As the Volkswagen emissions story continues to unfold, the scale of the damages and the scope of who stands to suffer and how continues to expand.
First some history – Making the argument that their diesel powered vehicle was eco-friendly without sacrificing power or efficiency, VW successfully wooed the green conscious consumers and met CEO Martin Winterkorn’s longstanding revenue goal by surpassing Toyota in becoming the world’s largest car manufacturer. Since his arrival from Audi eight years ago, Winterkorn has made his vision clear to all within the VW organization – beat Toyota.
CNN reported this week that, “The company was found to have falsified U.S. pollution tests on 500,000 diesel engine vehicles, by installing software ("defeat devices") to make them appear cleaner than they were when being tested. Once on the road, the cars would pump out as much as 40 times the allowed level of nitrogen oxides.” Half a million such vehicles have now been sold in the US. Another 5 million or more similarly altered VWs and Audis have been sold in Western Europe, and current worldwide estimates are running as high as 11 million affected vehicles.
Although Winterkorn denies having been aware of any wrong doing on his part, he resigned last week taking responsibility for the debacle. German prosecutors are currently investigating Winterkorn with rumors of fraud charges being brought against him. However, while it is possible that Winterkorn could be charged, found guilty and imprisoned, no amount of time behind bars could begin to measure up to the resultant damage to institutions and individuals.
Here is a brief summation of at least some of the persons negatively affected and how.
- Shareholders – corporate value now and in the future will be judged in part on how the market reacts to this news and what the actual financial cost turns out to be for recalls and penalties.
- Consumers – car owners are discovering that the car they are driving is not the car they thought they bought.
- Employees – any negative impact on sales now or in the future will threaten job security for VW employees and persons working in their supply chain.
- Dealerships – Any negative impact on sales translates very directly to dealer bottom lines and employee job security.
- Proud German Citizenry – Prior to this two words that were frequently married together with highly positive implications were “German Engineering”. That in fact is by many considered to be the “Brand slogan” of Germany.
- Anything and anyone that breathes – Tree hugger or not, one has to admit that 40 times the allowable level of unfavorable emissions cannot be a positive impact for the environment or those of us who breathe.
As my colleague, Tim Kincaid, pointed out to me, “If VW truly wanted to be superior to Toyota, perhaps they should have focused on lessons they could have learned from Toyota’s violation of consumer trust.”