Both Chipotle and Volkswagen are suffering from a serious public relations crisis that threatens their corporate and brand viability.

The two crises are similar yet quite different. Both companies suffered a dramatic loss of customer trust, earnings and stock price. Which company faces the worse crisis? What have the companies done right and wrong? And what can they do to restore their reputations and businesses? To find those answers, CyberAlert polled PR crisis experts.

The crisis management experts generally praised the companies’ early public apologies. Chipotle ran full-page newspaper ads to apologize and co-CEO Steve Ells apologized on the “Today” show. They also agreed the brands must maintain frequent and transparent communications going forward. However, the crisis management experts disagreed over which brand faces the tougher PR challenge. On one hand, VW employees deliberately broke the law. Yet some argue that food safety is more important that car emissions. Moreover, threats to food safety remain an on-going risk. The emissions blunder won’t repeat.

Causes of the Crises

Volkswagen admitted its employees had installed software designed to evade emissions tests in 11 million diesel vehicles worldwide. Government agencies and customers geared up investigations and class actions lawsuits. The U.S. Justice Department sued VW, alleging that nearly 600,000 vehicles had illegal emissions-evading devices. The company stopped sales of the affected vehicles and may need to buy back 115,000 cars in the U.S. where fixing the problem is more difficult due to regulations.

Hundreds of Chipotle Mexican Grill customers have become ill from E. coli and salmonella outbreaks in multiple states since last August when dozens of customers and 18 employees became ill in Simi Valley, Calif. A federal grand jury subpoenaed the company over that outbreak, and the U.S. Attorney’s Office for the Central District of California has opened a criminal investigation. Perhaps most disconcerting, the restaurant has yet to determine a source of the illnesses. The crisis has eviscerated Chipotle’s key positioning of delivering fresh locally-sourced products.

A Poll of PR Crisis Experts

An Advertising Age poll reported last month that 68% of respondents thought that Volkswagen had a worse year than Chipotle (32%). However, that was before news before news a Chipotle’s criminal investigation emerged.

“Chipotle is on two strikes — one more health related outbreak and it strikes out in the court of public opinion with significant reputation damage to deal with. Let’s see what happens because actions speak louder than words. It’s time to live up to the purpose of ‘food with integrity,’” Stephen Hahn-Griffiths, U.S. VP of strategy consulting at Reputation Institute, said in a statement to Advertising Age.

Years to Recover

Some VW personnel evidently perpetrated a fraud knowlingly. “It doesn’t get much worse than that,” Laurel Kennedy, principal of Blink, told CyberAlert. “It will take years to recover, especially given VW’s piecemeal response.”

Chipotle also suffered greatly from its repeated outbreaks of illnesses. “When your company’s positioning stakes out the moral high ground, you set yourself up for a bigger fall if you fail to deliver,” she said.

Both Chipotle and VW completed some good initial responses. VW’s Board prompted its CEO to resign and offered customers dealership benefits and Visa cards. Those were good initial moves. Chipotle’s apologies, closure of stores for extensive cleaning, and its decision to hire a third party to investigate the outbreaks and overhaul food safety procedures were also good moves. Nevertheless, responses from both companies only temporarily assuaged customers.

VW has not come up with an action plan or timeline for correcting the compliance and compensation issues, leaving others to fill the information void, she said. Chipotle missed its opportunity to communicate with avid customers early on with its tepid social media response.

“In other cases, Chipotle made the right move, but took too long to get there or buried the lead,” Kennedy said. “This was the case when announcing the hiring of IEH Laboratories to overhaul food safety procedures.”

“The court of public opinion has found Chipotle guilty of spending time touting trendy issues like non-GMO and antibiotic-free ingredients, instead of taking care of the fundamentals, like providing safe food. Safety is not a positioning — it’s table stakes, Kennedy averred.

Both companies must develop new brand positions that are meaningful to customers and reflect lessons learned. “VW should hire a board-level executive with the sole responsibility of developing a corporate ethics platform; Chipotle needs the equivalent on the food safety front,” Kennedy said.

VW Must Pay Penalties

PR crisis expert Jim Lukaszewski said there’s no question VW has the harder PR crisis to solve. “The absence of whistle blowers indicates a broad and deep failure in compliance and quality assurance. Many knew a lot but elected to remain silent,” he told CyberAlert.

