Is the “Made in Germany” brand still a sign of quality? What does this scandal due to Volkswagen (VW) and its brand?
VOLKSWAGEN – DIESEL SCANDAL
Is the “Made in Germany” brand still a sign of quality? What does this scandal due to Volkswagen (VW) and its brand? Does the value diminish as a result? Can the brand be trusted?
Until recently the mighty Volkswagen brand symbolized German engineering prowess and reliability. But over a matter of a few short days, that has changed radically. A scandal over cheating on U.S. diesel emission tests has engulfed the company and many Germans worry it will have a domino effect on their businesses, eroding the cherished Made in Germany label. And the brand has lost a great deal of credibility among many consumers in the United States and they would rather go elsewhere.
Through their history lies the fact that Germany has always come across as being a champion of clarity and fairness, meanwhile accusing Italy, Greece and Spain of misconduct. Yet rarely taking their own share of blame for any misconduct on their part. . Now what are we to think?
Following a series of other blows to Germany’s reputation — from repeated delays in Berlin’s new airport to a string of financial misdeeds at flagship lender Deutsche Bank — Germany’s business image looks tainted. And it is being viewed quite skeptically, the trust has been lost. It’s the leadership as well.
Made in Germany has always stood for quality and trust. Now that trust is lost, not just in Germany, but in the United States and around the globe. No one could have imagined the scale of this and the damage it will cause for German industry will go on and on and take a long to recover from, if ever… This is just the tip of the iceberg. VW had been described as one of the crown jewels of German industry and they feel that its success must not be gambled away. The reality, however, is that VW has been caught deliberately misleading the U.S. environmental watchdog and U.S. consumers over emissions from its diesel engines.
The impact of such a scandal is especially great in Germany, Europe’s biggest economy, because of its reliance on exports which make up more than 45 percent of gross domestic product. The scandal and resulting impact is far from over. While it’s possible that there’s no evidence the government knew about the deception, though it was aware there could be deviations between emissions on the road and in the laboratory. But the matter is not just about jobs, market share or corporate and bureaucratic reputations.
Even if we don’t know how much the VW case will affect the German economy, the risk is high due to a reliance on exports. Germany’s auto industry accounts for roughly one in five jobs. It accounted for 17.9 percent of Germany’s 1.1 trillion euros in exported goods last year, according to Deutsche Bank, and has enjoyed above-average export growth since 2009.
Perhaps even more harmful in the long run, the Volkswagen scandal also comes at a time when Germany is trying to set an example for the rest of the world on lowering carbon emissions. Its ambitious policy of shifting away from carbon-based fuels to alternative energy like wind and solar has driven up costs for German business and consumers. “The biggest problem for VW is that the giant conglomerate has become ungovernable.
So it’s no surprise that as a result VW’s chief executive quickly stepped down once it was disclosed that t the company deceived regulators over emissions from its diesel cars. Even though he denies any wrong doing or any involvement in the scandal, I have a problem in believing his assertions. He had to know what was transpiring. But the effects on Germany are likely to play out for some time, even as it copes with a huge influx of migrants attracted by its reputation as Europe’s beacon of opportunity and as it continues to find its footing as an often-ambivalent global power.
Further, the timing puts Germany in an awkward spot ahead of the global climate conference in Paris in December, where it had hoped to hold out its transformation as an industrial power reliant on a lower-carbon energy system as a model to the world.
In the immediate aftermath, Germany’s leaders scrambled to distance themselves from the scandal and to mitigate the damage to the auto industry, which accounts for one in seven German jobs. The damage that a few people have caused for the firm and its workers is huge. In fact, it may be too late for that. Germany is very closely aligned with its auto industry. Indeed, the state of Lower Saxony, where Volkswagen is headquartered in Wolfsburg, owns about 20 percent of the company. Any governor of that state is deeply involved in the company’s affairs.
Highlighting the PR battle it faces, German television has been showing a frequently-aired U.S. television commercial in which VW not only boasts that it is the top diesel car brand in America, but also asks: “Isn’t it time for German engineering? “The scandal undermines VW’s whole push into clean diesel which has been the pillar of its efforts to develop environmentally-friendly technology, a strategy shared by other German carmakers BMW and Daimler.
Some experts say VW now needs to apply a strategy like Mercedes did after the 1997 ‘elk test’ when a Swedish motor magazine found Mercedes’ new A Class tended to flip over when undergoing an evasive maneuver test.
Yet this scandal is different to the “elk test” and other car recalls as it exposes not incompetence but a deliberate attempt to mislead.
Volkswagen needs a fresh start — also in terms of personnel. The company has admitted to rigging 11 million cars with sophisticated software to trick regulators into believing the vehicles were compliant with emissions standards. If this is true, what else could they be hiding? The company is setting aside $7.3 billion to pay for the expected cost of the scandal, a figure it acknowledged could change. But are they being honest about paying the cost, and will it increase?
The ongoing scandal involves upwards of 11 million vehicles around the world, and could theoretically cost VW billions of dollars in fines. Volkswagen is accused of installing software specifically designed to defeat and obscure emissions tests. The vehicles in question, all of them diesel-powered, would switch to a lean mode during the testing.
At any other time in the vehicle’s operation, however, the modified car or truck would emit anywhere from 10 to 40 times legal emissions levels. The E.P.A. revealed the scandal last week and VW has since halted sales of its diesel models here in the U.S.
Dealers have been ordered to stopped selling the vehicles involved in the scandal — which can emit harmful pollutants at rates of up to 40 times U.S. standards — until the problem can be fixed no matter how long it takes. Hence a greater loss in profits.