The Volkswagen BUDD-e, an Internet-connected electric concept car, at the Consumer Electronics Show in January. Image source: mobilenet.cz
Volkswagen’s emissions testing scandal last autumn was so severe some observers said it threatened to send the company to the junkyard. But Volkswagen now believes it has turned a corner and hopes to speed away from the crisis, leaving it behind in the smog (sorry about that).
Volkswagen suffered its worst-ever annual loss of €1.58 billion last year following revelations that its employees had faked diesel engine emissions tests. In a settlement with U.S. regulators and car owners, the Volkswagen agreed to repair or buy back 482,000 vehicles that do not meet emissions standards. The company announced that it set aside €16.2 billion ($18.32 billion) to fund the recall of millions of cars, legal claims and related costs.
Volkswagen executives and investors believe it has already suffered the worst of the crisis and it can begin its financial recovery. Although costs of the settlement are still undetermined, VW believes they will be less than analysts’ worst-case scenarios. It passed Toyota as the top selling auto maker for the first quarter this year and its leaders predict robust business performance this year.
Stepping on the Gas
“We are not letting the crisis slow us down, but are stepping on the gas — in all of our brands, and in all relevant markets,” VW Chief Executive Matthias Müller told the media. He said VW would “accelerate the transformation and lay the foundations for a new, better Volkswagen.” The New York Times reported that Müller personally apologized to President Barack Obama, during the president’s trip to Hanover, Germany at the end of April.
How it can rebuild its image and recover trust of consumers is another question. One of those consumers is Eric Orts, owner of a Volkswagen diesel car and a Wharton professor of legal studies and business ethics.
“People like me have been hurt in a way that is not easy to calibrate or calculate the damages, when you thought you were buying something helpful to the planet and it ends up that you were doing the opposite,” Orts stated in a Knowledge@Wharton article.
Many Questions Remain Unanswered
Other questions remain, he said. They include: What happened inside the company? Who was responsible for the fraudulent tests? How high up did it go? (An investigation is ongoing.) Can VW restore its image as a green car company?
The severity of the crisis cause some to wonder if Volkswagen can follow the standard PR crisis playbook that entails apologizing quickly and pledging to make amends. The textbook crisis reaction may still not be adequate considering the nature of the issue. VW still faces a long and winding road to rebuilding trust.
“Volkswagen may try to steer attention away from engines to electronics and connected cars (cars with Internet access) and some of the safety features of autonomous driving,” said Wharton management professor John Paul MacDuffie in the Wharton article.
The company appears to be still touting its green credentials. It announced this week that the 2016 Volkswagen e-Golf was named Best Compact today in the 2016 AAA Green Car Guide, and unveiled its BUDD-e, an Internet-connected electric concept car.
Still Needs Repair
“Obviously, trust in the automotive industry needs repair – especially as it moves toward driverless cars and more automated features. The industry must be as transparent as possible and cooperate with its many stakeholders,” stated The Christian Science Monitor editorial board.
“You have yet another lesson of how expensive it is when you make a big legal or ethical mistake — $18 billion is not a small number, and it is avoidable,” said Orts, who is co-editing the book “The Moral Responsibility of Firms.” “It could really be cheaper if companies could watch themselves and regulate themselves and do the right thing without the big government over your head.”
Bottom Line: Although Volkswagen optimistically believes it has driven through the worst of its emissions testing crisis, it still faces a long road ahead to repair its image and regain consumer trust. Despite past difficulties, it’s possible for the company to regain traction in its effort to portray itself as an environmentally friendly brand.
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.
