Wednesday, September 30, 2015

The Pollution 'Bug' That Bit Volkswagen Threatens Carmaker's Image

Recent events had me thinking about my old ride in high school. 

As a teenager I drove an old Volkswagen Super Beetle that was painted bright red.  

I vividly remember flooring the gas peddle -- hoping to get some speed out of that machine. My all-time record, pointed down a steep hill -- with a tailwind -- was 72 mph. 

Once, pranksters rolled my car onto its roof. My Dad and I rolled it back over. There were some dings on the fenders but it started right up and I hopped in and drove away.

In the winter, we had to scrape ice off the inside of the windshield. The heater was a pipe connected to the engine. Hot air came shooting out of a small vent on the floor. After a long trip my left ankle was as red as the paint job -- but the car was still a slow rolling ice box.

That said, my old VW was the epitome of basic, cheap, transportation. If nothing else, that Volkswagen was reliable.


VW's reputation for reliability has taken a hit lately. Perhaps you heard about it. On Sept. 18 the EPA revealed that Volkswagen sold 11 million diesel cars equipped with computer software that turned on a pollution control device when cars were being tested. The pollution control system turned off when cars went back to normal driving conditions.

As a result, VWs spewed out pollution that was up to 40 times higher than allowed by federal regulations.

In a report by the Washington Post Frank O’Donnell, director of Clean Air Watch, was quoted as saying, “The charges here are truly appalling ... It was cheating not just car buyers but the breathing public.”

VW could be fined up to $37,500 for each car that violated federal pollution rules and that could add up to $18 billion. The company says it has set aside more than $7 billion to pay for damages and anticipated car repairs.

However, the real cost could go much higher. Volkswagen's reliable reputation is in danger of being shredded. Undoubtedly, millions of the company's customers purchased vehicles based on the phony pollution figures. And they can't be very happy.

Ironically, Volkswagen is German for "The People's Car."

Wall Street isn't happy either. According to shares of Volkswagen stock dropped from around $160 to $110 in the three trading days following the EPA's announcement. On Sept. 30 VW closed at $103 per share. Ouch. In May, Forbes listed the Volkswagen Group as the world's 14th largest company with $425 billion in assets and sales of $268 billion. Those numbers have no doubt fallen dramatically.

A VW dealer in Woodlands, Texas told NBC News he sold 13 cars on the Saturday after the scandal broke and only one vehicle on the following Tuesday. 

Media reports say dozens of lawsuits have been filed and more are likely. VW has had to stop selling the cars in question. Officials in Germany have launched an investigation.

So what is Volkswagen doing to restore the public's confidence? Good question. The company has fired CEO Martin Winterkorn who has said he doesn't know how this happened. 

A video posted on Volkswagen's website includes an apology from Michael Horn, President and CEO of Volkswagen Group of America. 

Horn says in part, "While we are still gathering all the facts it's clear that our company betrayed the trust of you, our customers, our employees, our dealers and the public." Horn goes on to say that VW is cooperating with regulators to determine a course of action and that customers will be notified when a fix is available.

Volkswagen has also set up a customer service hotline to answer questions. It's 1 (800) 822-8987. The question I think should be answered is 'How did this happen?'

I always tell people that a key tenet of effective public relations is to "do good." In other words, it's best to do the right thing from the start. Failing that, a key tenet of crisis management is to make things right as soon as humanly possible. As I write, it's been 12 days since the VW scandal erupted.

How is it possible that a company of this stature was able and willing to cheat its customers? VW officials need to come clean. And the sooner the better.

An old VW ad campaign you probably remember featured the tagline, "On the road of life there are passengers and there are drivers. Drivers Wanted." 

What's wanted -- and needed now -- is the truth.

Otherwise, when it comes to VW's reputation, instead of "Fahrvergnügen" you can Fuhgeddaboutit.

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