficulttosellpeopleacarwithafuelsourcethat isprohibitivelyexpensive,ornolongerexists.

14

15

AFailureofLeadershipAtVolkswagen‘Thedaysoldiersstopbringingyoutheirproblemsisthe dayyouhavestoppedleadingthem.Theyhaveeitherlost confidencethatyoucanhelpthemorconcludedthatyou donotcare.Eithercaseisafailureofleadership.’ColinPowell.(Harari,1996)

16

TheFailureatVW:

TherewasafailureofleadershipatVolkswagen.Thisoccurredatmultiple levels,theextentofwhichmayneverbecomeclear.Therewerebarrierstoupwardscommunicationwhichledtotheinstallationofthedefeatdevicesandsoftwaremanipulation.Thismeantthatsubordinatesdidnothavethetrustintheirsuperiorstoaskforhelp.

AsHarari notedonCEOs:“theybuild somanybarrierstoupwardcommunication thattheveryideaofsomeone lowerinthehierarchylooking uptotheleaderforhelpisludicrous.”(Harari,1996)

“Everysuperiorhasresponsibilityforhisorheremployees.”(VolkswagenAG,2015a)ThisscandalisabyproductofthecorporatecultureatVolkswagenandultimatelytheCEOisaccountableforthemanagementculturehecreates.Indeed,theVolkswagencodeofconductnotesasmuch:“Everysuperiorhasresponsibilityforhisorheremployees.EverysuperiorsetsanexampleandmustactinstrictaccordancewiththeCodeofConduct.”(VolkswagenAG,2015a)

Askingforhelpshouldneverbeseenasaweakness.Itshouldbepositivelyencouraged.Inthecaseoftheinstillationofdefeatdevicesandsoftware,itmostlikelycameaboutfromengineersbeingplacedundertremendouspressuretocreateevermorefuelefficientandcleanerburningdieselengines.Thispressure,combinedwiththecultureinwhichtheyfeltunabletoaskforhelp,ormoretimeorresourcestosolvetheproblem,ifthatwasindeedpossible.Somewhatinevitablymanifesteditselfthroughthetakingashortcut,therepercussionsofwhicharebeingfeltbyVolkswagenatthispresenttime.

Goingagainstthecompaniesownvaluesmusthaverequiredatremendousamountofpressure,evenifthevaluesofVolkswagenaresomewhatvague.

These‘abstract’valuesarelikelyalsotoblame.SurelyacompanyaslargeanddiverseasVolkswagenneedsamorecomprehensiveandexhaustivevaluestatementthantheyhaveatpresent.

17

VolkswagenValues:Fromthevaluestatement,itiseasytoseehowanemployee,oranumberofemployeescouldjustifybendingtherules.

CurrentVWValuesStatement“Ourpersonalvaluesarefundamentalconvictionsandattitudes towardslifethatdetermineourthoughtsandactions.Ourvaluesprovidethebasisforourmotivationandourdecisions. It’s exactlythesamewiththeVolkswagen’s values– ourGroupvalues.Oncetheyarefirmlyestablishedinourheadsandourhearts,theywill influenceourbehavior anddecisionsinadditiontoourpersonalvalues.

Likeourpersonalvalues,ourGroupvaluesareabstract.TheadvantageofabstractvaluesisthattheycanbeappliedtothewidestvarietyofsituationsandfieldsasaretobefoundinsuchalargecompanyasVolkswagenAG.Everyemployeeimplements thevaluesdifferently.Butthedirectionremainsthesame.

Andwhat’smost importantistohaveacommondirection!

