I’m at the IBA in Vienna this week networking with over 5000 lawyers and I have had numerous conversation about the fate of Volkswagen’s brand.
To answer this I’ve started by asking a few questions.
Do you own a diesel engine Volkswagen? How does it appear to you when you open the garage door, or approach the pavement where you parallel parked? Do you feel different? Cheated? Like you hardly know it? Unlikely. Even fervent fans of Top Gear are not actually in a relationship with their cars, and your VW doesn’t drive any differently on the school run, a drive to the beach, or on a hairpin bend driving up to Chamonix. I don’t want to ruin the end of the blog but VW will likely weather the storm. The brand’s ‘product’ – as associated with precision German engineering – has taken a bit of a hit. It’s now been labeled a ‘diesel dupe’, and will have to deploy candour and science to rebuild trust. The bigger hit has been taken by VW as a ‘corporate’ brand. It has been forced to set aside billions of pounds to cover the costs of an escalating scandal, as well as firing some pretty key employees. It’s the corporate suits that lied to you – not your car. But unless the corporate side can find ways to re-establish and broadcast trust, then this will start to affect your affection for the product side. Put simply, would you buy an unused car from these people?
No room for error
The scandal has come as a serious shock to many people as the facts suggest that this simply couldn’t be an error or misunderstanding. According to the Environmental Protection Agency, some Volkswagen cars with diesel engines were being sold in America fitted with a device that would detect when they were being emissions tested. As soon as that happened then performance could be changed so as to manipulate the results of the test. The cars that were the subject of the Agency’s findings include the Audi A3, and the VW brands Jetta, Beetle, Golf and Passat. However, it’s now thought that vehicles in Europe are likely to be affected too and Volkswagen has admitted that there could be around 11 million cars with the devices globally. “We’ve totally screwed up,” said VW America boss Michael Horn. Yes, just a bit.
Sorry, not sorry
We’re all aware of the ways in which businesses seek to ‘work with’ laws that might impede them from making money and reaching a broader market but it’s not that often that you come across something that is such a flagrant and intentional act. There’s no mistaking why that device was in there – to help those cars pass emissions tests that they should not have passed. Under the circumstances, the company has really taken the only approach that it could have and held its hands up to everything. It almost makes you feel sorry for them – which is why it was such a good move. But let’s not get the violins out just yet as this is a business that reported a 19% rise in net profit in 2014, bringing its figures in at €10.85 billion. And yes it’s sad when someone has to resign but Departing VW chief executive Martin Winterkorn could get more than £20 million as a result.
Of course Volkswagen isn’t the first business to have been in this kind of situation, facing a dire PR crisis as a result of deception. Enron is probably one of the most famous corporate scandals of all time, keeping huge debts off its balance sheets and costing its shareholders tens of millions. In 2008, Lehman Brothers’ attempt to disguise more than $50 billion in loans as sales created a PR disaster of epic proportions and there has been scandal after scandal involving the food industry, from horse meat to exploding watermelons and fake eggs. While it remains to be seen whether Volkswagen will ever return as a trusted brand, the latest reports indicate that it’s not the only car maker to have used this kind of device.
This could be the start of a much broader PR crisis for the auto industry and not the end of it. For many car makers – like VW – in their favour is the fact people like their cars. But unless they can find a way to be and seem trustworthy as an organisation, they will find affection for their products fading. Because let’s face it no-one likes to be lied to.