What VW Needs To Do To Survive Its Biggest Scandal

What VW Needs To Do To Survive Its Biggest Scandal

6:06pm Oct 09, 2015
Volkswagen board members Wolfgang Porsche (from left), Berthold Huber and Stephan Weil attend a news conference to announce Martin Winterkorn's decision to resign as Volkswagen CEO on Sept. 23, in Wolfsburg, Germany.
Volkswagen board members Wolfgang Porsche (from left), Berthold Huber and Stephan Weil attend a news conference to announce Martin Winterkorn's decision to resign as Volkswagen CEO on Sept. 23, in Wolfsburg, Germany.
Alexander Koerner / Getty Images
  • Volkswagen board members Wolfgang Porsche (from left), Berthold Huber and Stephan Weil attend a news conference to announce Martin Winterkorn's decision to resign as Volkswagen CEO on Sept. 23, in Wolfsburg, Germany.

    Volkswagen board members Wolfgang Porsche (from left), Berthold Huber and Stephan Weil attend a news conference to announce Martin Winterkorn's decision to resign as Volkswagen CEO on Sept. 23, in Wolfsburg, Germany.

    Alexander Koerner / Getty Images

  • "Herbie the Love Bug" and other vintage Volkswagens are lined up in 2005 in Santa Monica, Calif., as part of a celebration of VW's 50th anniversary in the U.S.

    "Herbie the Love Bug" and other vintage Volkswagens are lined up in 2005 in Santa Monica, Calif., as part of a celebration of VW's 50th anniversary in the U.S.

    Christian Petersen / Getty Images

American culture has long held a soft spot for Volkswagen. There was Herbie in the 1968 comedy The Love Bug. And, more recently, the chronically honking, classic VW bus featured in Little Miss Sunshine.

Volkswagen also cultivated its image as a progressive, countercultural icon in its advertising. There were the three elderly sisters who touted the merits of clean diesel. And its various ads talking up German engineering. But now, that's all turning against it.

"They were amazing commercials and they created this enthusiasm," says David Whitcomb of Waynesboro, Va., who bought so much into the company's ethos that he owns four Volkswagens. "They talked about driving for love and ... man, it's hard to talk that way right now."

In addition to its legal, regulatory and financial problems, Volkswagen has serious image problems. Revelations that it cheated on emissions tests and that its diesel engines aren't as clean as advertised are not sitting well with its customers. And now the carmaker is trying to navigate its way out of a damaged reputation.

"I think Volkswagen is playing a long-term game," says Eric Dezenhall, CEO of Dezenhall Resources, a crisis-management firm. He says VW has clearly put itself in a world of pain, but he says a comeback is still very likely.

"I think that if you evaluate how well a company is doing in mid-crisis, it's sort of like trying to figure out how well the patient is doing in mid-surgery," he says.

Earlier this week, VW's chairman warned that the scandal poses an existential threat. Yesterday, the company's new CEO warned employees of financial retrenchment; the company will pare back or delay nearly all planned investments. Meanwhile, VW's investigation is reportedly focusing on at least three top executives, who are among those who've been suspended.

And that trickle of bad news does not help, Dezenhall says. However, "to some degree, the drip-drip of allegation is a part of the process," he says.

One mistake companies often make is they try to seek the fastest path out of their public relations nightmare. But Dezenhall says the public does not take kindly to companies dealing with self-inflicted wounds trying to put a happy face on bad news.

"The crisis has to pass through the system," he says. "You've got to go through CEO firings, you have to go through lawsuits, you have to go through congressional hearings — these are all of the rituals that you have to survive."

So, going forward: Be honest. And, he says, focus on the substance. VW must successfully recall the cars, fix the problems and offer incentives to loyal customers. Those are not issues marketing alone can solve.

"It's not messaging and spend that are going to vindicate them," Dezenhall says.

Joan Schmit, a professor of risk management at the University of Wisconsin, Madison, says Volkswagen set itself up by touting its German engineering and environmentalist credibility in its various ad campaigns.

