Volkswagen Goes All-In On Their Reputation?
How much are you willing to gamble on the essential reputation of your business? Most small business owners would not gamble much because their very life’s work is at stake. Street hustlers are willing to make exaggerated claims and falsehoods because their risk is minimal, they have little to lose. But corporate gambling is very different because the players are using other people’s money, the personal risk is minimal and the potential rewards are great. It seems VW execs were willing to go “all-in” and risk one of their company’s most prized assets to gain a bit more profit. It remains to be seen whether their risk was worth the potential reward.
VW built its reputation as a fuel efficient alternative to the gas guzzlers of the early 1970s as fuel prices steadily rose to an ultimate crises. On April 5, 1979 the average price of crude more than doubled over 12 months. Motorists panicked and long lines formed at gas stations. In urban areas, hoodlums siphoned gas from cars on the street, ushering in an unprecedented demand for locking gas caps. Amidst this chaos Volkswagen was seen as a fuel efficient alternative. In fact about that time my first car was a used Beetle followed soon after by a used VW Squareback station wagon, the predecessor to the Rabbit.
People were looking for smaller cars with less fuel consumption. At this time diesel was also gaining popularity as an alternative for passenger vehicles and VW was leading the charge. According to fueleconomy.gov in 1979 the VW Rabbit was getting 41 MPG on their diesel 5 speed manual transmission. The Chevy Nova by comparison was getting about 15 MPG on their manual 4 speed gasoline engine. Over the next 30 or so years VW would ultimately become the largest automaker in the world by number of cars sold.
Fast forward to 2015 and Volkswagen is in the news when the US Environmental Protection Agency accuses the company of deliberately rigging the onboard computers of nearly a half a million diesel cars to circumvent emissions standards. The “defeat device” allows vehicles to pass the EPA’s test procedures and actually spews up to 40 times the reported emissions. The “cheating” software has been installed in 11 million cars globally.
Thanks to years of advertising by the auto industry there is hardly another consumer purchase more emotional than an automobile. To a greater or lesser degree your car announces to the world something about you personally, if not who you actually are, maybe who you want to be, or where you’re at right now in your life. It advertises your socioeconomic position and maybe even what you value. Among these values are safety and environmental responsibility. Automakers have spent untold millions of dollars to sell the public on these various attributes and have built massive databases to categorize us accordingly. In my mind VW has positioned themselves as attractively designed, well engineered, fuel efficient and environmentally friendly vehicles at a moderate price. The question is why would a company like Volkswagen risk the very essence of who they are, through a massive cheating scandal that will likely cost them tens of billions of dollars and may possibly bankrupt the company? The answer of course is greed.
How can a company overcome this level of dishonesty? Most of the people I know spend weeks sometimes months or longer researching their auto purchase preferences, comparing minor details of performance which includes safety, fuel efficiency and fuel emissions. When a company makes the claim that they have superior emissions standards they attract more consumers for whom this is a priority. This results in more sales and greater profits. But when the claim is a lie, and in this case involves deception it is criminal. It is not just an oversight, overstatement or poetic license it is criminal. They have promised their customers a specific standard of performance then actually designed a system by which the buyer and the regulating authority would be deceived into thinking it is something other than the reality. It is stealing it is out-and-out theft.
Current reports suggest that VW will offer an aftermarket device or “fix” that will bring the performance of certain vehicles closer to their original claim. Why did they not do this to begin with? People do not want their car “fixed” they want what they were originally promised. Most of all they don’t want to be deceived. In this case every consumer involved should have the right to return their vehicle for a complete refund of the original purchase price plus damages for the inconvenience involved. The company should be required to pay fines in relation to the amount of damage they have done to the environment relative to their environmental claims; they should pay a severe penalty for false advertising; and those who had firsthand knowledge of this criminal scheme should be held personally responsible and subject to criminal liability to both consumers and shareholders who have been affected.
The problem in these cases is that corporate representatives, who have a fiduciary duty to do the right thing, take chances like this because the penalties are seldom substantial enough to deter them from making an attempt to get away with it. Because of the very size of the organization is can be difficult to ascribe blame. It is a giant shell game. There is seldom any personal accountability and the public is all too often willing to forgive and forget because the company is seen as “too big to fail”. I think to some degree we have also become used to being lied to and being cheated by massive multi-national interests including “big auto” and their cousin “big oil”.
It will be interesting to see who is actually looking out for the consumer in this instance and how VW will fare. This will likely be a sizeable financial hit to the company and their investors. One thing is for sure, the reputation VW has spent years to build will never be the same. The one power consumers have is the power to choose where to spend their money. As other automakers are trying to position themselves as the environmentally conscious alternative of the future I think Volkswagen will have to be content to take a backseat for a while. For the near future they will be deservedly seen as untrustworthy and downright dishonest. Every purchase has an element of risk. Every transaction is something of a gamble. Nobody likes to sit at the table with a cheat.
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Reno Lovison is outreach chairman for Midwest Writers Assn and a marketing and communications professional in Chicago specializing in web video production.
