Subject: Business and Management
Topic: VOLKSWAGEN AND INTERNATIONAL FRAUD
Language: English (U.S.)
Pages: 2
Instructions
Volkswagen company Each student is to individually prepare a two- to three-page paper on some aspect of international fraud. This brief, but researched, paper should contain at least three references; Wikipedia.com is not a qualified source. Due dates for relevant milestones are in the course schedule that follows.

Volkswagen and International Fraud

Introduction

Volkswagen is one of the biggest auto vehicle manufacturers in the world. It therefore came as a surprise when on 18th September 2015, the Environmental Protection Agency declared that the company had violated the Clean Air Act. During investigations, the EPA discovered that the carmaker had manipulated emissions controls during laboratory testing. The EPA found that vehicles from the company met the nitrogen oxide US standards when tested in the laboratories. However, the vehicles emitted forty times more nitrogen oxide in real world driving. The fraudulent act led to increased awareness about the high levels of pollution emitted by vehicles made by a number of car manufacturers, which exceed the regulatory limits in real-world driving.

How VW Manipulated Emissions Controls

Though the German auto carmaker had initially denied the allegations, it later confessed to manipulation of the emissions controls in its vehicles. The company claimed that the independent laboratory testing was flawed. It was later revealed that VW had installed devices that could cheat the pollution tests conducted in the laboratories. VW had used software that caused its vehicles to release fewer nitrogen oxide molecules in laboratory tests as compared to real-world driving conditions.

The software was designed to sense when the vehicle was being laboratory tested. The software would then activate controls that reduced the nitrogen oxide emissions. However, the software turned the equipment off during real world driving leading to a dramatic increase in emissions above the legal limits. The reasons the equipment was turned off during regular driving range from improving the vehicle’s acceleration and torque or in a bid to save fuel.

John German and a group of other scientists were called to conduct an industry wide research on diesel cars to prove that diesel cars were safer for the environment than other vehicles. They were comparing EPA lab results with real-world driving emission results when the team discovered a major disparity between the two sets of emission results for Volkswagen cars. The EPA laboratory tests showed that the vehicles’ emissions were in line with EPA standards. However, on-road testing showed that the emissions were 40 times higher than the results from the laboratories (Vincent, 2015).

Effects of the Discovery of Fraud

The immediate effect of the international fraud discovery was the plummeting of the company’s stocks. The company lost more than a quarter of its value in less than a week. The loss translates to a loss of approximately 20 billion euros in less than five days. In addition, the company was forced to halt all diesel vehicle sales in the United States leading to $US 18 billion in fines after the conclusion of the investigations.

Further research into the potential hazards of the scandal revealed that VW is responsible for a cumulative amount of 524-kilo tones of nitrogen oxides escaping into the atmosphere. The additional oxides have directly resulted in the loss of 45,000 life years, with a loss of 44,000 life years in Europe alone. The greater loss of life years in Europe is due to the higher population density and the fact that more VW vehicles were sold in the continent than in anywhere else in the globe.

The healthy life years were lost due to ill health or death because of inhalation of fine dust aided by the proliferation of additional nitrogen oxides molecules in the atmosphere. According to Oldenkamp (2016), if the company does not recall all the vehicles that were tampered with then an additional 72,000 healthy life years would be lost in the continent.

Outrage from Countries

The company’s international fraud caused outrage in many countries other than the United States. It was discovered that more than 11 million cars had been affected by the manipulation of emission controls. The United States launched criminal investigations into the fraudulent activities of the company. Spain demanded that Volkswagen pay back in full all the subsidies it had received for selling ‘fuel efficient’ cars in the country. German prosecutors have launched criminal investigations into the company’s former CEO, Martin Winterkorn. If culpable, he may face ten years in jail and a hefty personal fine (Thompson, 2015).   

References

Oldenkamp, R. (2016, Feb 3). Volkswagen fraud: 44,000 healthy years lost in Europe. Radboud University. Retrieved on 1/3/2016 from http://www.ru.nl/english/news-agenda/vm/nature-environment/2016/volkswagen-fraud-44-000-healthy-years-lost-europe/

Thompson, M. (2015, Sep 28). German prosecutors probe Volkswagen CEO for fraud

Vincent, M. (2015, Sep 23). Volkswagen emissions scam: Man who uncovered VW fraud wants other carmakers under spotlight. ABC News. Retrieved on 1/3/2016 from http://www.abc.net.au/news/2015-09-23/man-who-uncovered-vw-emissions-scam-wants-wider-probe/6797082