Volkswagenhasdefinedsevenvaluesforitself:

•Customerfocus

•Topperformance

•Creatingvalue

•Abilitytorenew

•Respect

•Responsibility

•Sustainability”(VolkswagenGroup,2015b)

18

ResponsibilityAndChangeUltimatelytheformerCEOMartinWinterkorn isresponsibleasismentionedintheVWcodeofconduct(VolkswagenGroup,2015a)andhasacknowledgedasmuch:“AsCEOIacceptresponsibilityfortheirregularitiesthathavebeenfoundindieselenginesandhavethereforerequestedtheSupervisoryBoardtoagreeonterminatingmyfunctionasCEOoftheVolkswagenGroup.”(VolkswagenGroup,2015c)

Thisisapositivestep,asisthesuspension ofseveralexecutiveslinkedtothedevelopmentofthesuspectengines.(Milne,2015)

Movingforward,Volkswagenneedstoaddressmanyofthese issues.TheneedforaculturalshiftisacknowledgedbythenewCEOMatthiasMüller."Weneedacultureofopenness andcooperation."(VolkswagenGroup,2015d)

Thistransformationalprocesswillbevital,ifVolkswagenistosurvivethisscandal.

19

20

ReasonsForProjectFailureTheprojectstoproducethecarsattheheartoftheemissionsscandalareundoubtedlyfailures.Tobeconsideredafailure,aprojectdoesnothavetobecancelledduringproductionorevenbeincompleteattheendoftheagreedtimeperiod.Infactaprojectcanfaillongafteritisdeemedtobecompleted.

Taketheexampleofabridgecompletedontime,andonbudget,thatmatchesthespecificationsexactly.Ifitcollapsestwoyearsaftercompletion,thenitisafailure.Thereforeadifficultyliesinmeasuringprojectsuccessatthetimeofcompletion.

21

Tobrieflyassesswhythisprojectisclassifiedasafailure.ItshallbeassessedunderseveralcriticalareasfromthePMBOK.Scope

“ProjectScopeManagement includestheprocessesrequiredtoensurethattheprojectincludesalltheworkrequired,andonlytheworkrequired,tocompletetheprojectsuccessfully” (ProjectManagementInstitute, 2013)

Bythisdefinitiontheprojecthasgreatlyexceeded itsscope.Whilstatthistimeperiodtheprojectshouldbeclosed, it isnowreopenedandfarmoreworkisrequiredinordertobringthecarsuptotherequiredstandards.

Time

Thetimelineoftheprojecthasbeenextendedbyseveralyearsafter itshouldhavebeenclosed.Itisunclearatthispointbyhowmuch.Thismassivetimeoverrunisaclearindicatorofprojectfailure. Andtimeismoneywhichleadsusontoournextpoint.

Cost

Atthispointitisimpossibletocalculate theexactcostofthescandal.Withestimates from€6.5to€78billionasmentionedabove.(Petroff,2015)Thisenormouscostoverrunonceagainindicates failure.

Quality

Theprojectalsofailedtodeliveronquality.Vehicles werenotasefficientwithregardstofueleconomyoremissions.Thereforethequalityofthefinishedproductwasunacceptable toconsumers.Onceagain,anindicatoroffailure.

Resources

Theuseofresourcesonthisprojecthasballoonedafter itwassupposedtobecompleted.This includes,butisnotlimitedto:PRandMarketingtomitigate theimpact ofthescandal,servicingandengineeringresourcestocorrectthedefective vehiclesandfinancialresourceswhichhavehadtobesetasideinordertocovertheanticipatedcostsfromthescandal,whichcouldhavebeeninvestedelsewhere.

Risk

Riskwereeithernotproperlyplannedfor,orcalculated andtakenanyway.Ultimately the“potentialnegativeconsequence event” (Houghton,2015)occurredandhaswreakedhavocatVW.Thiswasperhapsoneoftheprimaryreasonforfailureofthisproject.

Stakeholders

Theendresultisunacceptable tostakeholders.ThestakeholdersinthisprojectaretoobroadtolistherebutconsiderthePMIdefinitionofastakeholderrelatedtothiscase. ThePMBOKdefinesstakeholdersas:”individuals,groupsororganizationswhomayaffect,beeffectedby,orperceivethemselves tobeaffectedbyadecision,activity, oroutcomeofaproject.”(ProjectManagement Institute, 2013)

Bythisdefinitiontheynumberinthemillions,ifnotbillions.Noneofwhomarehappywiththeoutcome. Itwouldnotbeunreasonabletoclassifyeveryhumanbeingonearthasastakeholderinthisproject,astheyhavecheatedonenvironmentalissues,andthishasthepotentialtoeffecttheentireplanet.

