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Volkswagen’s Impact on the U.S. economy

Updated on November 1, 2016

Volkswagen's Impact

The German company, Volkswagen, impacted the German car industry and economy throughout the scandal of cheating the reputation and good name of 'Made in Germany'. September 2015, Volkswagen produced U.S. diesel emission testing, which was later proven to be inaccurate. Knowing that automobiles and car parts are the greatest thriving export for Germany, the quality and reliability are held to a high standard. Subsequently, disrupting the Clean Air Act, reflect heavily and post long-term risk.

Researchers at West Virginia University discovered fabricating the results of the emission testing. In 2012, a performance testing on clean diesel cars was completed. Arvind Thiruvengadam was the head of his colleagues and led the group into finding inconsistencies throughout the emission levels of the Volkswagen.

Being questioned by the California Air Resource Board in May 2015, while discussing with the US Environmental Protection Agency about the multiple discrepancies was found during the routine testing of the automobiles. Immediately when interrogated about the incident, Volkswagen tried to divert the topic, bringing up technical issues instead. This way, even the idea of Volkswagen cheating could be set aside and hopefully forgotten. But, the dishonesty of the company led to $18 billion penalties and fines, 30 lawsuits, affecting all 50 states and an additional 5 provinces in Canada. Being doubted by the U.S. EPA for the rigged testing, they threatened the company to not approve its 2016 clean diesel automobiles for sale in the U.S., Volkswagen owned up and took responsibility for the actions that took place.

Chief Executive, Martin Winterkorn, resigned after the crisis had occurred, with the board replacing him with Matthias Mueller. Under new management, Volkswagen is attempting to obtain more cash to pay off the billions in fines and lawsuits. Although, the company doses have enough cash on hand to cover the U.S. predicament alone, it is not enough for the other expenses that have incurred over the incident. This resulted in long-term risk for Volkswagen, as it not only affects the company, but significant harms the economy.

The crisis removed 40% of the stock value involving 11 million diesel cars. So, Understanding that 70% of the company’s automobiles are sold outside of German’s boarders, demonstrates that Volkswagen creates sales largely in the U.S.. In fear of losing sales internally now, there can be cut backs and lay offs, but the company will survive. Nonetheless, it pushes customers to be attracted to different automobiles, enhancing competition for Volkswagen. If competition increases, the already suffering company will become further weakened. Creating a new environment for not only the remaining employees, but for the suppliers and customers that are affected by the lies.

Knowing that Volkswagen is one of the largest country’s employers. Employing over 270,000 jobs in the U.S. plus the individuals hired to work with suppliers. It affects many. Employing 600,000 workers worldwide, more than a third of the workers employed in the automobile industry in Germany. Therefore being the biggest car producing company of Germany, ultimately now hurts the German label, being looked at differently now.

Hurting the name on every item produced out of Germany impacts and now stunts the growth of the company, resulting in various fallouts for the biggest private employer. Fallouts affects the profit and sales, that Volkswagen now has to replace and recover. Due to the fabrication performance of the automobiles, results in uncertainties now for where the company stands currently and in the future. Having other suppliers and companies depending on Volkswagen, damages the health and strength of the relationships the company once held and the sales corresponding with it. Sales go down, dependency is wounded and creates fear. Fear in the company and the economy.

With the now hurt economy, Volkswagen needs repairing. The repairing of the German company, takes more time and more money than anticipated. The scandal created tricked many, including various suppliers, other industries, and its customers. Even though, there was an overall increase in sales and profit in the beginning, the discovery of cheating resulted in a backfire. Backfire of mistrust created for the good name of ‘Made in Germany’ and the mistrust of the company itself.

Under new management, the current CEO needs to prove the Volkswagen is on the right track. Getting the company back to having high quality for its products and proving accuracy throughout. Letting customers, suppliers, and other industries know, Volkswagen is someone they can still rely and depend on. Additionally, showing that the future only holds positives for the company and those affected by it.


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