Guest Blogger

VW shares collapsed over 20% in Frankfurt today as further revelations about their emissions testing scandal emerged. In fact, their US Chief Executive Michael Horn even went on the record to say that VW has “totally screwed up.”

US authorities have ordered the recall of half a million cars and the global figure for diesel vehicles that may be affected by fake emission results could be over eleven million vehicles. VW says that they have already put aside €6.5bn to cover the costs of the scandal, but the reality is that nobody knows how far the recall needs to go or how much the company may yet be fined.

The US Environmental Protection Agency (EPA) can fine VW up to $37,500 for each individual vehicle that fails a clean air test. With almost half a million cars sold in the US since 2008 that require these tests the potential for fines from the US alone extends far beyond the money that VW has set aside for contingencies.

At the heart of this scandal though is the issue of trust. Automobile manufacturers have often been hit by the requirement to recall vehicles because of safety problems. The “sticking accelerator pedal” issue Toyota faced in 2010 caused a recall that cost the company over $5bn – possibly the most expensive recall to date. However, customers trust that when a recall is launched for safety reasons there is a good reason for it and the brand rarely suffers negatively if the recall is handled well.

With VW though, the car software was deliberately coded so the vehicles would know if a test was being undertaken – most simply if the car was up on rollers in a lab rather than out on the road. In this case the engine management system was programmed to drastically reduce emissions. The reduction can only work temporarily, but it’s enough for the test cycle.

Someone in VW commissioned this software – it had to be approved by the management for it to ever end up deployed in production vehicles. The technical team had to design and implement it. At many different levels of the company, a code of silence has allowed them to install a system that cheats the emissions test.

At present, this scandal has focused on VW alone, however as many emissions experts have pointed out, the official figures and real figures for vehicles by other manufacturers are also extremely different. It would not surprise anyone if every major car manufacturer were gaming the system because they knew how the US emission tests are undertaken.

But although we can all guess at wider industry corruption, the fact remains that VW is the only company in the dock at present. Not only do they now need to manage the biggest car recall in history, but also they have to meet every customer and admit that they lied about the performance of their vehicles. Software was installed in every car with the specific aim of cheating the system.

This is such a blatant abuse of trust between a manufacturer and customer that I cannot see the head of VW in the US surviving for much longer in the automobile industry. And if it can be proven that orders to cheat came from the headquarters in Germany, then the brand toxicity will go further.

VW is such a large – and trusted – brand, but this episode is proving that even the most loved and iconic brands cannot abuse the trust of their customers. A global collapse in trust for the brand could be catastrophic and yet all this expense and brand damage could have been avoided just by not trying to game the system.

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