So it is not long ago that the world was up in arms about VW and its ability to deliver emissions control test results that the authorities wanted. The scandal was embellished by the outrage of the media when they found out that VWs engineers had developed software that could detect if a vehicle was being tested and then reconfigure the engine management system to ensure that the test results fell into the acceptable limitations of the test!
Whether this was legal or illegal, I’ll leave to the various Governments around the world that demand restitution in the form of hefty fines. However what has really happened after the scandal was exposed?
Firstly, other members of the group, notably Audi and Porsche were tested and threatened if they didn’t tell all – there was a discussion about an Audi engineer being the person who originally developed the code that “enhanced” the test results. The CEO resigned and several other executives were stood down or pushed out across the group. It was expected that the company would have to spend billions to rectify the code and do a recall.
The value of used cars dropped for a while as no one wanted to buy a VW – the media were baying for blood and many people didn’t want to associate themselves with the brand.
Secondly, the scandal then spread to Japan – Mitsubishi were the next to admit that they too had enabled their cars to provide the result that the Government wanted, despite the Government not defining clearly (or testing) the test. It was doom and gloom in the industry.
Thirdly, the legal fraternity smelled blood – and lots of it. Like sharks, they circled the manufacturers and the buyers of the cars to set up class action law suits. One in Australia had VW, Audi and Skoda in their sights and all because VW had said that their cars were clean and eco-friendly. No car – even a Tesla – can claim to be truly clean as there are components and power sources that emit pollution at power source or at the time of manufacturing.
Then, as described above, Governments started to demand cash – fines for misleading the public. It’s bribery, pure and simple because those affected by the potential pollution or the owners of the cars never saw a cent. The monies went into the Government black hole coffers to be spent on anything but cleaning up the environment – in fact the billions paid to the US are clearly going nowhere near the environment now that Trump is installed at the White House!
But what of VW? How earth shattering was the scandal to them? Did they suffer (apart from the loss of key executives)? Did the brand suffer? The answer to most of those questions is a simple “no”. Yes they suffered a public relations disaster, trimmed their workforce by firing the top men and had the media and others bagging the brand. However, let’s look at their financials….
The scandal broke in 2015 after a particularly poor Quarter and this resulted in an even bigger loss the following Quarter. 2016 came along with three solidly profitable Quarters and a Q4 that was a smallish loss – certainly compared to the previous year. Within three months of the scandal, the company was back in profit and you only get profit by selling more product than the cost of manufacturing/supplying to the markets. Clearly buyers didn’t really care about the scandal, despite writing volumes of comments online about how hurt they were and how abused they felt by the brand.
And then we have Quarter 1 of 2017: a surge in sales (the buyers had clearly recovered from their temporary amnesia) and a massive $4.7Bn profit, their largest for many Quarters. All their brands seem to be selling like hotcakes, especially the premium, high profit models. A great time to have that boost in cash – it will fill the depleted coffers after giving so much away to Governments who failed to govern in the first place.
The moral of the story is simple: the first and second worlds are now accustomed to complaining about anything but within a few months forget why they were complaining and the flow of cash continues unabated. There were lessons learnt by VW and by a wide group of companies who saw the aftermath. No company is immune from a PR disaster, however the clever ones will have learned how to deal with consumers from the “dieselgate” scandal.