Ethical Issues in Car Manufacturing

Introduction

Business ethics is important for all businesses. Business ethics deals with the issues of corporate responsibility, consumer rights, and the overall conduct that is expected from a business. At the same time, business ethics is a complex topic, and one that must be evaluated through the lens of the various ethical theorems. The differences in the ethical theorems will lead to different outcomes, which means that while a particular action may be unethical under one theorem, it may be completely ethical in relation to another theorem. The industry that will be explored is the care manufacturing industry. The car manufacturing industry is very large and is comprised of various big companies such as General Motors, Toyota, Volkswagen Group, Ford, Honda, Suzuki, and Mercedes Benz. Given the vastness of the industry, it is inevitable that there are going to be ethical issues. Three specific ethical issues in relation to three different companies have been selected. The focus and scope of the intended review will use normative theories to explore the Volkswagen Emission Scandal, Takata Airbags Malfunction, and Daimler Bribery and Corruption Scandals.

Volkswagen Emission Scandal

Volkswagen is one of the foremost car manufacturing companies in the world (Minnock, 2017). Given their position on the global market, it was surprising to find that they were skirting some regulations set by the Environmental Protection Agency (EPA) in the US. Hotten (2015) notes that Volkswagen had installed a particular device in their cars that made their cars appear environmentally compliant. The EPA tests cars that are deployed in the US market. The purpose of the tests is to ensure that the automobiles not only meet the emission standards during the manufacturing process but also that they continue to be compliant long after they have been deployed onto the roads (EPA, 2019). In the scandal, it was found that the Volkswagen vehicles did not meet the set standards; rather, they only mimicked the set standards within lab conditions, but when on the roads, they exceeded the emissions standards. According to Rhodes (2016), Volkswagen had installed a “defeat device” in all their cars. The technology was ingenious in the sense that it sensed when the car was being tested and then activated equipment that helped reduce the actual emission rates. Volkswagen had installed the cheat device in around 11 million automobiles (Jolly, 2019). While on the road, the cheat device turned off and it was found that the diesel engines emitted noxious nitrogen oxide fumes that were 40 times above the recommended levels (Hotten, 2015). It is this discovery that makes the Volkswagen Emission Scandal and ethical issue.

The issue will be explored using Duty ethics and consequentialist theories. Duty ethics are also referred to as deontological ethics, and they are more concerned with what people do, rather than the consequences of their actions (Alexander & Moore, 2016). Duty ethics asserts that people should do the right thing simply because it is the right thing to do. Conversely, people should not do wrong things simply because it is the wrong thing to do. In relation to the Volkswagen Emission Scandal, duty ethics required that Volkswagen do the right thing which in this case was compliance with the emission standards. However, they chose to install a device to defeat the testing as a means of cutting down on costs. The standards clearly state that emissions are not wrong since they are the by-product of internal combustion. However, there is a set limit that must not be exceeded. Volkswagen clearly knew the rules, and they willingly broke them which is a deviation from their expected duty.

Consequentialism, generally referred to as utilitarianism focuses on the consequences of an action. The right action is one that generates the most good for the highest number of people (Fieser, 2019). In relation to the scandal, consequentialism concludes that the action was wrong because the only beneficiaries were Volkswagen. Volkswagen got to cut down on costs, but the emission levels would have affected the atmosphere and contributed to the acceleration of global warming. Volkswagen also failed in corporate citizenship. Corporate citizenship dictates that the company has a responsibility towards society as a whole. Volkswagen’s responsibility is to ensure that the future of the planet is secured by reducing the emissions of their diesel engines. In choosing profits over such responsibility, Volkswagen abandoned their corporate citizenship because they did not meet their social, cultural and environmental responsibilities.

In terms of policy recommendations, the first thing that the company has to do is to improve their corporate governance. Fitting 11 million cars with the cheat device would not have happened without the leadership being in agreement. As such, it shows that there is a need for drastic improvements in their corporate governance measures. An individual whose sole purpose is to ensure that emission standards are below or at par with the recommended levels should be made a board member. Moreover, for a time, the company should send their engine designs to the relevant authorities until it is determined that its corporate governance levels have improved. Also, leaders that knew of the cheat device and yet did nothing should be fired or put on probation. The other thing is that all defective products should be called back. Calling back defective merchandise is the right thing to do since it shows that they admit that they are wrong and are willing to fix their mistakes.