Both the corporation and its top executives must pay substantial fines and leaders involved in the crime must face jail term in order of the company to restore confidence in the brand.

“The same people who perpetrated the scam appear to be still in charge,” Lukaszewski said. “Settling the prosecution in the US will probably hinge upon the most culpable perpetrators getting some serious jail time. VW needs to stop protecting these people.”

Chipotle has a far easier time, he said. The public is accustomed to food problems, even among large, popular brands. Most commentators say it responded well and is doing as best it can to resolve contamination issues.

“In both cases, the survival power of major brands is showing,” Lukaszewski said. “It is really hard to kill or seriously wound a major brand, although VW seems to be testing their brand resiliency and their reputation’s durability.”

Former VW CEO Martin Winterkorn. Photo via Wikipedia

Bonnie Russell at Personal Publications agreed that VW must cut ties with top executives involved in the scandal and answer criminal charges in order to recover. However, Chipotle has the toughest challenge by far “because it’s a real gut check.”

Chipotle’s problems feel more personal because it’s an American company, she said. Although it responded quickly, its failure to find the source of the contamination raises questions about its food preparation competency. The company should bring in fresh eyes and hire a slew of new sleuths, she said. Unfortunately, time is not on Chipotle’s side.

The Fresh Food Disadvantage

Chipotle’s main allure of serving local, fresh natural ingredients is also its major disadvantage, Bill Fish, founder and president of ReputationManagement.com told CyberAlert. Eliminating pathogens is extremely difficult in non-centralized food production facilities. Chipotle has announced that it will now use centralized food processing facilities to reduce risk of safety issues that result from improper food processing, but the company will continue to use fresh, locally sourced foods. The company will also likely reduce the number of fresh-food suppliers to minimize risk.

Chipotle must double down on its marketing message and emphasize its fresh food while keeping it safe at the same time.

“I’m going to stay away from VW, as they were absolutely malicious with their emission tests, and the lying associated with them,” Fish said. “That said, in terms of Chipotle, I genuinely feel for them, as they are in a very difficult situation trying to win back their customers.”

Similar viewpoints emerged in the media. VW was portrayed as the perpetrator of a deliberate, unscrupulous and illegal act. Initially, the Chipotle crisis was seen more as an unfortunate occurrence. Repeated outbreaks, however, called into question Chipotle’s fundamental approach to sourcing and processing its food at the local level.

No One Gets Sick from Emissions Software

Deb Hileman, president and CEO of the Institute for Crisis Management, believes Chipotle faces the larger challenge because of its U.S. locations and the nature of the crisis: Deceptive emissions software does not make anyone sick or, at least, any sickness harmful emissions cause isn’t traceable in the short term. “Food safety is a high priority for Americans, and Chipotle has had simply too many issues in a short time to make a quick recovery,” Hileman said.

Both companies made the right responses by apologizing and taking corrective actions, Hileman told CyberAlert, citing VW’s management change, Chipotle’s food handling improvements and other actions.

However, Volkswagen executives almost immediately began pointing fingers. Many blamed the company culture. VW’s communication with stakeholders including affected customers was inconsistent, demonstrating the lack of an effective crisis communication strategy.

Chipotle was slow to respond, and the co-CEOs at times delivered conflicting messages. “There appeared to be no effective crisis communication strategy in place, and it is still weak, in my opinion,” Hileman said. “Information was difficult to find on their website, and is not formatted to be user-friendly. Two months passed before the website had links on its home page regarding the crisis, and the information that is there even now is somewhat thin and not user friendly.”

Hileman recommended the companies take three actions going forward: “Communicate, communicate, communicate!” The companies must commit to regular, transparent and frequent public updates on websites and social media. They should focus on solutions, make sure the problems never reoccur, provide front line employees information they need to answer customer questions, and commit to creating a company-wide culture that encourages people to speak up when they see a problem.

Adopt a “Culture of Caring”

David A. Ball, president of Ball Consulting Group LLC, agreed that both companies need to continually provide updates to the media and public about steps they are taking to fix their products. “Most important, they need to adopt a culture of caring, for the benefit of customers, which will translate into better results for shareholders.”

