It may have rocked VW, but what did it re­ally do to the com­pany's bot­tom line?

Wheels (Australia) - - Contents - ALEX RAE

UN­DER THE IRON-FIST rule of CEO Martin Win­terkorn, Volk­swa­gen, the world’s largest car maker, had tun­nel vi­sion. Diesels were the fu­ture, it would do any­thing to crack the US diesel mar­ket and be the dom­i­nant Euro­pean player within it, and it would take a watch­ing brief be­fore in­vest­ing in per­ceived mar­ginal ideas like elec­tric mo­bil­ity and au­ton­o­mous cars. The com­pany was not in­no­va­tive but it was mo­ti­vated, al­beit by flawed rea­son­ing.

But a black swan landed and blew apart the German es­tab­lish­ment. VW’S clean diesel cam­paign was a lie. It had duped cus­tomers into think­ing that its diesel-pow­ered cars were green when they were brown. In Septem­ber 2015 it was re­vealed that VW had en­gi­neered soft­ware to de­tect when gov­ern­ment bod­ies were test­ing ve­hi­cles and switch to a ‘clean mode’ that was fleet­ing dur­ing real-world driv­ing. It dam­aged VW’S rep­u­ta­tion in the US and sales plum­meted nearly five per­cent in 2015 and 7.6 per­cent fur­ther the year af­ter. Deal­er­ships sacked staff and ques­tioned the brand’s vi­a­bil­ity.

In Aus­tralia, from a boom­ing in­crease of 10 per­cent in 2015 – even fac­tor­ing in a slow­down af­ter the Septem­ber bomb­shell – sales in 2016 fell by more than six per­cent. Europe, Wolfs­burg’s strong­hold, slipped from a six per­cent in­crease through 2015 to flat­line in 2016.

The cul­ture in­side the com­pany that led up to its fall from grace was like “North Korea with­out the labour camps”, wrote Europe’s largest weekly news mag­a­zine, Der Spiegel. Win­terkorn was a ruth­less leader who saw diesel as the fu­ture and was not to be ques­tioned. But in the wake of Diesel­gate, jus­tice was served. Win­terkorn re­signed, and ex­ec­u­tives have since been crim­i­nally charged. Sales were in free fall; the com­pany was be­ing pulled apart from the in­side out. So what hap­pened next is noth­ing short of a mir­a­cle. Turn­ing its at­ten­tion away from diesel, VW piv­oted from ob­server of elec­tric and au­ton­o­mous mo­bil­ity to an in­dus­try leader. Volk­swa­gen pledged that its VW, Skoda, Seat and Audi brands would launch 27 elec­tric ve­hi­cles by 2022 – re­mark­able from the com­pany that took 13 years even to catch up with Toy­ota’s Prius hy­brid tech­nol­ogy.

“In An­gela Merkel’s Ger­many, there is a clear mes­sage that its auto in­dus­try is too im­por­tant to let it suf­fer from this,” John Paul Mac­duffie, the di­rec­tor of the Pro­gram on Ve­hi­cle Mo­bil­ity In­no­va­tion at the Univer­sity of Penn­syl­va­nia’s Wharton busi­ness school, said. “And [it says] to Volk­swa­gen, ‘We’re not go­ing to cover this up. We’re go­ing to push you to re­ha­bil­i­tate your rep­u­ta­tion’.”

“It makes them look like they’re clean­ing up their act, leav­ing the Diesel­gate em­bar­rass­ment be­hind them” Pro­fes­sor John Paul Mac­duffie

Since the rapid de­cline in sales and con­sumer con­fi­dence be­gin­ning in late 2015, the brand has re­cov­ered. Sales in Europe in 2018 were up two per­cent. In the US, sales grew by more than five per­cent in 2017 and four per­cent in 2018. In­cred­i­bly, Volk­swa­gen bucked Aus­tralia’s fall­ing new-car mar­ket in 2017 by in­creas­ing sales 2.5 per­cent, and last year, in an­other bear­ish mar­ket for Oz, it slipped by just over two per­cent – health­ier than some topselling brands.

Roy Morgan’s 2018 con­sumer con­fi­dence poll brought home the fact that Aus­tralians had given the German an­other go. Volk­swa­gen emerged as the brand that cus­tomers were most likely to stay with for their next pur­chase, ahead of the likes of Toy­ota and Mazda.

There has been a seis­mic shift in cul­ture at Volk­swa­gen, and Pro­fes­sor Mac­duffie says it was the sud­den turn to elec­tri­fi­ca­tion and au­ton­o­mous mo­bil­ity that left Diesel­gate in a for­get­table wake. Not that it’s a smoke­screen. Volk­swa­gen is in­vest­ing (de­spite more than US$30 bil­lion in emis­sions cheat­ing fines thus far) and de­liv­er­ing on its elec­tric ve­hi­cle prom­ise. It’s a new era, ben­e­fit­ing the en­vi­ron­ment, con­sumers and the in­dus­try as a whole, and aris­ing only be­cause of the events that un­folded in Septem­ber 2015.

“It makes them look like they’re clean­ing up their act, leav­ing the Diesel­gate em­bar­rass­ment be­hind them and pi­o­neer­ing this new clean tech­nol­ogy,” Pro­fes­sor Mac­duffie said.

“Volk­swa­gen has had a shock to its strat­egy, and to its cul­ture.”

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.