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A Brand Still at Risk: Volkswagen – The Aftermath

by Richard McGourty on

When the news broke on Volkswagen’s use of software to deceive emissions testing, we wondered about the potential impact of the crisis on such an established company and the implications for Volkswagen’s leadership. We commented, as did Danny Hakim of the New York Times, that the crisis at Volkswagen and the company’s response will be studied in the future.

Recently, the New York Times published a story about how Volkswagen is responding to the crisis and the news is not good.

The article reported that a recent Harris Poll of American’s attitudes toward the 100 most visible companies ranked Volkswagen dead last. The reasons for this begin with the admission of intentional cheating on tailpipe emissions tests, but that injury to the brand has been compounded by poor communication about the deception.

This is somewhat surprising because Volkswagen had previously been thought of as good at managing its image. Instead, there have been misstatements, half-admissions, complete admissions and halting efforts to put things right with customers.

Volkswagen appears to be circling the wagons. They have hired three public relations firms – one in the US, one in Britain and one in Germany – to assist their current PR firm, Edelman, which is on retainer. In addition they have retained Jones Day, a law firm, to provide counsel on how to handle the disclosure of documents to the government which may have an interest in filing criminal charges.

Volkswagen’s problems are playing out on in many countries and on several continents at once. There is no question that the challenges to the company are complex and still evolving.

VolkswagonDoes Volkswagen face a public relations problem? Obviously, yes.

Does Volkswagen face legal problems? Potentially, yes.

Will Volkswagen have financial problems in 2016 and beyond? Yes.

It might be tempting to predict the demise of a famous brand. We think that would be premature. The company may still be able to dig its way out of these difficulties. None of these problems argue against the ability of the company to manufacture high quality vehicles. Volkswagen’s basic operations are still intact.

We remain curious about how this all got started. The first explanation that was put forward by Martin Winterkorn, the chief executive – that the illicit software was due to “the mistakes of a few people” – has since been abandoned. That implies the existence of a systemic problem. Until that problem is identified and remedied, Volkswagen’s credibility remains in doubt despite the efforts of public relations experts.

Getting to the root cause of a problem this massive may not be easy. However, it is the kind of challenge leaders take on.

What do you think of Volkswagen’s response to the crisis? Leave us your thoughts in the comments.

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