4.5 C ONSUMER IMPACT
4.5.4 Falling share prices
financial loss from 2010 to 2011. It is difficult to explain why Apple’s financial performance continued to increase while Foxconn employees commit suicide due to the working conditions. However, it may be that Apple’s global image was able to protect the company’s revenue during the crisis if stakeholders held the company’s reputation favourable and valued their relationship. For Apple, this could mean a reputational halo effect. As a shield, the halo effect could protect the Apple while they handled the crisis in a responsible manner.
Nevertheless, in 2011, Apple experienced another CSR scandal after an explosion occurred in the Shenzhen plant (thegaurdian.com). As a string of suicides took place in the previous year at the same plant, Foxconn was already under intense scrutiny. The result of several labour and human rights violations against Apple employees at Foxconn created consumer mistrust to the company and their business activities overseas. Therefore, in 2012, as a consequence of irresponsible misbehaviour, consumers worldwide protested against Apple, which resulted in reputational loss for the company (politikken.dk). Over 250,000 signatures were gathered from angry consumers and given to 6 Apple stores worldwide, while consumer were standing outside the stores, protesting for better working conditions while fighting for labour and human rights.
4.5.4 Falling share prices
As mentioned earlier, the time span for the Volkswagen case was substantially shorter than the other cases. Even though Volkswagen had the fastest respond time of the four and acted as expected within days, it may be that Volkswagen was still the company that suffered most by the four by the four companies.
At this time, CSR had become an integrated part of all multinational companies’ business model and although there was no legislation for reporting on CSR activity, most companies had CSR reports published annually. As described above, Porter and Kramer (2006) have argued that this has been part of companies’ effort to differentiate themselves and achieve competitive advantage, but also, as we argue, to accommodate and meet the expectations of society and stakeholders. Consequently, when companies disclose allegedly correct
information on their CSR activities both society and stakeholders also judge them on the results.
When Volkswagen was exposed for having directly lied about their vehicles and their environmental footprint, the biggest problem for Volkswagen was arguably therefore that they had violated the trust of its customers and as a result damaged their own reputation for being an environmentally conscious company, which aimed at reducing their products impact on the environment. The financial impact of the exposure is evident in looking at their stock value that dropped more than a third from 166 to 105 in just one day. The also immediate rise came after Volkswagens CEO Martin Wintercorn resigned, but the stock value has struggled to regain the value prior to the incident.
Source: Yahoo Finance – Volkswagen stock price, January 2015 to mid-‐2016
However, looking at the financial statements from Volkswagen Group’s annual report from 2014 to 2016 indicate that the damage may not be as severe as it would be expected. Both Volkswagen Group’s total sales figures and revenue has been examined as well as the equivalent for Volkswagen passenger cars.
The scandal happened close to the final quarter of the year and thus the sales of Volkswagen was only affected in the remaining three months compared to sales in 2014. While the number of vehicles sold fell 3.5% from 4.58 million to 4.42 million in 2015, sales revenue increased 6.5% from € 99 billion to € 106 billion. In the same period, the total sales for Volkswagen Group fell however only 2% and revenue was only up 5.4%. In order to determine if the scandal had a significant impact on the annual financial performance, it is
necessary to examine the individual quarters. Table 11 shows the quarterly results from Volkswagen Group. It has not been possible to find the equivalent numbers for Volkswagen passenger cars, but because Volkswagen passenger cars constitute between 50-‐60% of Volkswagen Group’s total sale, we argue that part of the changes in Volkswagen Group’
revenue could be caused by the Volkswagen scandal.
Furthermore, because the Dieselgate scandal is arguably the most intense of the four and it is also interesting to also look at the figures from 2016 in order to determine, if the scandal has had a more long-‐term effect on Volkswagen’s sales and if it has impacted the Volkswagen Group’s brand to such a degree that their total figures have also been impacted.
It is evident from the numbers that Volkswagen Group’s revenue was increasing steadily by 10% in Q1 and Q2 of 2015 from 2014 and 5% in Q3, but declined -‐3% in Q4 2015 compared to Q4 2014 after the scandal had occurred. The decline in revenue continued in Q1 2016, but started to increase already in Q2. Thus, Volkswagen Group only experienced a financial loss in the first 6 months after the scandal and lost around €1.7 billion plus the expected profits of around €5 billion1 for both Q4 2015 and Q1 2016 resulting in an financial loss of around
€13.4 billion.
Table 11: Figures from Volkswagen annual report 2014, 2015 and 2016
In 2016, Volkswagen only sold 4.37 million passenger cars down from the 4.42 million in 2015, thus making it a fall of 1.7%. At the same time, the revenue dropped from €106 billion to €105 billion indicating that the scandal still affected the sale of Volkswagen passenger cars.
In the same year, the sales of vehicles for the Volkswagen Group rose 3.8% and revenue increased with 1.9% which could suggest that the damage from the scandal mostly affected Volkswagen and not the Volkswagen Group as a whole, although the impact is still visible in Volkswagen Group’s figures. Support for this argument can further be derived from Volkswagen Group’s 2016 annual report, where they state that their organisation is structured as “twelve brands with an individual identity and a common goal: mobility. For
1 Estimate derived from average quarter increase between 2014 and 2015.