Reputational Risks: Volkswagen Case

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    Today we decided to switch to an unusual topic - analysis of the reputational risks of the project. To do this, we briefly consider the case of Volkswagen, which has already managed to make some noise. / photo davidd CC The essence of the story with Volkswagen is that reporters became aware of reliable information that the automaker underestimated emissions of harmful substances. The scale of this scandal is difficult to overestimate - such stories can become a point of no return for any company. Let's try to analyze the situation. The economic losses from the scandal can be estimated at several tens of billions of euros - the company lost about € 25 billion in capitalization in a matter of days, and besides this, it will face billions of fines and litigation.

    Special software

    Investigation of journalists showed that Volkswagen developed special software that regulated the level of emissions while working on a test bench. Outside the test complex, emissions could be several times higher than normal.

    The fact of the work of special software was revealed by experts of the International Council on Clean Transport (ICCT). They tested diesel cars themselves, but the result surprised them. Diesel engines, which for a long time were considered as a more environmentally friendly option, turned out to be more harmful.

    The scandal that broke out forced the company to acknowledge the fact that special software was installed, which underestimated the level of emissions during official tests. The company itself said that the problem may be characteristic of more than 11 million cars that were sold worldwide.

    Response measures

    Volkswagen said it is ready to solve this situation and is sending more than 7 billion euros to fix a technological problem. It is not yet known what exactly will happen - engine reprogramming or installation of an additional air purification system on each car. Both options are costly. Along with this, it will be necessary to review all processes for the production of new cars.

    The scale of history forced the shareholders of the company to remove the head. He resigned and issued an appeal in which he gave his assessment of what was happening. The Board of Directors said that Winterkorn was unaware of software manipulation.

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