The worldwide press has hammered Volkswagen for months due to its emissions cheating scandal. The company initially blamed a small group of engineers and tried to assure consumers, governments and shareholders that VW’s management was unaware of any wrongdoing by the company. That approach wore thin rather quickly and VW’s board ousted CEO Martin Winterkorn in the hopes that such a major management shakeup would stop the bleeding and perhaps even provide a PR win.
Courtesy: DPA
After all, this scandal has tarnished the image of VW and created a potential liability so large that it might reach $48 billion in the US alone.
In an effort to bring this fiasco to a close, the company has been focusing on two issues. First, it’s attempting to satisfy customers via financial incentives and second, it’s been working on a “fix” that would bring their vehicles into compliance.
From the beginning it has been clear that VW hoped to put this episode behind them as quickly and cheaply as possible. The company initially claimed it had no knowledge of the issue, then later admitted it had indeed known for at least one year prior to the scandal becoming public. Similarly, the company has been slow to reveal the extent of the fraud, by claiming only one set of engines was affected. It’s had to revise those statements and expand the list of engines and years affected.
Crisis management specialists generally suggest that the best way to minimize the damage is to apologize, to commit to a transparent investigation and to take the required steps to solve the problem and implement processes to ensure something similar won’t happen again. By most accounts, VW has not embraced this approach.
Much has been made of VW’s insular culture. The company’s complex ownership structure, which is dominated by one family and the German state of Lower Saxony, coupled with a special law aimed solely to keep VW from a takeover, have resulted in a company that is not responsive to outside forces, including shareholders and governments. This makes it less surprising that VW has handled this scandal so poorly.
At this week’s North American International Auto Show, VW CEO Matthias Müller was confident he could make progress on the issue. During his first trip to the US since becoming CEO, he planned to personally apologize to the global press and meet with the Environmental Protection Agency (E.P.A.) and California Air Resources Board (C.A.R.B.) in order to gain approval for VW’s proposed software fix.
VW’s tone-deaf approach was on display by its CEO, who, while officially apologizing, managed to not apologize at all. On one hand, he said, “… we let down customers, authorities, regulators and the general public…and I would like to apologize [for that]”. Shortly thereafter, in an interview with NPR, Mr. Müller claimed that VW did not lie, but that it did not understand the EPA’s diesel emissions rules. That does not sound like an apology or a company that is fully embracing its culpability in a major fraud.
VW’s second setback of the week came when the E.P.A and C.A.R.B. declared that VW’s attempted fix would not be acceptable because it does not provide information how it would impact fuel economy or emissions. It appears that VW had hoped to placate regulators with an ill-defined plan to do something that would make this matter disappear.
Similarly, the company is attempting to minimize its exposure from class action lawsuits by offering a “Goodwill Package” to owners of affected vehicles. These incentives consist free roadside assistance for three years, a $500 Visa card and a $500 debit card that can only be used at VW dealers. While VW owners who take advantage of the offer might limit their ability to claim damages in court, the approach should please dealers who will be able to take advantage of additional foot traffic and cash payments by VW.
Instead of embracing transparency, letting an outside party investigate the causes and doing everything in its power to regain the public’s trust, VW’s approach has been to deny, delay and discount.
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