There and Back Again: How Volkswagen Can Mitigate the

Fallout from its Emissions Scandal

Carter Beck von Peccoz

Alexis Galmin
Cayla Mabie
Alexandra Rafter
Abishek Volety

3/3/2016

Proposal Audience
In the wake of Volkswagen being discovered for cheating emissions tests, they have been
under incredible scrutiny from government agencies as well as consumers. We are a team of five
multifaceted Northeastern University undergraduates who have been hired by Volkswagen to
come up with an approach to maintain positive public relations and re-establish credibility for the
brand. Our research will focus on understanding the environmental effects of Volkswagens
excessive carbon emissions, the effect the scandal has had on the publics perception of the brand
and the steps that the manufacturer should take to improve their now tarnished reputation.

Introduction
In September 2015, Volkswagen was exposed for selling over 11 million diesel cars with
a built-in device that was used to cheat emissions tests. During testing, the device would activate
to produce a false report of significantly lower Carbon Dioxide emissions in order for the models
to pass; the numbers they were covering showed emission rates over 40 times the legal limit
allowed in the US. Volkswagen is feeling the heat for its irresponsible cheating of the system, but
the manufacturer cannot successfully regain trust by correcting the issue alone. Our work will
highlight the steps Volkswagen has already taken to regain its reputation and recommend further
implementations that will help to bring back the Volkswagen name. We will focus primarily on
areas such as business processes, brand communications and marketing, and the environmental
impact of Volkswagen products. While Volkswagens primary concern is repairing their tarnished
reputation and reestablishing the publics broken trust through a new marketing campaign, it
must also consider both the publics environmental concerns and the effect their cheating the
tests had on the ecosystem.

Research History
There was a time when owning a car was the pinnacle of luxury, the top priority in car
manufacturing was mobility and as car ownership became more common the priority shifted
towards performance. Car buying behavior in America before the 2000s consistently served the
personal desires of individuals that for most rarely, if ever, gave precedence to matters involving
the wider social and environmental consequences of automobile use (McCarthy 2007). As
environmental concerns have taken a front seat in recent years due to rising planetary
temperatures, oceanic acidity, and the immensely negative effects of fossil fuel emissions,
consumers have shifted expectations as well.
Higher levels of Carbon Dioxide (CO2) in the atmosphere (caused in part by car exhaust),
cause a surplus of dissolved metal pollutants to collect and increase the oceans acidity. This has
had a significant impact on ecological systems that are crucial for coastal protection, fisheries,
and consumption. Currently, the atmospheric concentration of CO 2 is over 380 parts-per-million,
greater than it has been in the last 20 million years. The dissolved carbon dioxide gas reacts to
form carbonic acid, which significantly reduces the rate of calcification of marine organisms.

This causes the coral skeletons to become brittle, resulting in weakened skeletal structures.
(1742). The dwindling reefs consequently become susceptible to damage from tropical storms,
leading to increased loss of coastal land, leaving communities vulnerable to rising wave and
storm impact. Increasing temperatures, which cause the toxicity of the pollutants in the water
increases proportionally, compel the aquatic creatures to inhale trace metals from the water,
increasing internal toxin concentrations (Sokolova 183). Many of these aquatic creatures are
consumed by humans, which exacerbates the risk of further poisoning.
The rising temperatures caused by pollution and greenhouse gases impact the world far
more than most people realize. But in our capitalist society it comes as no surprise that
corporations forget that emissions tests exist to keep our world clean and safe. The global interest
in the sustaining our natural world means that oversights will have drastic consequences, as
evidenced by the intense backlash that Volkswagen currently faces.

Discussion
As environmental concerns continue to take a front seat in global concern, additional
regulations have been put in place to keep manufactures in line. To glean the parameters and
effects of these regulations, we must first explore the origins and the means of cheating
emissions tests. Paulina Oliva, of University of California, created a statistical test which speaks
to the origins of Volkswagens cheating emissions testing. Olivas test is used to detect difficultto-observe behavior within the production process and revealed that throughout South American
countries, technicians in car manufacturing plants are being bribed by manufactures to
circumvent the regulations and retesting procedures. To enable companies a higher level of
control and transparency, B.A. Ahmed Ali has come up with a materials selection process, which
will help companies comply with regulations. We recommend Volkswagen consider programs
like these at the production level in order to get back on track.
An article published by the Energy Efficiency Journal found that environmental criteria
was influential; when consumers were faced with two cars of equal performance and luxury they
were more likely to purchase the eco-friendly car than the other (Sprei, 2010). However, if a
buyer was planning to buy a car for performance and luxury the lack of environmental
sustainability was not a deterrent.
Our research showed that an important first step to regain public trust is apologizing. The
President of Volkswagen America himself, Michael Horn, released a simple yet powerful
statement on Twitter, offering his deepest apologies and promising to remedy Volkswagens
violation of the emissions standards and more importantly the publics trust (Schultz). We
recommend that they continue to reassure their customers that the company will ensure that
future models are truly environmentally friendly and sustainable vehicles. They have a good
start: immediately after the public apology, CEO Martin Winterkorn resigned and was replaced
by Matthias Mueller Porsche Boss (Schultz) in an effort to show accountability.