Takata Airbag Malfunction

Takata is one of the biggest major parts suppliers for automobiles. One of the parts that they manufacture is airbags. In the manufacturing process, it is possible that something went wrong, and their products became defective. Consumer Reports (2019) notes that automobiles made by 19 car manufacturers had to be recalled because of defective airbags. The purpose of the airbag is to act as a cushion that protects the car occupants during a crash (Kumar & Madhu, 2015). Given the lifesaving nature of airbags, one can see why it was very serious issues for airbags to malfunction. The National Highway Traffic Safety Administration (NHTSA) (2018) states that exposure to high heat and humidity can cause the airbags to explode during deployment. The defectiveness of the airbags led to 15 fatalities and more than 100 injuries (Consumer Reports, 2019). Given that Takata agreed to pay a $1 billion dollar penalty, it is assumed that they were aware of the defectiveness of their products, but they still chose to continue manufacturing them using the same defective products. The fact that Takata was aware of the defective products and still continued manufacturing them is what makes their case an ethical issue.

The ethical issue will be explored using virtue ethics and consequentialism. Virtue ethics asserts that the right action is the action that a moral or virtuous person would do (Velasquez, Andre, Shanks, & Meyer, 2018). The focus of virtue ethics is on moral character rather than duty or consequences. In relation to the Takata incident, the act that the moral person would have pursued is ensuring the safety of the parts being manufactured. A virtuous individual would have taken into consideration the fact that manufacturing that they are doing is for the safety of people and that means that manufacturing must be to the highest standard. Takata did not act in accordance with a virtuous moral character. They were aware of the defectiveness of their merchandise, and they still continued to manufacture the same parts using the same defective building blocks. In relation to consequentialism, the company did an unethical thing because the consequences of their actions led to the death of 15 people and more than 100 people being hurt. If the issue had not been noted, it would have led to the loss of more lives and more injuries too.

In relation to policy, to company needs to focus on its corporate governance and corporate responsibility. The leaders chose to focus on profits rather than making superlative parts. It was the height of corporate irresponsibility for them to create defective parts, not regarding that the purpose of those parts was safety. If parts whose purpose is safety are defective, then safety levels decrease. Takata failed to meet the duties of corporate citizenship. They trivialized the lives that were in their hands by failing to meet the set manufacturing standards that led to defective parts. They chose that path in a bid to make profits but in doing so, it led to them declaring bankruptcy which means that they also failed to meet their responsibilities towards their shareholders and immediate stakeholders. In failing to have good standards of corporate citizenship, shareholders and stakeholders suffered.

Also, automobile manufacturers should have their own processes of testing outsourced parts especially if the purpose of the parts is safety. Furthermore, Takata should have an independent body whose purpose is to review the ethicality of the decisions that the management makes. The independent body may be dissolved at a future date after it has been established that proper corporate governance and responsibility have been woven into the organizational culture. Another policy is that leaders involved in the scandal should be fired, reprimanded or put on probation based on the level of their involvement.

Daimler Foreign Bribery and Corruption

Daimler is an automotive manufacturer located in Germany. It was found that the company was guilty of violating US bribery laws. The violation came in the form of giving foreign officials gifts in the form of money or luxury cars (Pelofsky & Margoiles, 2010). The purpose of the gifts was to influence the officials to award them lucrative business deals. It has been found that the company is accused of bribing individuals not only in the US but also in China, Russia, Iraq, Egypt and many other countries (Kollewe, 2010). The US Securities and Exchange Commission (SEC) notes that based on the bribery, the company earned revenue to the tune of $1.9 billion and more than $90 million in illegitimate profits (SEC, 2010). Eventually, the company’s illegal dealings were discovered, and they were ordered to pay $185 million in fines (O’Grady, 2010). Daimler was aware of the bribes, and that is what makes their case an ethical issue.

