Volkswagen may be in worse shape than BP after Gulf spill

No one has died, and thousands of miles of coastline has not been polluted in black oil, but the widening emissions scandal at Volkswagen will be harder to fix than either the deadly ignition problems at GM or the massive BP oil spill, wrote BNN News Sept. 25, in a story quoting Canadian marketing expert Alan Middleton, marketing professor at the Schulich School of Business at York University and executive director of the Schulich ExecEd.

Volkswagen has admitted to installing so-called “defeat devices” in some diesel models to cheat emission standards testing. That blatant dishonesty of the act has tarnished the tarnished “Made in Germany” moniker that once stood for engineering excellence, reliability, and quality, says Middleton.

“I don’t think it’s just Volkswagen. It’s the whole idea of German reliability, and German engineering, and trust,” he said. “[German Chancellor Angela] Merkel clearly recognizes that “Made in Germany” is associated with this in some way,” he said.

The Volkswagen situation may even be worse than the 2010 Deepwater Horizon oil spill in the Gulf of Mexico, says Middleton. BP spent billions working to remedy the situation and quell angry public sentiment. Volkswagen has already set aside a US $7.3-billion war chest to cover fines and lawsuits. But unlike BP’s oil, there are many alternatives to buying a Volkswagen, he says.

Now that the company has admitted to the deception, drivers will be suspicious of everything about the Volkswagen brand, says Middleton. “It’s not the fact that a few people bought diesel cars have been misled by the company in this specific event, it’s what else I can’t trust about their engineering and what they say. That’s the devising part about this one,” he says.

Volkswagen’s greater umbrella of brands is at risk as well; particularly Audi, SEAT, and Škoda vehicles that share the majority of their underpinning with VW badged cars.

Middleton says Volkswagen has about 30 days to develop a plan that will stem the consumer backlash and put anxious car dealers at ease. He says Volkswagen – which is lauded in the automotive world for its clever advertising – will then mount charm offensive on the public.

“I expect the advertising response to talk about what they are doing, and then gradually move to what I call the ‘assurance strategy.’ Talking about their strengths like gas mileage and safety,” said Middleton.

The scandal couldn’t have come at a worse time for Volkswagen. With South Korean offerings more closely rivalling German and Japanese products in the mid-to-upmarket segment, even minute details make a difference. Middleton estimates that buyers look seriously at 2.8 cars before making a decision.