Volkswagen recently announced that they will transform all their cars into more
environmentally friendly electric models using expensive yet effective selective catalytic
reduction converters. It is precisely because the company claimed to use clean diesel
technology back in 2013 and then went on to cheat the emissions test that they must now take the
extra steps to truly prove their commitment to change (Golson).
Additionally, the company should not only restructure management, but also redistribute
the decision making powers. This will improve internal communication within the company by
forcing different divisions within the company to talk with each other regarding their vehicles.
The even distribution of power prevents events such as the emissions scandal from happening. In
this scandal it was believed that a small group of employees carried out the deception
(Boston). The scandal could have been avoided if the decisions regarding the emission devices
were made and known by executive management.

Conclusion
The teams research is founded on the understanding that excessive carbon emissions are
toxic to the environment and unacceptable for sustainability. Knowing that Volkswagen is
correcting this at the manufacturing level, we recommend that the company continue by
restructuring management to distribute power and avoid poor individual decisions wreaking
havoc. By communicating to the public that they are taking strides to improve, Volkswagen will
begin to regain trust in the companys ethics. Once consumers believe in the company again, new
marketing campaigns should focus on the tangible benefits that Volkswagen has consistently
delivered on: fuel economy, sport performance and German engineering.

Annotated Bibliography
Ali, B.A. Ahmed, et al. "Implementation of the Expert Decision System for Environmental
Assessment in Composite Materials Selection for Automotive Components." Journal of Cleaner
Production 107 (2015): 557-67. ScienceDirect. Web. 17 Feb. 2016.
The Analytical Hierarchy Process (AHP) is a material selection tool in which B.A.
Ahmed Ali from the Institute of Advanced Technology explores the implementation and
effectiveness of this decision-making technique. Ali argues that this method will give companies
a way to select material while observing an environmental friendly and sustainable outlook. This
analysis gives insight into the changes within the materials selection method companies use, and
will therefore help me to investigate future methods Volkswagen can use in order to restore its
supply chain and production methods.
Boston, William, Hendrik Varnholt, and Sarah Sloat. "Volkswagen Blames 'Chain of Mistakes'
for Emissions Scandal." WSJ. N.p., 10 Dec. 2015. Web. 17 Feb. 2016.
From the Wall Street Journal, this source argues that Volkswagen blames a chain of
events for the emissions scandal, with the companys Chairman, Hans Dieter Ptsch saying
There was not one single mistake, but rather a chain of errors that was never broken (Boston).
It is no surprise that the company responded to the scandal by making structural changes to
management, such as suspending managers involved with the scandal. This source will be
valuable in helping me understand the root causes of the scandal and specifically how
Volkswagen responded.
Golson, Jordan. "Volkswagen Plans to Recover from Its Scandal by Going Electric." Wired.com.
Conde Nast Digital, 13 Oct. 2015. Web. 16 Feb. 2016.
Jordan Golson is a technology and automotive reporter from Chicago, this time reporting
on Volkswagens plans for its future following the emissions scandal. The first half of the article
Golson dedicates to a report of Volkswagens plan to start equipping all its diesel cars with
AdBlue technology and selective catalytic reduction (Golson) and later personally comments on
the feasibility and likelihood of success for this plan, stating its hard to believe Volkswagen can
bring out a fully electric large sedan anytime soon (Golson). Golsons intent seems to be
showcasing the companys current status to regular people while simultaneously remarking on
his opinion of the plan, and he is backed up by all the authority of Wired. This article provides
both a firmly researched report on current events and a personal commentary on the likelihood of
success from a credible source, making it an especially useful source to draw from.
Hoegh-Guldberg, O., et al. (2007). Coral Reefs Under Rapid Climate Change and Ocean
Acidification. Science, 318(5857), 1737-1742.
Ove Hoegh-Guldberg, PhD is the Inaugural director of Global Change Institute at
University of Queensland, best known for work on climate change and coral reefs. In his article,
he discusses the ecological importance of Coral Reefs in oceanic ecosystems and in human