22

WhyDidFailureOccur?Havingdeterminedthattheprojectfailed, itisimportanttoexaminetherootcausesbehindthefailure.

Thethreemainareasthat ledtoprojectfailureinthiscaseare:

PoorRiskManagement

Asdiscussedearlier,theriskmanagement forthisprojectwaswoefullyinadequate.Ultimately theprimaryriskinthisprojectwasthediscoveryofthedefeatdevicesandthesoftwaremanipulationinVolkswagendieselengines.

Itremainsunclearatthispoint,howfarknowledgeofthismanipulationspreadinVW.Whatisclear isthat itwasanunacceptable risktotake,as ithadahighprobabilityofdiscoveryandaveryhighpotential impact.

Inordertohaveavoidedtakingtherisk,abetteranalysisofthepotentialdiscoveryandimpactshouldhavebeentaken,ethical issuesnotwithstanding.

PoorEthicalDecisionMaking

“Projectmanagersshouldnotresorttoshortcutsandunethicalmeansinordertogenerateprofitsbecausethatwillbedisastrousfortheproject,client,andtheorganizationinthelongrun.Thiscanbehighlydamagingtothesocial imageandbrand.”(Karpe,2015)

Therewasanappallingfailureinethicaldecisionmakinginthisproject.ThiscameaboutmostlyfrompoorlydefinedabstractvaluesinVolkswagenandalsoafailureinleadershipatVolkswagenwhichwillbediscussedbelow.

Inordertoavoidfutureethicalfailures,thecreationofanethicaldecisionmakingframeworkcouldbeconsidered,alongwithlessabstractandclearervalues.AfailureofLeadership

It isclearthatbarrierstowardsverticalcommunicationexistedandthat,acultureoftrustandunderstandingwasnotinplaceinthisproject.This isafailureofleadershipandultimately theCEOwasresponsible.

InthefutureitisimportantthatthecultureinVWisthoroughlyreviewedandattempts toremovethese barrierstocommunicationaretaken.Employeesshouldneverfeelthattheycannottaketheirproblemstosuperiors.

23

Whatcouldhavebeendonedifferently?Ifthesuggestionsabovehadbeeninplace,thentheprojectmayhavestillfailed.However, theimpactonVWwouldhavebeen farlesssevere.

Themanipulation occurredbecausetheengineerswerestruggling toachievethedesiredengineperformance.Thereweretwooptionsatthispoint:Delaythecompletionoftheprojectinorder toovercomethesehurdles,orscraptheproject.

Bothoftheseoptionswouldhavebeenverycostly(Butnowherenearascostlyasthescandalhasbeen.)andrequiredextremelystrong leadershiptoimplement.

Itisavitallesson,thatsometimes itisnecessarytomakedifficultdecisions,ratherthantakingashortcut,asultimatelytheyprovemorecostly,asVolkswagenarenowdiscovering.

24

RecommendationsandConclusions

25

Recommendations:Optionsforthefuture.AFreshStartVolkswagenwillbeunable torecoverfromthescandalwhilstitisstillevolving.Thereforeitisessentialthatallthefactssurrounding thescandalaredisseminated tothepublicandrelevantauthoritiesasrapidlyaspossible.ThiswillallowVWtomoveon.

BeginDivestingFromFossilFuelsVolkswagenmightbeginbydivestingfromfossilfuels.Itisnotonlymoreethical,butwouldoffergreaterstrategicfitmoving forwards,asalongside risingoilprices,thereisnotaninfinite supplyoffossilfuels.Theywilleventuallyrunout.Itwouldbeverydifficult tosellpeopleacarwithafuel sourcethatisprohibitively expensive,ornolongerexists.