His advice to clients in similar situations is always the same: Share as much information as you can, own up and apologize for what occurred, and do your best to move forward. “Releasing information in a slow stream and failing to take accountability at the CEO level will compound and extend the crisis,” he said. “Yet we continue to see companies that talk in terms of crises being ‘one day stories’ and we often hear the phrase ‘this will blow over.’ This is a multi-year problem for both brands and part of the reason for that is the way they initially responded.”

Both companies appeared to take ownership of the crisis and to take steps to re-build consumer trust, citing their high-profile apologies through both earned media and paid media. In addition, VW provided gift cards to customers, and brought in attorney Kenneth Feinberg to adjudicate claims for compensation and replacement vehicles. Feinberg handled disbursements to families of the 9/11 tragedy.

Both companies failed to get out in front of their crises. “Both companies knew the scope and severity of the problems yet they were slow to provide details and to try to re-build customer loyalty and trust,” Ball said.

The Newer Brand Faces Greater Difficulties

While suffering a huge blow, VW has been around longer than Chipotle and has millions of loyal customers ready to give it a second chance, said David E. Johnson, CEO of Strategic Vision PR Group. As a newer brand, Chipotle faces a greater challenge maintaining customer trust.

Photo via Wikimedia Commons

“The very fundamentals of its brand have been shattered and with each new case of E. coli or norovirus it is shattered even more,” Johnson said. “It also appears to have been less than forthcoming with the public, investigators and even its own public relations firm, which severed ties with the company.”

While crediting the companies for some actions, such as apologizing, both made PR crisis communications mistakes, he said.

Volkswagen lacked an online presence that corresponded with its traditional media approach, a common mistake. Chipotle’s unrealistic guarantee to provide absolutely safe food raised the question of why its food wasn’t already the safest. It spent too much time explaining E. coli and norovirus rather than explaining the steps it was taking toward a solution. It also failed to adequately include employees and franchise owners in its crisis response, Johnson added.

Some Find Fault in VW’s Apology

Disagreeing with many of their peers, some PR experts criticized VW’s apology. “It sounded like they were apologizing for being caught, not out of any real concern for its customers or the environment,” Gary Frisch of Swordfish Communications, told CyberAlert. “This was a clear example that when your misdeeds rise to the level of consumer and governmental fraud, an apology just isn’t enough.”

Replacing CEO Martin Winterkorn with another corporate insider, Matthias Mueller of Porsche, was also a mistake, Frisch said. Hiring an outsider would have assured a clean slate. On a positive note, its creation of a compensation fund, administered by Ken Feinberg, shows its commitment to making customers whole. Feinberg is an experienced, highly regarded, well-known independent compensation fund manager, Frisch noted.

Going forward, VW must strive to make consumers financially whole, even if it has to buy back vehicles if necessary. It must revamp its advertising to regain consumers’ trust, and ramp up corporate social responsibility efforts. “This will all be very costly, but it is necessary to move forward as an admired brand, and is the cost of getting caught with your hand in the cookie jar.”

VW is Second on Worst-Handled PR Crises of 2015

CrisisResponsePro founder and CEO Jim Haggerty also knocked VW’s mea culpa, calling the CEO’s statement “boilerplate.” VW also lacked a system to spot employee cheating.

CrisisResponsePro, a subscription portal for crisis and litigation communication, rated the VW scandal second on its list of 2015’s worst handled PR crises after the NFL’s deflategate. “The company’s supervisory-board chairman and new CEO gave a public accounting on Dec. 10, but its efforts continue to not impress,” Haggerty wrote on the website.

It rated Chipotle fourth on its “dishonorable mentions,” saying the company responded admirably. “Whatever operational problems — or bad luck — the company continues to experience, Chipotle’s communications are impressive,” Haggerty stated.

Bottom Line: PR crisis experts disagree over whether Volkswagen or Chipotle faces the tougher PR crisis challenge. Although most praised the companies for some of their PR responses, crisis management communications from both companies could have been better, experts say. They agree that going forward frequent, transparent communications with the media and the public will be key to recovering the companies’ reputations. Both companies must institute concrete programs to assure the public that the problems will not repeat and that company culture has changed.

Would you like to add your thoughts? Do you agree or disagree with any of the points made by the experts? Please comment below.

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William Comcowich

William J. Comcowich founded and served as CEO of CyberAlert LLC, the predecessor of Glean.info. He is currently serving as Interim CEO and member of the Board of Directors. Glean.info provides customized media monitoring, media measurement and analytics solutions across all types of traditional and social media.