societies/industries. This vital system on our planet however, has become more vulnerable due to
rapid increases in atmospheric carbon dioxide, which accelerates global warming and ocean
acidification (1737). The article is a scientific research report which statistically and
biochemically examines the ecological impacts of increased carbon dioxide in the atmosphere,
and by extension, the oceans. Since it was published in a peer-reviewed Scientific Journal, it was
most certainly subject to consistent review for any type of plagiarism or falsification of data. As
such, it can be assumed to be reliable.
Lyons, Saralyn. "Road to Recovery: How Does Volkswagen Bounce Back from Emissions
Scandal?" The Hub. Hub, 07 Dec. 2015. Web. 16 Feb. 2016.
Saralyn Lyons provides an in-depth account of her conversation with noted Johns
Hopkins marketing expert Sylvia Long-Tolbert in her article. Choosing to integrate the
environmental impact of Volkswagens scandal into her marketing conversation, Lyons and
Long-Tolbert discuss the massive environmental and health implications (Lyons) in addition to
exploring avenues of rehabilitation Volkswagen can take. Their conversation continues along a
logical path, focusing on consumer reaction to the scandal, employee retention, and the process
of rebuilding confidence and trust (Lyons) beginning from within the firm. Published on the
Johns Hopkins website, Lyons article asserts its professionalism from the beginning, obviously
intended for an academic audience. With the inclusion of an expert in the field, Lyons firmly
establishes the reputable tone of her academic article.
McCarthy, Tom. Epilogue. Epilogue. Auto Mania: Cars, Consumers, and the Environment.
Yale University Press, 2007. 253266. Web
For the purpose of this paper I will only be referencing the epilogue of Tom McCarthys
book Auto Mania: Cars, Consumers, and the Environment in which he tries to answer the
question: Can six to nine billion human beings find contentment through the unending
acquisition of material possessions without irreparably harming the planet they depend on for life
itself? Throughout the book McCarthy talks through the history of the automotive industry and
the consumer behaviors that came along with each major shift in the industry. In the epilogue
particularly, he says The American Answer seems to be that consumer decisions consistently
served the personal desires of individuals that for most rarely, if ever, gave precedence to matters
involving the wider social and environmental consequences of automobile use. He also makes
the claim that, if consumers placed environmental concern at the top of their agendas and kept it
there, producers would do likewise, and do so profitably. His research was based from 1920 to
roughly 2000 and so I will use his research on the effect of the industry introducing
environmental standards, which resulted in consumer awareness of environmental impact. I will
use this as a base because of the huge increase in consumer concern and affective buying
behavior.

Oliva, Paulina. "Environmental Regulations and Corruption: Automobile Emissions in Mexico

City." Journal of Political Economy 123 (2015): n. pag. The University of Chicago Press
Journals. Web. 17 Feb. 2016. So
Paulina Oliva of University of California, Santa Barbara, and National Bureau of
Economic Research, documents the effects of corruption on emissions tests in this paper. Oliva
establishes a statistical test for recognizing bribery within the technicians in order to cheat on
emissions tests. Her model further allows the estimation of the benefits and costs from boosting
incentives for car maintenance through plausible policies such as increased enforcement and
higher retesting costs. Through this analysis, I can explore the origins of cheating emissions
tests, which will in turn help me to understand how this problem can be corrected as well as
prevented in the future for Volkswagen.
Reed, Stanley. "Despite Volkswagen Scandal, Europe's Diesel Habit Could Be Hard to Kick."
The New York Times 30 Sept. 2015: n. pag. Gale Academic OneFile. Web. 17 Feb. 2016.
Stanley Reed is the London bureau chief of BusinessWeek and a graduate from Yale
University and Colombia Business School. In this article, Reed discusses the European affinity
for diesel cars, and how there is not a high environmental concern with consumers. He then
compares it to the American consumers and shows how there is not as high of a market for diesel
cars. This article gives insight to the behavioral differences between European and American
consumers, which will help me to determine how Volkswagen will change its production process
based on the consumers demands.
Schultz, E.J. "Scandal Threatens Volkswagen Brand." Advertising Age CMO Strategy RSS.
Adage.com, 26 Sept. 2015. Web. 16 Feb. 2016.
E.J. Schultz, the Bureau Chief of Ad Age, chooses to focus on what Volkswagen can and
is doing to deal with the fallout from their scandal. Using informal language and tone, Schultz
discusses what Volkswagen has done already, including the resignation of CEO Martin
Winterkorn (Schultz) and Volkswagens promoted tweet acknowledging their fault and
promising to remedy the issue (Schultz), and the problems they still face, noting examples of
the hypocrisy of their clean-diesel technology (Schultz) message from 2013. His overall
message to the general online-newspaper audience seemed to be that the very future of the
Volkswagen brand is in doubt (Schultz). As another article under the online newspaper brand,
Schultz does a good job of keeping the facts straight, the sources credible, and the terminology
simple. His articles authenticity shines through, screaming that Volkswagen has a lot of work
left before it can regain its former glory.
Sokolova, I., & Lannig, G. (2008). Interactive effects of metal pollution and temperature on
metabolism in aquatic ectotherms: Implications of global climate change. Climate Research
Clim. Res., 37(2-3), 181-201.
Inna M. Soklova, PhD is a professor in the Biology Department at University of North
Carolina, Charlotte. In her article, she discusses the impact of pollutants (rather than carbon

