The year 2016 was full of ups and downs, so many immeasurable flip-flops observed. The year witnessed goodness, honours, respect while some contradictory, unwholesome, inoperable and even scandals too. We are going to discuss the automotive industry’s biggest scandal in today’s edition. While so many scandals have been done before in the same industry. Here we start with the infamous name of the automotive industry indulge in scandals are Takata’s faulty airbag scandal, Volkswagen‘s “Dieselgate”, Mitsubishi‘s fuel economy scandal, Tesla‘s autopilot mode, Fiat Chrysler’s rollaway accidents, Ford Explorer-Firestone tires disaster and much more.

Usually, the biggest scandals tackle with security and safety, yet some of the scandals were so impertinent that made headlines at the national and international level. The company we are going to discuss done such a biggest scandal of history in the automobile industry sector in past 78-years. Volkswagen’s ‘Dieselgate’ scandal, the diesel engines big emission which headed, the CEO, Martin Winterkorn, of the company to the resignation.

Enlightenment to the Fact of the Volkswagens ‘Dieselgate’ Case:

On 18th of September, 2015, the United States Environmental Protection Agency (EPA) busted out the truth of the Volkswagen company that it had violated the Clean Air Act’s emission test on the diesel car. Volkswagen was using a software device to pass the emission test on the diesel engine cars. There was a disparity in the actual emission and Volkswagen’s given number of emission. The disparity in both the number of emissions was the defeating device using by the Volkswagen in their labs. The original test shows the variance of 15-20 times more than the legal limits set by the US.

Volkswagen’s trouble started from May 2014 when EPA and California Air Resources Board directed the company to muse on their variances, and Volkswagen affirmed the fact that there’s some deficiency in their software. After the order from the tribunal, the company recollect all its 500,000 cars from the market. The issue was again ready to set on fire when the petition against Volkswagen was filed by CARB in June, 2015 in front of EPA. In the beginning, Volkswagen tried to impute its discrepancy to Nox levels, which is not entertained by EPA and the aim of the company to come out with clean chit was shattered. The practice of such emission defeating device changed the whole scenario of the case. About more than 11 millions cars dominance by the cheated software algorithm, proven by a report of the company’s internal investigation after the whole fact was revealed out.

Defamation and Loss of Share & Goodwill:

The emission scandal which is commonly known as ‘Dieselgate’ scandal is the biggest of all times in 78 years of operation of the automobile company (Cremer, 2015). The company said that the company doesn’t know about the facts all blame of wrongdoings transmitted to the engineers but later on, the whole ‘Dieselgate’ scandal’s responsibility was taken by the CEO of the company Martin Winterkorn. After declaration, the revelation knocked down the company’s stock market value, the company’s goodwill collapsed badly and resulted in the loss of trust. Shareholders, members and even the customers of the company lost all the faith from the company and a huge fall was recorded on the sale of the diesel cars. After this Volkswagen admitted its mistake that the company was unsuccessful in fulfilling their responsibility of managing the leadership task.

Martin Winterkorn, the CEO of the Volkswagen convened an internal investigation team to revise the whole case. Alongside that multiple other studies were also made to find out what happened to Volkswagen about the scandal that the company why was so inefficient in finding out the reason of such a big defeating device earlier. Volkswagen’s inner house team of investigation also raised several questions on the culture and the leadership techniques of the company.

Lack in Organising the Leadership:

Martin Winterkorn, CEO of the company resigned when the counter charged started emerging and said that he didn’t involve in any wrongdoings, he was just working in the well-being of the company and he was unaware of the fact of the dieselgate defeat software. But the fact is: without team support and without any management, the software installation couldn’t be done in any case. So now the question raised, if the CEO was not guilty in the whole case, then there was the major issue of wrong administration which led the situation worse for the company’s reputation. The interesting fact is the top management is unaware of the facts and the engineers installed the defeated software under the nose of the management. The mistake was not just a small thing that could have been slipped from the management and it was proved also by the investigator.

Total 11 million vehicles were affected by the emissions violations scandal and the company declared layout to refit its blunder. The affected diesel models of the Volkswagen that have been mentioned by EPA for the violation of emissions are as follows:

• 2009–2015 Volkswagen Jetta 2.0L TDI
• 2010–2015 Volkswagen Golf 2.0L TDI
• 2012–2015 Volkswagen Beetle 2.0L TDI
• 2012–2015 Volkswagen Passat 2.0L TDI
• 2009–2016 Volkswagen Touareg 3.0L V-6 TDI

VW recalled its 8.5 million cars in Europe, inclusive of 2.4 million in German, 1.2 million in UK and 500,000 in the US. Volkswagen admitted its installation of Cheat software device in the car, at the time of assertion. The company confessed the software let emissions control system to work according to the US legal limits and work according to the standard of EPA even when the original emission is much more than the stated one in norms. The company was charged the criminal fine for rigging diesel-powered vehicles to cheat on government emissions tests with $2.8 billion.

