Scandal rocks Volkswagen – will the brand survive?

Scandal rocks Volkswagen – will the brand survive?

By Jon Michail

University researchers have uncovered shady dealings in the Volkswagen Group that may prove to be the company’s downfall.

The scandal became public knowledge last week when the company was forced to acknowledge it intentionally implemented technology into it’s cars that would falsify emissions tests.

Software known simply as “the Switch” would detect when an emissions test is in effect, turning the car into a kind of temporary fuel efficient mode whilst the tests were being conducted, but would cause the car to refer back to it’s original setting afterwards.

Recent developments also suggest that the company was warned several times by relevant authorities of the mishap, but the executives appear to have ignored those warnings.

Last year the company was granted a recall of Volkswagen automobiles, with the company citing “an easily fixable glitch” to be the motive.

What caused the revelations?

Four researchers from the American Institution, West Virginia University, conducted tests on three cars: BMW X5, Volkswagen Passat, and the Volkswagen Jetta.

The two professors and two students set out to conduct the first tailpipe evaluations on diesel cars by American testers on European automobiles.

A claim made by the Volkswagen Group that the Passat offered “clean diesel” proved to be, at least in their specific car, false — the emissions readings of the Passat were over 20 times that of the official levels allowed by the California Air Resources Board.

The Passat wasn’t the only car to come under suspicion, and it was the other Volkswagen car, the Jetta, that also produced readings above and beyond what it should have — this time, 30 times more than what the CARB permits.

It wasn’t until sometime later when the team unraveled their findings to a conference in San Diego that the ball began to roll in the direction it would find itself almost a year later — uncovering perhaps the biggest cover-up in automobile history.

Members of the Environmental Protection Agency were amongst the crowd in attendance at the convention, and this spurred the organisation to confront Volkswagen over the staggering findings; eventually leading to an admittance of the intentional tampering by Volkswagen executives, and a possible dire situation for the company.

The consequences

$41.5 billion have been erased from the company’s total value, and penalties of almost $25 billion have hit the company in the United States: an accumulation of fines on all diesel vehicles sold within the past 6 years.

CEO of the group Martin Winterkorn stepped down in the aftermath of the controversy, and other high ranking executives are set to do the same, with some expected to be thrown out the door for their negligence.

Martin Winerkorn – CEO of Volkswagen Group Image Group International

Martin Winerkorn – CEO of Volkswagen Group.

Not only are the consequences to be felt by the company as a valued corporation, but a substantial amount of the German economy relies upon the company for it’s widespread and mass employment, of which, a large portion are set to be laid off en masse.

The reputation of the company is in great jeopardy, and not even the massive reparations of over $10 billion dollars can change that.

Some estimations of the company’s total costs after this scandal’s unraveling are in the tens of billions of dollars, and it begs the question: how will the company come back from this?

What do you think will happen with the brand?

 

Jon Michail is Group CEO of Image Group International, Australasia’s No 1 image coach. Image Group International supports executives, entrepreneurs and their organisations to become iconic and monetised leadership brands.

If you valued this post, please do share it and follow me on Twitter at @jon_michail and Subscribe to The ImageMaker Blog at www.imagegroup.com.au/the-imagemaker-blog/.

 

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