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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.