Name: Soh Yi Jie

Student ID: J20032793

Course Code: COM227S

Lecturer: Miss Ashreen Shahira Mohd Aslam

 Abstract

The Volkswagen emissions scandal, also known as "Dieselgate," was a global controversy that

emerged in 2015. The scandal led to massive recalls, fines, and lawsuits against Volkswagen, as

well as a decline. This paper aims to analyze the crisis management steps taken by Volkswagen

in response to their PR crisis.

Keywords: Volkswagen, scandal, PR crisis, crisis management, Dieselgate

 Introduction

The function of public relations is to manage relationships between a brand and its

stakeholders. This involves building and maintaining these relationships to ensure the brand's

success, as stakeholders have the power to influence whether the brand succeeds or fails (Public

Relations Society of America, n.d.). One of the main responsibilities that falls under the PR’s job

scope is crisis management. Public relations and crisis management are closely related; in fact,

crisis management is considered a crucial part of public relations.

When a crisis occurs, public relations professionals are responsible for managing the

organization's response to the crisis and communicating with all stakeholders, including

customers, employees, investors, and the media (Coombs, 2013). The goal is to minimize the

negative impact of the crisis on the organization's reputation, financial stability, and ability to

conduct business. In this paper, the case study selected as a major crisis faced by a company’s

public relations department would be the Volkswagen car emission controversy.

Dieselgate, also known as the Volkswagen (VW) emission scandal, was a significant

controversy that broke out in 2015 after it was discovered that VW had been faking emissions

testing for its diesel-engine vehicles (Mansouri, 2016). The 2015 scandal caused great havoc in

the automobile industry and cost billions of dollars in fines, recalls, and court judgements. The

diesel-powered cars under Volkswagen had a "defeat device" software system that could

recognise when it was being tested for pollutants and alter the engine's operation to create fewer

emissions than under normal driving conditions (Topham et al., 2015). Because of this,

Volkswagen was able to pass emissions tests even though when driven on the road, it may

release up to 40 times the allowable amount of nitrogen oxides.

 Findings

Researchers from West Virginia University were the first to discover the problem when

they noticed differences in pollution levels measured during testing and those experienced in

actual driving situations. The scandal had brought far-reaching impacts to both the company as

well as the entire automotive industry. After Volkswagen cheated on its emissions tests, the

Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) in the

US embarked on an investigation, which resulted in a total of $14.7 billion settlement in 2016

(Hotten, 2015).

The software, known as a "defeat device," was intended to adjust the automobile's

performance so that it would produce fewer pollutants when the car was undergoing emissions

testing (Atiyeh, 2019). However, it was found that the emissions from these Volkswagen

products were much greater than what was permitted by law when the car was being driven

routinely on the road. Volkswagen admitted to installing the defeat devices on around 11 million

cars worldwide, including 500,000 in the United States (Atiyeh, 2019). According to Hotten

(2015), the affected models included the Volkswagen Jetta, Golf, and Passat, as well as the Audi

A3.

In accordance with the settlement, Volkswagen committed to invest in clean vehicle

technology, purchase back or repair the damaged vehicles, and compensate the customers who

were harmed (Glinton, 2019). Moreover, Volkswagen was prosecuted criminally, with several

executives being charged with conspiring to mislead the US, committing wire fraud, and

breaking the Clean Air Act.

 According to an article published in the CPA Journal, the scandal had taken a huge toll

on Volkswagen’s reputation (Jacobs & Kalbers, 2019). The automobile company’s stock price

plummeted drastically in the wake of the scandal, and Volkswagen lost billions of dollars in

market value. Also, the scandal caused a drop in sales of diesel engines across the board and

spurred many governments to think about tightening emissions rules. The affair also revealed

deeper ethical and governance problems within the business, such as a lack of accountability and

transparency (Jacobs & Kalbers, 2019).