dioxide absorption) on marine life and marine ecosystems. She reviews studies that have
investigated the effects of temperature and anthropogenic pollution by trace metals... on the
physiology and survival of ectotherms (Sokolova & Lanning 181). The scientific articles
purpose is to accumulate data and extrapolate conclusions that pertain to the global environment
at large. Additionally, this was submitted to the peer-reviewed Scientific Journal Climate
Research relatively recently, indicating that it was reviewed and examined for any plagiarism,
bias, or falsified data before publication. This indicates that the source should be considered
fairly reliable.
Sprei, Frances and Wickelgren, Mikael. Requirements For Change In New Car Buying Practices
Observations From Sweden. Energy Efficiency Journal, 2010. Web.
In this article, Sprei and Wickelgren paint a picture of the buying behavior and decision
making process of car buyers in Sweden. One of the main topics is the concern with ratio of
emissions rates to engine and car size. In summary they said, the only major exception concerns
the environmental criterion, which has become significantly more important for many car buyers
in the last 3 years The car buyers not accepting a trade-off between car performance and
environmental concern wanted basically the same type of large, roomy and powerful vehicles but
with other engines than traditional petrol ones. Powerful diesel or ethanol engines were preferred
among these consumers. The authors conducted indepth research in a specific demographic, but
their finds are comparable across continents and cultures. While Swedish culture may be
notoriously inclined to protect the natural world, the trend is not isolated to this demographic.
The authors connect these points with the buying behavior at the dealership, when visiting the
car dealer with the specific intention of buying a particular car model with a particular type of
engine (consuming less fuel than average models of the same kind), was affected by the dealer to
choose another type of engine.
Theotokis, Aristeidis and Manganari, Emmanouela. The Impact Of Choice Architecture On
Sustainable Consumer Behavior: The Role Of Guilt. The Journal of Business Ethics. 2015.
Theotokis and Manganari consumer response to cause-related marketing and the affect
of the increasing number of product and service options for greening up consumer footprint. This
piece focus on a variety of industries and how marketing tactics both in response to scandal, and
in effort to appear more sustainable (or actually be more sustainable) affect consumer behavior.
Velasco, Schuyler. "After Volkswagen Scandal, Can Consumers Trust Anything Companies Say?
(+video)." The Christian Science Monitor. The Christian Science Monitor, 24 Sept. 2015. Web.
17 Feb. 2016.
Schuyler Velasco, business editor from The Christian Science Monitor, discusses how the
scandal affected one of Volkswagens most important shareholders, the customer. This scandal
made customers question whether or not they could trust the company. Volkswagen was known
for its environmental and sustainability efforts, so it made the company less trust worthy when
the scandal broke. The following quote illustrates how customers were effected: Millennials

(adults ages 21 to 34) are more than twice as likely as their Gen-X and baby boomer counterparts
to be willing to pay extra for products and services billed as environmentally and socially
sustainable (Velasco). Velasco discusses valuable information that Volkswagen needs to
understand, to rebuild their image and regain customers trust.
"Volkswagen exec must map plans for key brands; Strategist's main job: Reposition volume
marques." Automotive News. 21 Dec. 2015: 0010. Academic OneFile. Web. 17 Feb. 2016.
From Automotive News, in the wake of the Volkswagen scandal, Thomas Sedran has been
hired as Volkswagens chief strategist. The main task is to come up with a plan to improve the
positioning of the Volkswagen, Skoda and Seat volume brands (Volkswagen exec must map).
This article highlights what Sedran plans to do to help reposition Volkswagen. Overall, the
company not only has to reposition itself, but also its products. This source is valuable because it
specifically discusses what products they have to reposition.