Duty, virtue, and consequentialism will be used to explore the issue. Duty ethics require that good things are done because they are simply good, and wrong things are avoided because they are wrong. In Daimler’s case, the right thing should have been to submit their bid, and if they are selected it will be because of their ability to deliver the required products. However, Daimler chose to bribe officials, which is wrong because it has been known to subvert justice. In terms of consequentialism, the consequence of Daimler’s bribery is that it set a precedent of justice subversion. There may have been other companies that offered better rates and services, but they were locked out of the bidding because Daimler had already secured the deal through bribes. In terms of virtue ethics, a virtuous individual would not have given bribes for the purposes of securing a business deal. The individual would have submitted their bid and hoped that their work would speak itself and earn them the business deal.

In terms of policy, corporate governance is very important to keep a company from giving bribes. According to Wu, Chandramohan, & Bali (2016), companies that report tax purposes are less likely to be caught up in corruption scandals. Having unbiased auditors go through the company's financial records will also help because they will note areas of fiscal irresponsibility. Additionally, board diversity is very important. Board diversity means that there are different points of view and when discussions regarding corruption spring up, there is bound to be a dissenting voice of reason. Also, punitive measures should be leveled against individuals who were part of the bribery based on their level of participation. The company shareholders should retrench the key leaders of the bribery charges. Retrenching them sends out a message to the rest of the company that corporate governance is a serious matter in the company and individuals who do not take the matter seriously will be subject to punitive measures.

Conclusion

Business ethics is very important because it leads to good corporate citizenship, proper corporate responsibility, and the creation of good governance practices. Volkswagen, Takata, and Daimler failed to uphold proper business ethics, which led to them losing a lot of money and the loss of life in some instances. The irony is that by choosing not to adhere to proper business ethics, the companies lost more than they gained; in the case of Takata they had to declare bankruptcy. In as much as business ethics are there to protect consumers from fraudulent companies, they are also there to protect businesses too from unethical practices that would lead to the demise of the company. As seen by the three companies, when businesses fail to adhere to proper business practices, it is they who suffer in the end.

References

• Alexander, L. & Moore, M. (2016). Deontological ethics. The Stanford Encyclopedia of Philosophy. Accessed 20th October 2019.
• Consumer Reports. (2019). Takata airbag recall: Everything you need to know. Accessed 21st October 2019.
• EPA. (2019). Private vehicle testing: EPA’s in-use vehicle emissions surveillance program. Accessed 20th October 2019.
• Fieser, J. (2019). Ethics. Accessed 1st November 2019.
• Hotten, R., 2015. Volkswagen: The scandal explained. BBC. Accessed 20th October 2019.
• Jolly, J. (2019). Volkswagen emissions scandal: mass lawsuit opens in Germany. The Guardian. Accessed 20th October 2019.
• Kollewe, J. (2010). Daimler ‘agrees $185m fine’ to settle US corruption investigation. The Guardian. Accessed 21st October 2019.
• Kumar, S, A. & Madhu, S. (2015). A research review on airbags in automobile safety system. International Journal of Applied Engineering Research, vol. 10(33), pp. 26815-26819.
• Minnock, O. (2017). Global Manufacturing. Accessed 1st November 2019.
• National Highway Traffic Safety Administration. (2018). Takata recall spotlight. Accessed 21st October 2019.
• O’Grady, S. (2010). Daimler faces $185 fine to settle corruption case. Independent. Accessed 21st October 2019.
• Pelofsky, J. & Margolies, D. (2010). U.S. charges Daimler with violating bribery laws. Reuters. Accessed 20th October 2019.
• Rhodes, C. (2016). Democratic business ethics: Volkswagen’s emissions scandal and the disruption of corporate sovereignty. Organization Studies, vol. 37(10), pp. 1501-1518.
• SEC. (2010). SEC charges Daimler AG with global bribery. Accessed 21st October 2019.
• Velasquez, M., Andre, C., Shanks, T. & Meyer, J, M. (2019). Ethics and virtue. Santa Clara University. Accessed 1st November 2019.
• Wu, X., Chandramohan, K. & Bali, S, A. (2016). Corporate governance and bribery: Evidence from the world business environment survey. In: Dion M., Weisstub D., Richet JL. (eds) Financial Crimes: Psychological, Technological, and Ethical Issues. International Library of Ethics, Law, and the New Medicine, vol 68. Springer, Cham.