How can VW recover from the emissions scandal?
The impact of the emissions revelations on Volkswagen are already being felt. Within days VW’s share price fell around a third and some were talking of a threat to the company's very existence. The cost has been estimated at up to $100m globally and sales fell considerably - 20% in the UK in December, for example - contributing to VW’s first quarterly losses in 15 years. It now seems likely VW will survive, but the firm’s reaction will be crucial to the direction this storied company will take for years to come.
Rebuilding consumer relationship after a crisis has three interlinked steps. Firstly, a brand needs to acknowledge the issue and take immediate actions. VW was open in the former but lacking in its response. Replacing the CEO with an internal figure was a mistake as he is still linked to the scandal and it confirms fears of the insularity of the company. VW needs to be very open, so appearing to be run by a group-wide mandarin class could prove inhibitive. The next action will be regarding recalls and compensation packages, which must be handled carefully. VW should beef up its customer support service considerably for at least the next year and also be sure to consider all complaints - even from those not affected - sincerely.
VW then needs to demonstrate that it is taking preventative steps against such things happening again. VW is a notoriously top-down company and internal reform is needed. Management changes, education and training should be enacted to demonstrate the company is taking a new direction.
Finally, Volkswagen must begin to rebuild their brand. I see this having two strands: the technological directions now chosen and also the brand's communications to the consumer.
VW Group invested heavily in diesel. Audi made the first diesel to win Le Mans and it was pushed as a green alternative to petrol due to lower CO2 emissions and better economy. Now, thanks to emissions revelations and other concerns about diesel, they need to focus on other options. Driverless cars are sure to be a major growth technology. Currently the lead has been taken by tech firms such as Google and Apple, although automobile manufacturers are investing heavily too. Despite the scandal, VW still has legitimacy and heritage as a car manufacturer which the tech firms never could. I believe that many consumers will be hesitant about the safety of (and perhaps even need for) the technology when presented by the likes of Google. VW should either take the lead amongst car makers or look to partner with a tech firm, bringing each other’s expertise together. A second direction they should take is investing in electric. So far the major player in electric cars has been the upstart Tesla, so again there is scope for a marquee automotive brand to make inroads. An interesting way for VW to get into the market would be to turn away from Le Mans (and certainly from suggestions it may buy Red Bull’s F1 team) and rather to sponsor Formula E. This would immediately demonstrate their determination to take a lead in the field. If a car dreamt up by the Nazi dictator can become the car of free love, then surely the car of emissions can become the car of a green future?
Finally, VW must seek to separate the brand from the scandal and reconnect with the consumer through its communications. I believe they need to remind everyone what made them one of the most admired car brand’s in the world. For this I would take inspiration from the marque’s name: "People's Automobile". It is the people - their customers - who VW have let down and it is now them who they should focus on. A car is central to someone’s identity and experiences, but it should be treated as the medium, not the result. If VW focuses on the consumer it will be able to recapture their support, but can also highlight key qualities their brand built up over eighty years such as understatedness and heritage. It is time to ‘Think Small’: simple, minimalist and, most importantly, honest.Â