26

FocusonPHEV(interim)andEVlongterm

FocusonPHEVsInTheInterimandEVslongtermWhilstVWhasnowswitcheditsfocustousingselectivecatalyticreductiontechnologyfollowingthescandal,itcouldfocusonElectricVehiclesasalongtermstrategy.(Bryantet.Al.2015)

Intheinterimperiod,VolkswagencouldfocusmostlyonPHEVs(PlugInHybridElectricVehicles)whichcombineexistingICE(InternalCombustionEngine)technologywiththatofelectriccars.

InthemediumtolongtermVolkswagencouldaimtoproduceprimarilyelectriccars.ThismarketiscontinuallygrowinganditisvitalthatVolkswagenremainaheadoftheirCompetitors.

Asof2012,ElectricVehiclesaccountedfor0.02%oftheworldscars.TheInternationalEnergyAgencyestimatethatby2020itwillbe2%ofallcars.Thatisanincreaseofalmost20millioncars.(IEA,2013)

SuchmarkettrendsarealsolikelytocontinueandifVolkswagencannotcompetewithcompetitorsinthisfield,thenitmayfailtoexploitamotorgrowthopportunity.

ThisisnotAlienterritorytoVW.TheyhavealreadylaunchedboththeeGolfandeUp.TheseproductscouldbechampionedbyVWasthefuturecoreoftheirbusiness.

27

UseTeslaOpenSourceBatteryTechnology

Whilstsuccessful,theeGolfandeUp’sbatterytechnologycomparepoorlywiththatofsomeothers,namelyTesla.Whosemodels typicallyhaveapproximately3timestherange.ThereforeVolkswagencoulduseTesla’sbatterytechnology’sopensourcepatentsinorder toincreaseefficiency.

Considera‘Gigafactory’

Inorder toreducethecostdisadvantageofEVscomparedwithICEpoweredvehicles,whichcomesmostlyfromtheproduction ofbatteries.Volkswagencouldconsiderdeveloping a‘gigafactory’,similartoTesla,inordertoimprove theefficiencyofbatteryproduction andreducecost.Agigafactoryisanextremelylargeproduction facilitywhichisveryefficientatbothbatteryandEVproduction.

28

DraftAComprehensiveEnvironmentalCharterIfVolkswagenistrulycommittedtotheenvironmentandsustainabledevelopment,thenitshould draftacomprehensiveenvironmentalcharterwhichreaffirmsthisandreinforcesthegroup’scorevalues.

29

ReduceBarriersToVerticalCommunication.Ashiftfromtherigidmanagementculturethatexistedpreviouslymaybeneeded.Themainpriorityshouldbeinfosteringacultureofopennessandtrustamongalllevelsofmanagement,whereemployeescanbringproblemstosuperiorswithoutfearofrepercussion.Itisvitalthatbarrierstoverticalcommunicationareerased.Thiswillalsoenablestobemorecreative.

30

AppointAHighLevelExecutiveResponsibleForEthics,SustainabilityAndEnvironmentalIssues.PreferablyFromOutsideOfVWWithAStrongTrackRecordOnTheseIssues.

Whilst theappointmentofanewCEOisagoodstepininitiatingchangeinthemanagementcultureinVW.Thepossibility ofcreatingasenior executivelevelposition responsible forethics,sustainability andenvironmentalissues should beexplored.Thispersonshould ideallybeappointedfromoutsideofVolkswagenandhaveastrongtrackrecordontheseissues. ThiswouldnotonlyhelpVWimproveintheseareas,butprovetothepublic thattheyarecommittedtodoso,atatimewhereconfidence isatanalltimelow.

31

CreateAnEthicalFrameworkForDecisionMakingSimilarToThePMIFramework.

VWcouldexplorecreatinganethicaldecisionmakingframeworksimilartothatusedbytheProjectManagementInstitute.Openadoptionofthisframeworkwouldremovesomeambiguityaboutethicaldecisionandmakeiteasiertoavoidtheprocesseswhich ledtotheinstallationofthedefeatdevices.

