4 Things Makers Can Learn from the Volkswagen ScandalOctober 06, 2015 by Jennifer A. Diffley
What the fall of one of the world's most popular car companies can teach makers about maintaining a positive reputation.
Important lessons from a massive mistake.
If you've somehow managed to avoid the catastrophic and ongoing demise of Volkswagen in its emission scandal, here's a rundown: the massive car manufacturer invented a way to allow its diesel cars to meet US emissions standards only while the cars were undergoing emissions tests--the rest of the time, they were busy releasing huge amounts of toxins. The cheat device eventually came to light and Volkswagen has since been navigating the colossal fallout.
So what can makers learn from Volkswagen's mistakes? Plenty.
Martin Winterkorn, CEO of Volkswagen, having a headache over the scandal.
Cheating Never Pays
The diesel cars affected could detect when they were undergoing emissions testing and emit passing NOx levels. However, under normal driving conditions the cars emitted over 35 times the NOx allowable under US guidelines. Volkswagen ostensibly did this to increase the performance of its diesel cars and edge out the competition. But whatever money it made by augmenting performance levels will most definitely be annihilated by the costs of cheating. In other words, being dishonest in business dealings very rarely pays off in the long run. Volkswagen, in addition to recalling 11 million vehicles with cheat devices, must now prepare itself for an onslaught of lawsuits, hefty fines, dropping stock prices, and ravaged brand perception. The consequences far outweighed any positive gains. For makers, this means that sticking to the straight and narrow pays off far more than trying to skew the system.
A line of Volkswagens at the assembly plant.
Use Your Powers for Good
Even though Volkswagen's diesel emissions control systems were manipulated, the technology behind them is still pretty impressive. After all, this was a system that could detect when it was about to be tested, then conceal its cheating until the testing passed. That begs the question: if Volkswagen designed something that cool, why didn't it just make a car that actually had low emissions? Furthermore, it had to keep that technology secret. If Volkswagen wanted to increase positive public perception, it should have come out with cars that had low emissions, then bragged about it. Take another example: Samsung's benchmarking cheating. If Samsung had devoted the energy it invested in cheating into something more interesting and less nefarious, it would have had much more of an impact on its performance in the market.
A close-up of the TDI section involved in the scandal.
Your Brand is More Important than Your Product
The most damaging piece of the emissions scandal is how Volkswagen destroyed its reputation as a reliable car company. Even those customers who have only a vague understanding of the scandal will still have a negative association from here on out, and that negative association can determine whether a customer will visit a Volkswagen or a Toyota dealership. Worse, customers have a notoriously long memory when it comes to brand association: ask Enron. Even if Volkswagen releases the world's most phenomenal car next year, it's unlikely to win back the public trust. And it's hard to put a price tag on that.
A VW Tiguan, affected during the airbag recall.
Don't mess with the environment.
It would have been one thing if Volkswagen had been price gouging or releasing cars with faulty driveshafts, but Volkswagen's sin was even worse: it was essentially a giant middle finger to environmental regulations. That blatant disregard for the environment is unsettling because it points to a deeper amorality among its corporation--if a car manufacturer doesn't care about the quality of the air its customers breathe, why would it care about adhering to regulations on, say, airbags? Indeed, showcasing a disregard for the environment is one of the surest ways a company can ruin its brand for good.
So as the details of Volkswagen's indiscretions continue to emerge, makers can learn from the auto manufacturer's mistakes. After all, the best way to avoid mistakes is to see their consequences play out in real life.