The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.
Sachin Mehta, MBA 2015-17, Vinod Gupta School of Management, IIT Kharagpur
What started in the US, immediately spread to the various countries throughout the world questioning the legitimacy of the Volkswagen Aktiengesellschaft (VW AG).
Last year in September, the Environmental Protection Agency (EPA) accused the car manufacturing giant Volkswagen AG of using defeat device in the cars to cheat the emission tests. The EPA’s findings have reported over 4,80,000 cars in the US only, which were found to be fitted with the sophisticated software used to cheat the test results. Martin Winterkorn, former CEO of VW AG accepted the allegations and apologized for breaking the trust of the customers. In one of the interviews he stated “We will do everything necessary to reverse the damage and win back your trust step by step.” Martin Winterkorn had to resign from the position after he lost the support of key shareholders. Matthias Mueller was appointed as the new CEO of the company shouldered with the responsibility of repairing the company’s reputation.
The VW will be able to recover the financial losses incurred but the flip-side is when car giant like Volkswagen can default on its values there is much more at stake apart from financial losses. One of the biggest challenges that the company faces is to rebuild the wider brand trust and win back the customer loyalty.
In the time since, the company is fighting back to build the trust but the struggle for building the reputation VW had before, will be a long one. Immediately after the scandal VW worked on a global strategy to fix the 11 million cars fitted with the deceptive software. In order to confront the scandal the company came up with the plan of developing hybrid and electric vehicles. Also, VW is planning to launch the next installment of its luxury sedan Phaeton as an electric-only vehicle. The company has planned to come up with an entirely new electric vehicle line in order to re-position their brand to make the VW as the people’s car.
Herbert Diess, VW division head quoted “The Volkswagen brand is re-positioning itself for the future. We are becoming more efficient, we are giving our product range and our core technologies a new focus, and we are creating room for forward-looking technologies by speeding up the efficiency program.”
The fact is bigger brands are resilient enough to fight back such disasters. However, it will take time to heal the damage that resulted because of – “Diesel Dupe”.