Thus from the above context, it has been cleared that the company has failed to fulfil its leadership responsibility, now it doesn’t make any impact in the case, whether the CEO found guilty or not and had no involvement. This only means that the major component of the company that denotes growth strategy had been neglected by the company’s leader and made the path clear to the wrongdoers. If the CEO doesn’t know about the facts then it represents lack of management, judgement, trustable personnel and cultural behaviour problem.

Cultural Intelligence in Question after ‘Dieselgate’ scandal:

From all above discussion, it made clear that the leadership of the CEO Martin Winterkorn was a reign of dictatorship which was more of fear and pressure amid the subordinates. If we have a look at the previous reign of Martin Winterkorn was former chairman and Board of Directors of Volkswagen AG and was also the Chairman of Supervisory Board of Audi and Porsche. Since from March 1, 2026 he had been a Chairman of the Supervisory Board of Audi.

He knew his work and priority but still, he failed in understanding the culture of the company and where he lacked. Rather than creating the environment full of fear and stressful, he could have helped in organising the work culture smooth and helpful for the subordinates and employees, where discussion could have been the thing done openly. Through a research, it has been proofed that the company’s working culture should be submissive it’s not important that the environment always demand innovation sometimes there should be humbleness and docility. Some leadership lessons important for any work organizations to be followed for the betterment of both company an d as well as for the employees are as follows:

• An Open Discussion Culture in Leadership: Climate plays a very crucial role in any management if it is transparent and open to speak up your mind and can share things easily in front of the superiors. Any situation can be easily handled and best figured out if it is discussed with the superiors.
• Fearless Environment: The environment of any company should be so fearless that gives power to the employees and a faith of self-reliance. Rather than reporting to the superiors, the employees report themselves first, understanding their responsibility of work primarily. This prevents any kind of misleading of management or leaders on the part of employees (Kinley, 2015).
• Distribution of power: Distribution of power is the major segment of any organisation. The structure of Volkswagen was in the hand of the CEO, no other representatives, shareholders were presented to take care of the matter. VW has total supervisory 20 seats from which 9 allocated to the workforce and shareholder representatives and also have two seats for politicians.
• Use of TQM in the organization: Total Quality Management (TQM) means with less effort greater result. Its work is continuous improvement, process and customer orientation. This process is successful in different big countries and reliable too in generating results.
• Implementing of Six Sigma: This method adopted by Motorola which purports ‘do it right’ theory. It gives the quality of work where the possibility of errors is 3.4 out of one million events. If this method had also been adopted by the VW then the possibilities of ‘Dieselgate’ might have been prevented.

Could Martin Winterkorn be a Saviour for the company?

The important question raised from the whole scenario is how much control the CEO had over the situation. In the beginning, when the allegation process started, the CEO denied all and said he had no idea about the cheating software. After that, an internal investigation organised from which also harmed the company’s reputation. The investigation affected the share price and market value of the company more. This clearly shows that Martin Winterkorn had no control over the situation and the uncertainties arisen during.

A leader could be a both employee oriented and production oriented. But most of the cases it can either be one from both, as from the whole case we got to understand. Martin Winterkorn is more concerned with the production orientation more than employees. He was concerned with the benefit, earning the share of profit despite paying heed toward the cheating software. At the time of dieselgate allegation, the leaders become innocent that they were unaware of the facts and blamed all the mistake to the engineers or subordinate. The leadership under his reign was a profit making time only neither in the favour of the company nor in the employees. He resigned only of pressure when shareholders increased the pressure.

Outcome:

According to a study, 70% of the leaders motive is to provide information and solutions to their subordinates and underestimate the power of their own thinking and challenge them in many ways. Volkswagen CEO Martin Winterkorn also aimed to achieve great results and pushed his workers for achieving success. But the method of pushing someone to work forcibly is a hindrance to success rather than motivation. The similar thing got to observe in the case of ‘Dieselgate’, that many leaders face the challenge to set their mark while sitting in a powerful position. The outcome, at the time of crisis very few businesses, support such leaders to reach the challenges. This type of administration and leadership behaviour led the company’s towards the cost of millions and scandals. In Volkswagen, such leadership function built outraged and resulted in scandal, which led to the cost of millions to the automobile industry.

For customised market research reports for any kind of startups and business in any industry, you can contact Craft Driven Market Research team here directly.

Tags: Automobile Industry, California Air Resources Board, Clean Air Act, Craft Driven, Craft Driven Market Research, Fiat, Ford, market research, Martin Winterkorn, Mitsubishi, Tesla, United States Environmental Protection Agency (EPA), Volkswagen Dieselgate