Lessons from the VW emissions scandal

THE TRUE COST OF REPUTATIONAL DAMAGE


By Warwick Partington: Strategic & crisis communications consultant


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 VW’s emissions scandal is looking likely to become an all-time business school case study on reputational damage. It is an interesting one to examine in more detail.


 


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Whilst the front page headlines are focused on “Scandal” and the hunt for who authorised, who knew and whose head must be placed in the corporate noose, conversations inside the car industry reveal a range of thought-provoking perspectives.


 


Give an engineer a problem, their job is to create an engineering solution. It appears VW’s solution to the challenge of the strict California emissions tests was some smart technology to ensure that the emissions were temporarily reduced during the test using software to detect when the car was being tested, cutting emissions and in some cases, the injection of a chemical into the exhaust.


 


However, creating a low-cost, neat engineering solution, completely misses the point…and massively increases reputational risk.


 


The real issue is that VW executives ignored their declared and expected corporate values, undermining customers and society’s expectations and trust in them, their brand and their products.


 


VW admit deceiving everyone. That completely undermines their reputation and our trust, potentially therefore, threatening the future viability of their business.


 


A comparison with athletics makes an interesting analogy. The easiest way for an athlete to perform better is to use drugs. Undoubtedly that is cheating, which is why drugs are banned and there is a sad line up of athletes and coaches who have broken the rules. In doing so, they have also broken the trust of their fans, their fellow athletes and their sporting event organisers.   


 


Similarly, VW have broken the trust of their buyers about the emissions performance of their products, and the trust of the society and its legislators with whom they interact. Hence their reputation is being trashed and it won’t be easy to fix.


 


Openness will be vital along with proactively addressing the many issues that arise from the deception including legal consumer rights after owners have been made unsure about the value of their investment in their car, the environmental performance of their vehicles and what effect any VW software fix will have on the vehicle performance, resale value, taxation banding and cost of ownership…..


 


Of course, government regulators are also in the spotlight They allowed test procedures to remain standardised and static for so long that there was an opportunity to develop solutions to cheat around them.


 


Test procedures in any industry must be regularly updated to ensure they are fit for purpose. Emissions testing regulations and procedures in Europe, as well as the USA, need to reflect changing environmental targets and are currently being slowly updated to do so.  


 


The reputation fallout will however widen. Germany’s reputation for business probity is in question.


Diesel’s reputation as a fuel source is also in the spotlight, giving oil companies the problem of a mid to long-term fall in demand in many markets.


 


The real cash cost of this crisis will extend far beyond VW and the car industry into investors and pensions schemes as well as government transportation and consumer policies.    


 


The only good news coming out of this is that electric car manufacturers must be eyeing up new  opportunities as buyers in California and elsewhere start to shun diesel cars and consider greener alternatives.         


 


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Warwick Partington is Strategic & Crisis Communications Consultant at the MTM Centre for Leadership and Management Development in Broadway, Worcestershire.


 


www.mtmleadership.co.uk