Shannon Thomas Robards
Volkswagen Motor Group was recently crowned the biggest car manufacturer in the world, surpassing key rival Toyota in total sales for the first half of 2016 and on track to maintain momentum into the new year (Bonnici 2016, Schmitt 2016). Manufacturer of the world’s all-time most popular car (the Volkswagen Beetle) and now the world’s most public shaming, it’s hard to believe that 12 months ago news emerged regarding Volkswagens now infamous “Dieselgate” scandal. Like watching a slow train wreck, it was revealed that the emission results of select diesel vehicles were falsified after independent testers in California found irregularities during testing (Wheels 2015, Political Lore 2016, Automotive News 2015). The brand suffered instant international fallout as a result, with sales dropping by up to 50% in some markets (-5.3% globally, -17.2% in Australia) and share value more than halving overnight to wipe a total of €24 Billion in value (Kollewe 2015, Smy 2016).
The 11 million cars affected over 7 years were variants of diesel engines in both commercial and passenger cars, ironically chosen in part for their eco-friendly fuel consumption environmentally friendly emissions (Useem 2016, Wheels 2015). The deceitful behaviour which instigated the illegal actions permeated through each level of the organisation (Stahler 2015) removing the company’s CEO and implicating chief engineers. These weren’t simply fudged numbers, but rather “defeat devices” which were made specifically to cheat emission tests under the direction and approval of senior management.
Whilst the cars perform as one would hope, the perceptions underpinning these vehicles is now tarnished, causing owners to sell at prices well below book value (Smy 2016). Volkswagen built its brand on consistently robust product offerings, delivering cars with just the right feature sets to win awards on a global scale. The somewhat typically German association of clinical levels of production, reliability and trust have, for the time been, moved to the background amidst the roar of customer dissatisfaction.
“…. intent on poisoning its own product, name and future.”
– Useem, 2016
Volkswagen itself though is not a single brand but rather a house of brands including Audi, Porsche, Skoda, SEAT & Lamborghini. The scandal not only resulted in damage to VW but also to VW’s entire portfolio, though it would seem that these brands were somewhat insulated. Whilst sales figures show that while Volkswagens sales continue to decline, others within the group have carried the organisation to their current industry leading position (Schmitt 2016, Bonnici 2016).
Still almost 12 months after the original news leaked, “Dieselgate” continues to have negative effects on the company as class actions against and fines ($14.7 Billion in the US alone) to the organisation plague headlines (Krisher and Thanawala 2016). In a self-admitted loss of trust, Volkswagen has done permanent damage to their brand image. The former associations of trust and reliability are slowly changing to those of deceit and scepticism. Speculation exists about the residual value of customer’s vehicles, with some economists hinting that a “market of lemons” could result, further jilting a whole generation of consumers (Stahler 2015).
Damages have been estimated upwards of €30 Billion (Stahler 2015), enough to develop over 30 new models. Despite these financial pitfalls, Volkswagen will most likely take out the title of the world’s biggest automotive manufacturer by the end of the year. Known for innovation, efficiency and reliability, modus operandi of the automotive giant will be on pause in the short-term, with all new models suspended until further notice in order recoup some of the extensive losses (Wheels 2015). Product life-cycle will be extended, and the once innovative offerings will become stale over time which will further reduce sales as competitor’s progress.
In a time where organisations are being called on the have genuine exchanges with their customers, Volkswagen chose not to and as a result have set themselves back years in revenue and product development.
- Automotive News, (2015). VW scandal widens to fuel consumption figures. [online & image] Available at: http://www.autonews.com/apps/pbcsi.dll/storyimage/CA/20151104/COPY01/311049927/AR/0/AR-311049927.jpg [Accessed 23 Aug. 2016].
- Bonnici, D. (2016). Volkswagen global sales win helps move on from ‘Dieselgate’. Wheels, [online] (August). Available at: http://www.wheelsmag.com.au/news/1608/volkswagen-global-sales-win-helps-move-on-from-dieselgate [Accessed 23 Aug. 2016].
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- Krisher, T. and Thanawala, S. (2016). AP Source: Volkswagen reaches $14.7B emissions settlement. Associated Press. [online] Available at: http://bigstory.ap.org/article/bc5418f7f7ae46529be912ee01a1dcc6/ap-source-volkswagen-reaches-147b-emissions-settlement [Accessed 23 Aug. 2016].
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- Schmitt, B. (2016). Despite Dieselgate, Volkswagen Is World’s Largest Automaker In First 5 Months Of 2016. [online] Forbes.com. Available at: http://www.forbes.com/sites/bertelschmitt/2016/06/29/despite-dieselgate-volkswagen-is-worlds-largest-automaker-in-first-5-months/#4c93d97d27a3 [Accessed 23 Aug. 2016].
- Smy, D. (2016). Australians Punish VW for Dieselgate. Wheels. [online] Available at: http://www.wheelsmag.com.au/news/1606/australians-punishing-vw-for-dieselgate/ [Accessed 23 Aug. 2016].
- Stahler, P. (2015). WE “TOTALLY SCREWED UP”: VALUES AND BEHAVIORS IN VOLKSWAGEN BUSINESS MODEL. [Blog] Business Model Innovation. Available at: http://blog.business-model-innovation.com/2015/09/values-and-behaviors-in-volkswagen-business-model/ [Accessed 23 Aug. 2016].
- Useem, J. (2016). What Was Volkswagen Thinking?. The Atlantic, pp.26-28.
- Wheel Staff (2015). VW Scandal affects 11 million cars, could attract $25 billion penalty. Wheels. [online] Available at: http://www.wheelsmag.com.au/news/1509/vw-diesel-scandal-affects-11-million-cars-could-attract-$25-billion-penalty [Accessed 23 Aug. 2016].