Answer to Question #59788 in Finance for Md Hamdan

Question

In 2015, it was revealed that Volkswagen (VW) had installed software on its diesel cars in order to circumvent US emissions tests. Carefully, outline what this scandal involved, and explain why the actions of the VW management were unethical. Discuss what issues may have caused this behavior to occur, and what you would do to prevent this from happening in the future. Evaluate the impact of this scandal on the value of VW, and explain why the value of the firm may change by more than the cost of the recall to correct the issue.

Answer 1

If in 2015, it was revealed that Volkswagen (VW) had installed software on its diesel cars in order to circumvent US emissions tests, then this scandal was involved by the try of VW engineers and managers to cheat the tests and also the people, who buying the VW car think that it is safer than it really is, that's why the actions of the VW management were unethical, because they provided untruthful information about the ecological safety of their cars, which could harm a lot of people, but VW could increase their revenues. To prevent this from happening in the future some another tests should be implemented, which would find any tricks. The impact of this scandal on the value of VW would be negative, and the value of the firm may change by more than the cost of the recall to correct the issue, because the rating of the brand "Volkswagen" will fall and the demand for VW cars will fall too.