The Volkswagen Debacle
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The Volkswagen brand is in BIG trouble. If Volkswagen doesn’t handle this the right way, the brand will suffer irreparable harm. Could they could suffer a fate as bad as having to withdraw from the US market? I have friends who are religious about their Golf. The brand has die-hard fans, so I don’t think they will disappear from these shores. But a loss of operating capital due to lost sales will certainly have orthogonal effects on US and global operations. You still need dollars to support customer service, advertising, and other areas of the business. Not to mention a healthy investor ecosystem.
This is a US-based software problem if I have my facts correct. This could lead down to a front-line manager and a core set of software engineers that made a bad decision in order to solve the requirements of their directives. We may learn that there were no controls or regression procedures to catch this before the software made it into the wild, and it could easily be covered up by a very small team. (or could it? That is an unknown.) This is an engine team. They may have figured out a way to meet their performance objectives by cheating the system without their superiors finding out.
(I find it very hard to believe in a conspiracy theory of a whole chain of management.)
If that is the case, then the CEO and the management chain in the organization down to this manager might not have been in on it, but the world is going to hold all of them accountable.
The family squabbles at the top of VW/Porsche/Audi have been fierce, so this might play out in different dynamics. Matthias Muller has been after the CEO position for a long time. But I find it hard to believe he would orchestrate a conspiracy to oust Winterkorn. Sure, he’s going to take advantage of the situation.
The best case scenario (in this hypothetical example) would be to find out if the manager and his engineering staff did this with known intent, and if so, take the appropriate action and immediately start a very visible and timely conversation with the public on what will be fixed, when it will be fixed, and finally, recalling all of the US vehicles for the software patch. An additional gesture towards those owners will be required.
A software patch may cause decreased acceleration, or decreased fuel economy. Will that be a problem? It might be. But diesel fuel is still cheaper than gas, and the buyers of diesel cars may not have a problem with slower acceleration. These are more unknowns.
Will the rest of the world demand a fix? I’ve been to Asia and they seem to be more concerned with fuel economy and reliability than air pollution. Diesel fuel is readily available. Gasoline is not readily available or is very expensive outside of the USA.
It will be expensive. The brand will suffer and revenues will be lost. But how VW handles this going forward will have more effect on brand value than the actual problem that caused this fiasco.
© Mark Travis – All Rights Reserved
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