Volkswagen's brand and comms crisis: where did it go wrong?

Volkswagen has got itself into deep trouble by first long ago using a software programme to adjust the running of the engine under test conditions to reduce emission of NO2 and other pollutants.

The issue affects 482,000 diesel cars sold in 2008 and this seemingly small technical problem has become catastrophic for the company.

It is facing up to $20bn+ in costs and damages and the company has already provisioned $6.5bn. Its share price has reduced by 30 per cent in the last two days alone losing investors $17bn, showing they believe that heavy penalties and losses are on the cards

The big question is how has this happened to such a global giant?

The Environmental Protection Agency (EPA) representation of the issue has been highly negative and aggressive, possibly overstating the discovery of a practice that might have been common to many manufacturers.

But since that discovery, Volkswagen has done nothing to explain or defend itself and has simply totally admitted liability without mitigation.

The CEO accepting responsibility is acceptable, however Volkswagen's tacit admission that it misrepresented itself without explanation is potentially very damaging in the face of the future litigation costs.

If the BP example is anything to go by, it is likely that both the government and other litigants are going to go after this foreign company.

BP paid out $54bn in costs and fines for the Deepwater Horizon spill. The two US operators and cement (the defective component) suppliers only had costs of $400m for Transocean and $1.1bn for the very well connected Halliburton. An anti-foreign company bias seems to be evident.

The same seems to be true with fines to financial institutions with foreign banks seemingly being fined more heavily and frequently than domestic ones.

There are a number of recommendations when dealing with bad press which Volkswagen should and failed to follow.

You must disclose fully what you know and don't know and speak to your core audience, customers typically, but in this case litigators too.

Do not fan the fire or create gaps that will feed the news and aim to be forceful and control the news flow to the best of you ability. You must fight all misrepresentation and be proud and hold you head high when defending the company.

VW has certainly not followed the rules. The CEO admitted liability and that it had broken the consumer trust. This is probably on a par to Gerald Ratner's infamous "because it is crap" comment. The CEO in effect said that VW lies to its customers.

The company is now trying to sell a high-end premium product to the Japanese but the statement is not aligned to that.

After the CEO statement VW has allowed the media to increasingly blow up the story; it has not controlled it.

As well as affecting 11 million vehicles, it is undermining German engineering and destroying the credibility of all diesel cars.

It is ironic in fact that VW makes some of the cleanest diesel cars of all producers but that VW itself is not saying anything of the sort but allowing the most negative statements (some untrue) to go totally unchallenged.

Maybe what it did was vile and underhand, but I for one do not believe that and believe it simply "managed" emissions testing a little bit more aggressively than others and might have crossed a line.

But it has cost investors dearly and will probably cost the CEO, and probably others, their job.

Jacques de Cock is a faculty member at the London School of Marketing

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