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The Dieselgate Scandal and its Adverse Implications for Volkswagen
[January 28, 2023]

The Dieselgate Scandal and its Adverse Implications for Volkswagen

/TMCnetWire/ – The Volkswagen (VW) car manufacturer stunned the world in 2015 with their admission that they had deliberately cheated on emissions tests in 11 million diesel vehicles. This event marked the dawn of the Dieselgate scandal, with VW facing international scrutiny and negative press as the extent of their diesel deception grew. The Dieselgate scandal forced VW to confront the devastating implications for its reputation, brand, and balance sheet.

Volkswagen’s falsification of diesel emissions was the largest corporate scandal in post-war Germany, and the VW boardroom was soon confronted with a litany of legal actions. The company was forced to pay out approximately $30 billion in fines and settlement costs, and over $25 billion was spent on reparations to car owners affected by the scandal. VW admitted to U.S. criminal charges that they had conspired to defraud the government and violated the Clean Air Act. Such actions had repercussions not only in the US, but across Europe and other jurisdictions where VW had sold cars with defeat device technology.

The ramifications of the Dieselgate scandal have been vast and long-lasting. An internal investigation within VW revealed a culture of deliberate disobedience and dishonesty, providing huge implications for corporate governance. In the light of such revelations, the VW boardroom has been working tirelessly in order to restore the public’s trust in the brand. However, this process is still deriving to this day and the battle for rebuilding public opinion is far from won.

In terms of the financial effects of Dieselgate, the scandal has been hugely costly for VW and resulted in a substantial rise in the company’s debt. Such issues have been compounded by the shift in the car industry towards electric vehicles, impacting VW’s core combustion engine-based automotive business. Inability to keep up with the EV market contributed to a 60 percent fall in the value of Volkswagen stocks, an exceptional blow to a one-time industry powerhouse.

The effects of the Dieselgate scandal on the VW brand continue to unwind even today. As VW and other manufacturers are pushed to move away from diesel-powered cars and towards electrification, the transition is one that the still-tainted VW brand have found difficult. This has been exacerbated by the over-emphasis on the EV market to the detriment of the market for traditional engines, which has been the core of VW’s business model since its earliest days was founded in 1937.

The implications of the Dieselgate scandal on the operations and reputation of Volkswagen may take years, if not decades, to repair. Five years on, the VW brand is still one thought to be synonymous with deceit, and it remains to be seen if the transition to electric vehicles is one that Volkswagen can successfully undertake in order to restore public trust.

-- With an expected total cost of around $44 billion, the effects of the Dieselgate scandal on Volkswagen have been far-reaching and, in some cases, irreversible. The consequences of the scandal have been grave, from criminal charges, legal action and brand degradation, to huge financial costs and the transition to electric vehicles. The scandal has been one of the most infamous in corporate history and, five years on, VW is still fighting for the redemption of its reputation.

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