Read the"Focus on Ethics"(picture below) and answer the following question.The U.S,boasts the world's largest auto market but also the toughest emissions standards.Volkswagenbelieved boosting U.S. sales with "clean diesel" cars was the key to overtaking Toyota.What role did VW'sdesire to be top automakerplay in the emissions scandal?
FOCUS ON ETHICS in practice Baby You Can Drive My Car-Just Not a VW Diesel Volkswagen had come a long way. In 1934, Hitler challenged German Volkswagen paid a big price imme- the capital budget roughly 8%-the diately. Within days, the EPA ordered industry to come up with an inexpen- first reduction since global auto sales sive vehicle for ordinary families-"a WW to recall nearly 500,000 diesel cars, crashed during the Great Recession. People's Car." Ferdin and the company suspended U.S. sales In March 2017, Volkswagen pled of all 2015 and 2016 models alleged to design got the nod, and construction guilty in U.S. court to conspiracy and have defeat devices. Within a week, began on a factory to produce obstruction of justice. The record fine Beetles in modern-day Wolfsburg, VW stock plummeted 33%, the yield on pushed the cost of the emissions Germany-still the corporate head- its outstanding five-year debt doubled, scandal in the U.S. alone to roughly and Winterkorn resigned. Within a 1.3 times the entire company's net quarters. By 2015, VW was the world's month, Standard & Poor's downgraded second largest automaker, producing income for 2014. For its ethical trans- the company's short- and long-term gressions, VW saw not only current 10.2 million cars annually. Not content debt from A to A- and indicated with second, CEO Martin Winterkorn earnings but also growth opportuni- further downgrades were possible. ties squashed like a bug. announced plans to pass Toyota and By November, it was clear the lead the industry "economically and scandal wasn't going away. On top of The U.S. boasts the world's largest ecologically" by 2018. the cost of recalls, Volkswagen faced auto market but also the toughest Then, on September 18, 2015, staggering government fines and civil emissions standards. Volkswagen Volkswagen's fortunes changed. The settlements. Even worse, the scandal believed boosting U.S. sales with U.S. Environmental Protection Agency was damaging the brand-sales of "clean diesel" cars was key to over- (EPA) charged the company with delib- VW-group cars worldwide fell 5.3% in taking Toyota. What role did VW's erately programming diesel engines October 2015. The capital budget desire to be top automaker play in on eight passenger models to fool took the first hit. Net present value was the emissions scandal? emissions tests. Allegedly, "defeat under assault from two directions-a devices" enabled the cars to meet higher cost of capital and lower Ferdinand Piech, grandson of Fer- dinand Porsche, served as Volkswa- government standards during testing, expected cash flows. With lower credit gen's CEO from 1993 to 2002 and despite spewing up to 40 times per- ratings, VW would now pay more for board chairman until 2015. He also missible levels of nitrogen-oxide pol- debt financing. Declining sales meant lower expected cash flows from R&D selected the next two CEOs (includ lutants in ordinary driving. VW later ing Winterkorn). What role did insider conceded that roughly 11 million cars and new factories. Accordingly, VW succession play in the scandal? worldwide contained such devices. forgot about burying Toyota and cut
