Volkswagen is in big trouble. That’s what happens when you knowingly mislead the world’s governments and your customers about a key feature of your primary product. In this case, it’s the two-liter “clean diesel” engines used in more than 10 million VW and sister brand cars over the past decade.
Volkswagen has admitted to illegally using software to manipulate exhaust emissions during government testing. When driving on the road, the emissions of mono-nitrogen oxides, or NOx, were up to forty times the legal limit. VW hasn’t explained how the software worked, but you can be sure that the (literally) dirty details will come out in court.
The company has seen tens of billions of dollars slashed from its market value and is potentially facing an $18 billion fine in the US alone. Then there’s the potential for vehicle recalls and buybacks, class action lawsuits from owners, and criminal charges. This is going to get worse before it gets better.
There are a few things that Volkswagen must do, and some others that it can do. None of it’s going to be fun.
The Volkswagen brand is one of the oldest and most storied in the world (it traces its routes back to, ahem, Nazi Germany). The company owns some of the world’s best car brands, including Lamborghini, Bugatti and Bentley.
It’s long had a strong reputation for value. The doors shut with a quality thunk. Most of its cars, especially its torque-heavy diesels, are fun to drive as well as affordable.
All that is tainted, because VW has shown it can’t be trusted. The cheating didn’t put anyone in immediate danger—though NOx causes asthma and other respiratory illnesses—but VW’s deceit is hard to take because it was intentional. It was a blatant, deliberate lie, likely done for no other reason than to sell more cars. Many customers bought the “clean diesel” cars because they’d been told they were cleaner for the environment than the alternative. VW betrayed them and the planet.
First, VW needs a leadership change. “Look for a shakeup of management,” says PR expert and entrepreneur Peter Shankman. “I can’t imagine that the company can survive just the next three months without saying ‘We’re getting rid of people.’”
VW denies rumors that CEO Martin Winterkorn has been fired. It should affirm them instead. He’s in charge, and he has to go. The company will need new leadership to start a new, post-crisis era.
Whoever’s left needs to apologize, deeply, sincerely, and repeatedly. “I personally am deeply sorry that we have broken the trust of our customers and the public,” Winterkorn said earlier this week. Expect to hear that again, and again.
New names on the door and apologies are empty without actions to back them up. It’s unclear how the company will repair the cars so they meet emissions standards—the options aren’t good—but it will spend plenty of money doing it, or on buying them back. Then there’s the money it will put into fines and handling court cases.
The company has already set aside more than $7 billion to deal with the problem, wrecking its profit estimates for the next quarter. That’s likely only the start.
If I were their engineers, I’d be buffing up my resume. Peter Shankman, PR Expert
“They’re going to take one hell of a nasty hit,” says Shankman. “More than anything, they are going to have to ask themselves ‘can this company survive?’”
There won’t be a quick fix, and the scrutiny on the company—and the rest of the auto industry—will be unbelievable. From investors and the press to governments and regulatory bodies, everything is going to be torn apart, every claim questioned.
Volkswagen will need to spend years getting back into the public’s good graces. No more mistakes, be contrite.
“It will leave some pain, and it might not be recoverable for VW,” Shankman says. “If I were their engineers, I’d be buffing up my resume. This is five years of bad PR, at least.”
Winterkorn’s apology is great, but with millions of Volkswagen owners wondering if their cars are worthless, it’s going to take years to right the ship—if it isn’t already sunk.