To address the crisis, Volkswagen took a number of steps to restore trust with its

customers and stakeholders. The company launched an extensive PR campaign, which included

public apologies, advertising campaigns, and a new corporate mission focused on sustainability

and transparency. In total, Volkswagen hired three different public relations firms from the US,

Germany and the UK to assist in handling this crisis (Mansouri, 2016). Together with

introducing a new CEO to the company and rearranging the management structure, Volkswagen

also implemented new compliance and governance procedures (Hotten, 2015). The business

even declared ambitions to convert to an all-electric fleet by 2030 and made significant

investments in the development of electric vehicle technologies (Szymkowski, 2021).

Discussion

Lerbinger (2012) has shared several important steps to tackle a PR crisis in his book titled

“The Crisis Manager”, with some of them being listed down below:

1. Creating a crisis communication strategy involves drafting important messages, choosing

the right spokespersons, and laying out the actions to be performed in the case of a crisis.
 2. Transparent and speedy response: It is critical to communicate openly about what

transpired and the organization's response to the problem while also acting swiftly to

address it.

3. Keeping all stakeholders informed about the crisis: this includes consumers, employees,

investors, and the media.

4. Keeping a consistent message: the main messages of the organization should be

emphasized in all communications.

5. After the crisis has passed, it is crucial to assess the organization's reaction and pinpoint

opportunities for improvement. This is known as evaluating and learning from the crisis.

While Volkswagen did take multiple measures to ensure the situation does not get worse:

such as appointing a new CEO while the former one stepped down, issuing public apology and

company new commitments in clean technology- there were still some mistakes done while they

attempted to save the company’s image.

First, the lack of accountability in the statements made by the company in response to the

crisis. Martin Winterkorn, who was the CEO of Volkswagen when the scandal broke out, issued

an apology video referring to the scandal as “a mistake caused by a few people”- which led to an

outrage in public as many people felt that he was not willing to claim his accountability while his

statement underplayed the severity of the whole issue (Joshi & Hakim, 2016). What makes it

worse is his later statement when he announced his resignation, he was quoted saying: “I am not

aware of any wrongdoing on my part”. In my opinion, that was a very unwise move done on

their part, the PR department should have reviewed Winterkorn’s statements before they were

released to the public.

 Next, the lack of transparency in Volkswagen’s response to the situation. It initially

claimed that just a small number of automobile models were equipped with the defeat device, but

had to retract that assertion once it became evident that more models were compromised (Clark,

2017). In my opinion, instead of making an impulsive, potentially inaccurate statement,

Volkswagen should have just announced that they are currently in the midst of investigation

before giving any misleading information. Their lack of transparency and attempts in covering

up the scandal made the already-challenging situation even more challenging. Sometimes a

simple acknowledgment of the issue and admitting that the company is still trying to figure out

what happened is more than enough, instead of making up inaccurate statements to try and

deceive the public.

Lastly, Volkswagen’s habit of ambiguous messages and stonewalling. Not only

Volkswagen was slow to respond to the crisis, which gave the impression that it was not taking

the issue seriously, it took weeks for the company to issue a formal apology, and months to begin

recalling affected vehicles. After more than a year of stonewalling investigators, Volkswagen

finally admitted to the claims that they hacked their own cars to deceive U.S. regulators about

how much their diesel engines pollute.

Conclusion

To sum it up, there is an uncuttable tie between public relations and crisis management.

Public relations is extremely important for managing an organization's reaction to a crisis and for

stakeholder communication. The negative impacts brought to an organization's reputation due to

a crisis can be reduced with effective crisis management, which will eventually speed its

recovery too. What Volkswagen did to tackle its emission scandal crisis was replacing the
leadership, restructuring the organization, redeveloping the strategy and rebranding the product.

This four-step recovery method served as the cornerstone of a refocused business like

Volkswagen. However, if the company had been transparent and accountable enough to own up

to their mistakes from the very start when the news broke out, the recovery process of the crisis

would have been much shorter and swifter.

 References

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