1) Volkswagen was found to have installed illegal "defeat device" software in 11 million diesel vehicles worldwide to cheat emissions tests. 2) The software could detect test scenarios and put engines into a low-power mode to reduce emissions during tests. 3) Volkswagen faces fines up to $18 billion in the US and long-term damage to its reputation and brand trust. Other carmakers may face increased scrutiny over emissions testing practices. 4) The scandal has major implications for Volkswagen and the auto industry, with consumers potentially losing trust in diesel vehicles and manufacturers.

1. VW: Hara-kiri?
“The Diesel Dupe”

2. Automobile industry
• Global sales of passenger cars are forecast to hit
73.9 million vehicles in 2015. Along with China, the
United States is counted among the largest
automobile markets worldwide, both in terms of
production and sales.
• About 7.7 million passenger cars were sold to U.S.
customers in 2014, and around 4.25 million cars
were produced here in the same year.
• Ford, Toyota, Volkswagen and General Motors top
the list of major automobile makers, while the
automotive supplier industry is dominated by
Bosch, Continental, Denso and Magna.

3. Automotive Industry Overview Units
International car sales 72.94 m
Worldwide production of cars 67.53 m
Passenger car production in China 19.92 m
Volkswagen is leading passenger car producer 9.77 m units
Toyota is the leading automobile manufacturer (sales) 10.23 m
Sales of passenger cars in the U.S. 7.66 m
Manufacturers & Automotive Suppliers Values
Revenue of Volkswagen €202 bn
Number of passenger cars produced by Toyota worldwide $8.79 m
Size of automotive supplier market worldwide €620 bn
Revenue of Continental (Germany) €34.5 b

4. Volkswagen- Growth
• Headquartered in Wolfsburg, Lower Saxony,
Germany, and established in 1937
• Volkswagen is a company which has built its
trust in its customers through carefully designed
campaigns over the decades since its inception.
• Named top global brands in 2014 : praised for
being clear & consistent in its design and brand
story
• Awarded the National Energy Globe Award
Germany in 2014

5. • 119 Plants
20 in EU countries & 11- other countries
• 153- countries- sells its vehicles
• 5,92,586 employees produce 41,000 vehicles
in a weekdays.

6. V W - Marquee Brands
• Beetle, Golf, Jetta, Passat, Polo, Vento
• Audi, Skoda, SEAT
• Roadsters: Lamborghini, Porshe
• Ultra Luxury: Bentley, Bugatti
• Commercial: Scania, MAN
• Sports Bike: Ducati

7. • Volkswagen listed its intangible assets
(which includes goodwill) at $67 billion.
• "Volkswagen’s goodwill and other
intangibles makes up about 16% of its
total assets. Compare that to just 4% at
Daimler and 3% at GM."

8. The Scandal – “The Diesel Dupe” Explained:
• the US Environmental Agency (EPA) stated that since
2009, Volkswagen had been installing an illegal
sophisticated software algorithm, dubbed as “defeat
device”, to cheat emission tests.
• the software could sense test scenarios by monitoring
speed, engine operation, air pressure and even the
position of the steering wheel.
• during controlled laboratory conditions in which cars are
put on a stationary test rig, the device appears to have
put the vehicle into a sort of safety mode in which the
engine ran below normal power and performance.
• Volkswagen Scandal Everything You Need To Know.mp4

9. Volkswagen’s Statement Regarding
the Scandal:
• Volkswagen has “admitted” that about 11 million
cars worldwide are fitted with the so-called
“defeat device”.
• Martin Winterkorn, the company’s Chief
Executive since 2007, “apologized” for losing
trust over the scandal now resigned.
• Leadership crisis- kept secret.

10. Action Against Volkswagen:
• The EPA and the California Air Resources Board (Carb)
had discovered the “defeat device” following independent
analysis by researchers at West Virginia University. The
International Council on Clean Technology, an NGO had
prompted these researchers.
• Since Volkswagen stands accused of breaching the Clean
Air Act, the EPA can impose a maximum fine of $ 37,500
per vehicle. Moreover, the Department of Justice is
contemplating criminal charges.
• For any concerned US car owners, the models expected to
be recalled include: The 2009-2015 VW Beetle 2.0L TDI;
2009-2015 VW Golf 2.0L TDI; 2009-2015 VW Jetta 2.0L
TDI; and 2014-2015 VW Passat 2.0L TDI.

11. Implication for Volkswagen:
• Computed at $ 37,500 a car, the fines could amount to
$18 billion, which is more than a year’s net profit for the
giant manufacturer.
• On 21st sept itself, almost 10.8 billion Pounds, or a fifth,
was wiped off the company’s market value.
• The company has halted US sales of its 2015 and 2016
clean diesel vehicles and now has to fix millions of
existing cars. It has already set aside $7.3 billion to deal
with the problem.
• A class action lawsuit on behalf of car buyers has been
launched by a US law firm. Besides, there will be
irredeemable long-term trust deficit and damage to the
company’s reputation.
• VW appointed Matthias Mueller, the head of Porsche
sports car brand, as its chief executive

12. Implications for Other Car
Manufacturers:
• It is perceived now that rigging emissions tests
must be common across the industry.
• Car industry selling diesel cars as eco friendly.
But now it may lead to decline of diesel cars in
some countries.
• Many consumers may switch to petrol engine
cars overnight.
• European regulators are planning to conduct
road tests in addition to laboratory tests from
2017.
• This is just the tip of the iceberg ! investigators
are wondering whether VW’s competitors might
be hiding similar illegal practices.

13. Protecting the environment builds
trust, and trust is precious capital
• Decades ago, a company’s market value was
nearly equivalent to its tangible assets—
buildings, machinery, materials, financial capital,
and so on. In 1975 intangible assets were just
17% of the market value of the S&P 500.
• But today those proportions are flipped:
intangible assets now make up 84% of the
market value of the S&P 500.