32

ConclusionsAsseenfromthisreport,theemissionsscandalhasprovedincrediblychallengingforVW.Itisalsovitalthatinordertoavoidanotherscandalofthismagnitude,acomprehensivereviewofVWpoliciesisneeded.Therearehardlessonstobelearned.Someofwhichareoutlinedinthisreport.Therecommendationsgivenhereofferhopeforthefuture.Volkswagenhasbeen,andisstillagiantintheauto industry,anditcanremainonelongintothefuture,aslongasitcontinuestolearnfrompastmistakes.

33

ReferencesBryant,C.,Wright,R.andSharman,A.(2015)Volkswagenchangesdiesel technologyplanafteremissionsscandal.Availableat:http://www.ft.com/intl/cms/s/0/71f3be26-718a-11e5-9b9e-690fdae72044.html#axzz3qQmFDdCE(Accessed:3November2015).DEFRA(2015)DraftplanstoimproveairqualityintheUK:Tacklingnitrogendioxide inourtownsandcities.Availableat:https://consult.defra.gov.uk/airquality/draft-aq-plans/supporting_documents/Draft%20plans%20to%20improve%20air%20quality%20in%20the%20UK%20%20Overview%20document%20September%202015%20final%20version%20folder.pdf(Accessed:20November2015).Foy,H.andPoliti,J.(2015)VWemissionscrisis fuelsjobsfearineastEurope.Availableat:https://next.ft.com/content/6d6d7b78-6d00-11e5-8171-ba1968cf791a#axzz3qQmFDdCE(Accessed:22November2015).Hardin,G.(1968)‘Thetragedyofthecommons’,Science,162(3859),pp.1243–1248.doi:10.2307/1724745.Harari,O.(1996)QuotationsfromChairmanPowell:ALeadershipPrimer.Availableat:http://tuftsdev.github.io/SoftwareEngineering/lecture_notes/quotations_from_chairman_powell.pdf (Accessed:20November2015).Houghton,J.(2015)ProjectRiskManagement:LectureNotes.IEA(2013)GlobalEVOutlook:UnderstandingTheElectric Vehicle Landscapeto2020.Availableat:https://www.iea.org/publications/globalevoutlook_2013.pdf(Accessed:21November2015).Jopson,B.andWright,R.(2015)EPAextendsVWdieselemissionsprobetootherbrandsinUS.Availableat:http://www.ft.com/intl/cms/s/0/9e4a32fa-68d6-11e5-97d0-1456a776a4f5.html#axzz3qQmFDdCE(Accessed:3November2015).Karpe,A.(2015)Beingethical isprofitable.Availableat:http://www.projectmanagement.com/articles/300210/Being-Ethical-is-Profitable/?PMIwelcome=1&regComplete=1 (Accessed:19November2015).Milne,R.(2015)Volkswagenhassuspended10seniorexecutives inemissionsprobe.Availableat:https://next.ft.com/content/337b86de-78c8-11e5-933d-efcdc3c11c89#axzz3qQmFDdCE(Accessed:22November2015).

34

Odell,M.(2015)About400,000VWcarsinUKtoneedchangestoengines.Availableat:http://www.ft.com/intl/cms/s/0/9dcaefb2-7110-11e5-ad6d-f4ed76f0900a.html#axzz3qQmFDdCE(Accessed:3November2015).

Petroff,A.(2015)VolkswagenscandalmaycostmorethantheBPoildisaster.Availableat:http://money.cnn.com/2015/10/02/news/companies/volkswagen-scandal-bp-credit-suisse/(Accessed:21November2015).

ProjectManagementInstitute(2012)PMIEthicalDecisionMakingFramework.Availableat:https://www.pmi.org/~/media/PDF/Ethics/Ethical%20Decision%20Making%20Framework%20-%20FINAL.ashx(Accessed:22November2015).

ProjectManagementInstitute(2013)Aguidetotheprojectmanagementbodyofknowledge(PMBOKguide).5thedn.UnitedStates:ProjectManagementInstitute.

Trudel,R.andCotte,J.(2008)Doesbeingethicalpay?.Availableat:http://www.wsj.com/articles/SB121018735490274425(Accessed:19November2015).

