Volkswagen (VW), the world’s second-largest auto group is in deep, deep trouble. They have admitted
that the emission test cheating engine management software at the centre of the "Dieselgate" controversy
is installed in 11 million Volkswagen Group cars worldwide.When the story broke a couple of days ago, the extent of the deception appeared to cover around half a million vehicles in the USA. That was already bad enough to knock twenty per cent from the share price. Now things have become much worse.
Prior to this debacle, VW had valued its brand at over thirty billion dollars in its annual report. That value has fallen off a cliff, and the full extent of the scandal is still unclear. It's possible that the "defeat device" designed to fool emission tests, may not fall foul of every country's standards. However, that isn't the point. The damage to their brand reputation has already been done, and recovery will be a long and painful process.
So what's to be done? How should a company that's scored a disastrous own goal try to win back the confidence of customers?
The first thing to do is come out with their hands up, as they now seem to be doing. They need to admit the full extent of any wrongdoing, and explain how it happened.
Secondly, they need to show that the people responsible are held to account. How far up the organisation did the knowledge go? Who made the decision to include a "defeat device"? How long has this been going on? It may be that criminal charges are laid, but that will require a detailed investigation. For now, VW need to reassure people that the investigation is under way, and not just by internal inspectors.
In cases as serious as this appears to be, those at the very top of the organisation have to go. There's no way of restoring confidence unless new managers are seen to be in charge. CEO Martin Winterkorn can start putting his desk toys into cardboard boxes. I suspect that many other heads will roll in the next few days and weeks.
Next, there is an apology and compensation. Everyone who has been affected by this affair needs to feel that they have been recompensed. That may sink the company, or cause its break-up, given the massive potential scale of the problem.
VW also needs to make itself the centre of information about the issue. They should give regular press briefings, correct any misinformation, and be completely transparent about the findings of any investigation.
Finally, when the dust has settled and the guilty have been dealt with, VW should declare the crisis over, an make an act of generous contrition. It will be a long and painful time before that day dawns.
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