"That is one of the ironies of reputation — both development and maintenance — that, of course, we have to be who we say we are," she says. "And if it turns out that we are less than who we say we are, that's going to be damaging."

Schmit says VW has a long history and good reputation heading into this crisis. The company could still redeem itself. But, she says, it will take a very, very long time.

Copyright 2015 NPR. To see more, visit http://www.npr.org/.

Transcript

STEVE INSKEEP, HOST:

The new leadership at Volkswagen has to find some way to get the car back in drive. The company suffered a disastrous blow to its image in recent weeks. Its cheating on emissions tests was revealed. NPR's Yuki Noguchi asked experts how to fix the company's reputation.

YUKI NOGUCHI, BYLINE: For decades, American culture has had a soft spot for Volkswagen. Think of Herbie The Love Bug...

(SOUNDBITE OF FILM, "THE LOVE BUG")

UNIDENTIFIED ACTOR: (As character) Isn't that the scruffy little car we had in the shop?

NOGUCHI: Or the dysfunctional family taking a road trip in a chronically honking classic VW bus in "Little Miss Sunshine."

(SOUNDBITE OF FILM, "LITTLE MISS SUNSHINE")

GREG KINNEAR: (As Richard) It's stuck or something.

TONI COLLETTE: (As Sheryl) Try pulling it from here.

KINNEAR: (As Richard) Oh, jeez, I'm being pulled over. Everybody just pretend to be normal.

NOGUCHI: VW cultivates that progressive counterculture association in its advertising.

(SOUNDBITE OF AD)

UNIDENTIFIED MAN #1: Stop less. Go more.

UNIDENTIFIED MAN #2: The Passat TDI Clean Diesel, with up to 814 highway miles per tank, just one reason Volkswagen is the number one selling diesel car brand in America.

NOGUCHI: David Whitcomb bought into it, so much so the Waynesboro, Va. resident owns four Volkswagens.

DAVID WHITCOMB: They were amazing commercials, and they created this enthusiasm, and you - they talked about driving for love. And man, it's hard to talk that way right now.

NOGUCHI: Eric Dezenhall is CEO of Dezenhall Resources, a crisis management firm. He says VW has clearly put itself in a world of pain. But he says a comeback is still very likely.

ERIC DEZENHALL: I think Volkswagen is playing a long-term game, and I think that if you evaluate how well a company is doing in mid-crisis, it's sort of like trying to figure out how well a patient is doing in mid-surgery.

NOGUCHI: Earlier this week, VW's chairman warned the scandal poses an existential threat. Yesterday, the company's new CEO warned employees of financial retrenchment. The company will pare back or delay nearly all planned investments. Meanwhile, the company's investigation is reportedly focusing on at least three top executives who are among those who've been suspended. That trickle of bad news, Dezenhall says, does not help. But...

DEZENHALL: To some degree, the drip-drip of allegation is a part of the process.

NOGUCHI: Dezenhall says it's a mistake to seek a faster path out of the dumps. The public does not take kindly to companies dealing with self-inflicted wounds trying to put a happy face on bad news.

DEZENHALL: The crisis has to pass through the system. You've got to go through CEO firings. You have to go through lawsuits. You have to go through congressional hearings. And these are all of the rituals that you have to survive.

NOGUCHI: So going forward, be honest. And, he says, focus on the substance. VW must successfully recall the cars, fix the problems, and offer incentives to loyal customers. Those are not issues marketing alone can solve.

DEZENHALL: It's not messaging and spin that are going to vindicate them.

NOGUCHI: Joan Schmit is professor of risk management at the University of Wisconsin at Madison. She says Volkswagen set itself up by touting its German engineering and environmentalist credibility in its various ad campaigns.

JOAN SCHMIT: That is one of the ironies of reputation, both development and maintenance, that, of course, we have to be who we say we are. And if it turns out that we're less than who we say we are, that's going to be damaging.

NOGUCHI: Schmit says VW has a long history and good reputation heading into this crisis. The company could still redeem itself. But she says, it will take a very, very long time. Yuki Noguchi, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

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