VolkswagenAG(2015a)TheVolkswagenGroupCodeofConduct.Availableat:http://www.volkswagenag.com/content/vwcorp/info_center/en/publications/2015/09/Verhaltensgrundsaetze_des_Volkswagen_Konzerns.bin.html/binarystorageitem/file/20150930_Verhaltensgrundsätze+-+update_coc_englisch_digital.pdf (Accessed:19November2015).

VolkswagenGroup(2015b)GroupGuidingPrinciples: PersonalValuesandGroupValues.Availableat:http://www.volkswagenag.com/content/vwcorp/content/en/misc/ir/Konzertleitlinien.html (Accessed:20November2015).

VolkswagenGroup(2015c)Volkswagengroupstatementbyprof.Dr. Winterkorn.Availableat:http://www.volkswagenag.com/content/vwcorp/info_center/en/news/2015/09/Statement.html(Accessed:19November2015).

VolkswagenGroup(2015d)VolkswagengroupMatthiasMüllerunveilsnextstepsfortheVolkswagengroup.Availableat:http://www.volkswagenag.com/content/vwcorp/info_center/en/themes/2015/10/next_steps.html(Accessed:19November2015).

35

BibliographyBlack,K.(1996)Causesofprojectfailure:Asurveyofprofessionalengineers.Availableat:http://www.pmi.org/learning/causes-project-failure-survey-engineers-4814?id=4814(Accessed:22November2015).Brunsden,J.(2015)EUfailed toheedemissionswarningsin2013.Availableat:http://www.ft.com/intl/cms/s/0/d593256c-78c8-11e5-a95a-27d368e1ddf7.html#axzz3qQmFDdCE(Accessed:3November2015).Carrington,D.(2015)Gatesfoundationwouldbe$1.9bnbetteroffifithaddivestedfromfossilfuels.Availableat:http://www.theguardian.com/environment/2015/nov/16/gates-foundation-divested-fossil-fuels-would-be-19bn-better-off(Accessed:20November2015).Carrington,D.(2015)MPscallfordiesel carsscrappage schemetotackleairpollution.Availableat:http://www.theguardian.com/environment/2015/nov/20/mps-call-for-diesel-cars-scrappage-scheme-to-tackle-air-pollution(Accessed:20November2015).FTView(2015)Europehasduckeditsobligationsondiesel cars.Availableat:http://www.ft.com/intl/cms/s/0/afc4d66a-7efd-11e5-98fb-5a6d4728f74e.html#axzz3qQmFDdCE(Accessed:3November2015).Heaps,T.A.A.(2015)Whatkindofworlddoyouwanttoinvestin?.Availableat:http://www.corporateknights.com/channels/responsible-investing/fossil-fuel-investments-cost-major-funds-billions-14476536/(Accessed:20November2015).Hotten,R.(2015)Volkswagen:Thescandalexplained.Availableat:http://www.bbc.com/news/business-34324772(Accessed:3November2015).Jackson,G.,McCrum,D.andHale,T.(2015)VWscandaltarnishesEurope’sbondmarket.Availableat:http://www.ft.com/intl/cms/s/0/086f4752-7330-11e5-a129-3fcc4f641d98.html#axzz3qQmFDdCE(Accessed:3November2015).Jackson,G.,McCrum,D.andHale,T.(2015)VWscandaltarnishesEurope’sbondmarket.Availableat:https://next.ft.com/content/086f4752-7330-11e5-a129-3fcc4f641d98#axzz3qQmFDdCE(Accessed:22November2015).Larson,E.W.andGray,C.F.(2011)Projectmanagement:Themanagerialprocess.5thedn.NewYork:McGrawHillHigherEducation.

