Monday, November 17, 2014

Volkswagen: Potential Time Bomb (2009-2014)

Company Overview
Volkswagen Company logo
Volkswagen AG is a very well known and successful player in the car manufacturing business on a global scale. They began operations in Germany in 1937 and have spread to about 40 other countries including the United States in 1955. The Volkswagen Group of America is what the U.S. subsidiary is formally known as, and is headed by CEO Michael Horn. This company is built on the foundation of certain values which include making attractive, affordable, and safe cars.

One of the core values that this company says it operates by is as stated before, safety. There no doubt that their cars are very effective at protecting the passenger during a collision. Most of their models receive a 4 out of 5 stars at least from the National Highway Traffic Safety Administration. This is a good statistic, but what about their effort in making sure that these accidents don't happen in the first place?
Volkswagen is a company that promotes the safety features within their cars with confidence. On their main website, there is a brochure that they have written that thoroughly describes how their features such as their power steering and headlights are designed to help provide a safer driving experience. Since 2009, which is when that brochure was published, multiple models have been recalled consecutively every year for failing systems and parts within the car. A good amount of these failing parts are the ones that are being boasted about in their brochure.
The models of cars that have been recalled are unfortunately for VW, vast. Just to name a few, the 2009-2011 Tiguans have been recalled for headlight and steering failures while driving. Approximately 26,452 2014 Passats were recalled due to a flammable fluid leak within the transmission system. Also many 2012-2013 Beetles have been recalled due to failing airbags that are designed to protect passengers. One could imagine the potential accidents and injuries that could be caused by these faulty parts. Volkswagen has invited the owners of these cars in for free service, but what is shocking is that they clearly have not done much to improve their quality control over the past 5 years.

Martin Winterkorn, former CEO of Volkswagen AG

The stakeholders for this company include a great number of different groups of people. The one that should be of most concern are for those who consume their products. The people who own these cars are the ones who have to go through the hassle of getting their car repaired for parts that should have been working in the first place. The passengers and other motorists on the road are stakeholders as well. If these failing safety features cause an accident one of these days, the owners of these cars and whoever they involve in the accident will be negatively effected. Shareholders of Volkswagen stock are to be included here as they are part owners of the company and will have their returns effected if sales fall for this company. lastly, the employees of Volkswagen are Shareholders as well. The reputation of upper management is at stake as well as the job security and livelihood of employees such as salesmen/women.

This economic theory states that the obligation of a company is to only maximize profits in a legal manner, and that a companies should only be responsible for themselves. Volkswagen has done nothing illegal so in that sense of this theory, they have been ethical. What is in question is whether their efforts are really maximizing profits or not. In today's society, consumers are able to communicate to each other very easily and tend to influence each others future purchase decisions. These recalls are very bad publicity for Volkswagen and have a negative effect on the satisfaction levels for their owners. This causes bad consumer reviews and bad word of mouth which all reach potential buyers. This phenomenon will result in a drop in sales which will in turn hurt profits. What VW has to do is see how much it will cost to improve their quality control compare those expenses with the potential loss in sales and decide which path is more profitable.

2009-2011 Volkswagen Tiguan, one of many recalled models

Utilitarianism is a theory that requires one to think about all the parties who are involved and to consider how one's actions effect them all. For a business entity, this means that they should take all of their stakeholders under consideration when weighing out the pro's and con's of their actions. The pro's should definitely outweigh the con's in every decision that is made in order for it to be considered ethical by a utilitarian. The one major consequence that comes from this for the Volkswagen is customer dissatisfaction. As stated before, this not only hurts the brand itself, but the managers and owners of the company as well. Probably the most important consequence to think about is the possibility of an accident being caused by a failure within these cars that are being recalled. An accident can greatly hurt not only those who are involved within the accident, but the company as well. The lawsuits that would ensue these accidents could amount to millions of dollars. Quite a large expense for any company to face. These con's outweigh the pro's in my opinion.

Kantianism is a concept that was formed by Immanuel Kant, and it is based on four basic principles. They are to act rationally, help others to make rational decisions, to respect the needs and differences of every individual, and to do what is right solely because of the fact that it is right. In other words, businesses should act provide beneficial products that serve the needs of their customers. Also, businesses should provide their consumers with all the information that they need to make a rational purchasing decision, and do they right thing not for profit, but because they want to do the right thing. VW's actions in addressing this recall issue is not ethical in relevance to Kantianism. They have still continued to tell their consumers that their cars are safe and reliable as part of their promotional and sales strategy. Despite this, recalls are still being made. Whether VW knows that they are providing their buyers with inaccurate information or not is up for debate, but nonetheless, the information they are providing is preventing the consumer from making a fully rational decision.

Virtue Theory
Virtue theory describes what character traits a business person as well as the product should have. This theory was created by Aristotle. His functionalism theory states that “whether an x is good partly depends on what an x is. A good x fulfills its function well”. In relevance to Volkswagen, the products that have been recalled have failed to initially function well. The managers of this company have not been accurate when distributing information on these recalled products. By doing this, they have failed to also treat their consumers fairly. Integrity is a good characteristic for a business to have in the eyes of virtue theory. By providing inaccurate information upon the safety and quality of these vehicles, the salesmen/women as well as the managers for Volkswagen are hurting their integrity.


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