36

Milne,R.(2015)FerdinandPiëch’s influenceseeneverywhereatVolkswagen.Availableat:http://www.ft.com/intl/cms/s/0/fe07b240-7645-11e5-933d-efcdc3c11c89.html#axzz3qQmFDdCE(Accessed:3November2015).Perminova,O.,Gustafsson,M.andWikström,K.(2008)‘Defininguncertaintyinprojects– anewperspective’, InternationalJournalofProjectManagement,26(1),pp.73–79.doi:10.1016/j.ijproman.2007.08.005.Reuters(2015)VWjusthiredanexecutiveawayfromapple.Availableat:http://uk.businessinsider.com/r-volkswagen-names-apples-jungwirth-as-head-of-digital-strategy-2015-11?r=US&IR=T(Accessed:19November2015).Sharman,A.(2015)VWemissionscandaldentsEUcarmarket.Availableat:https://next.ft.com/content/5363c286-8cc8-11e5-8be4-3506bf20cc2b(Accessed:19November2015).Sharman,A.(2015)VWpreparestobuybackcarswithemission ‘irregularities’.Availableat:https://next.ft.com/content/8e246afa-895e-11e5-90de-f44762bf9896(Accessed:19November2015).VWfallout:HowBelgiumaccelerated diesel’sdominance(2015)Availableat:http://www.ft.com/intl/cms/s/0/c173f7ae-6c30-11e5-aca9-d87542bf8673.html#axzz3qQmFDdCE(Accessed:3November2015).(VWfallout:HowBelgiumaccelerateddiesel’sdominance,2015)VolkswagenAG(2015)InterimReportJanuary-September.Availableat:http://www.volkswagenag.com/content/vwcorp/info_center/en/publications/2015/10/Q3_2015_e.bin.html/binarystorageitem/file/Q3_2015_e.pdf(Accessed:19November2015).VolkswagenGroup(2015)ViaVision:ShapingtheFutureofFobility.Availableat:http://www.volkswagenag.com/content/vwcorp/info_center/en/publications/2015/01/VV1.bin.html/binarystorageitem/file/Viavision_e.pdf (Accessed:20November2015).VolkswagenGroup(2015)VolkswagengroupMatthiasMüllerappointedCEOoftheVolkswagengroup.Availableat:http://www.volkswagenag.com/content/vwcorp/info_center/en/news/2015/09/CEO.html(Accessed:19November2015).VolkswagenGroup(2015)VolkswagengroupstatementfromtheexecutivecommitteeofVolkswagenAG’ssupervisoryboardfollowingitsmeetingonSeptember30,2015.Availableat:http://www.volkswagenag.com/content/vwcorp/info_center/en/news/2015/10/AR.html(Accessed:19November2015).

37

VolkswagenGroup(2015)Volkswagengroupstatementofthesupervisoryboardonirregularities inCO2levels.Availableat:http://www.volkswagenag.com/content/vwcorp/info_center/en/news/2015/11/Stellungnahme_des_Aufsichtsrates.html (Accessed:19November2015).

VolkswagenemissionsscandalspreadstoPorsche(2015)Availableat:http://www.ft.com/intl/cms/s/0/aa165e96-818c-11e5-8095-ed1a37d1e096.html#axzz3qQmFDdCE(Accessed:3November2015).

(VolkswagenemissionsscandalspreadstoPorsche,2015)

Wright,R.(2015)VolkswagenopposedUSfuelefficiency rules.Availableat:http://www.ft.com/intl/cms/s/0/65d439a8-7668-11e5-933d-efcdc3c11c89.html#axzz3qQmFDdCE(Accessed:3November2015).

Wright,R.andBryant,C.(2015)Volkswagenscandalisrootedintechnologyshortcomings.Availableat:http://www.ft.com/intl/cms/s/0/58975016-720f-11e5-9b9e-690fdae72044.html#axzz3qQmFDdCE(Accessed:3November2015).

38

AntiPlagiarismStatement

“Itheundersignedconfirmthattheworksubmittedhereisentirelymyownwork,andthatanyworkofotherswhichisincludedhasbeenproperlyreferencedandacknowledgedaccordingtonormalacademicguidelines.”Eoin Dick11387401

39

AboutTheAuthorEoin DickisanMScProjectManagementStudentattheUCDMichaelSmurfitGraduateBusinessSchool.HealsoholdaBA(Hons.)inPoliticsandInternationalRelationsFromUCD.Contact:eoin.dick@ucdconnect.ieeoindick1@gmail.com

40