Volkswagen – another epic big brand fail

stephen2By Stephen Rhodes

When big brands fail, somehow we are shocked.

The latest is Volkswagen,  engulfed by a growing crisis over its attempt to make millions of diesel cars appear cleaner than they are.

The scandal broke Friday, when U.S. regulators said the German company had programmed some 500,000 vehicles to emit lower levels of harmful emissions in official tests than on the roads.

vwVolkswagen stunned investors Tuesday by admitting that the problem was much bigger than that: internal investigations had found significant discrepancies in 11 million vehicles worldwide.

It set aside 6.5 billion euros ($7.3 billion) to cover the cost of recalls and “efforts to win back the trust of our customers,” trashing its profit forecast for the year in the process.

Shares in Volkswagen plunged 18% Tuesday, after crashing 17% Monday. That means about a third of the value of the group has been wiped out in two days.

Volkswagen is not the first. There is the GM ignition switch problem, that caused 13 deaths and 10 years to recognize. Toyota’s airbag problems. Toyota ‘s $1.2 billion settlement with federal prosecutors over its handling of more than 4 million recalled cars because of unintended acceleration in 2009 and 2010.

The US Justice Department will investigate Volkswagen, so undoubtedly there is more bad news coming.

What are we to make of this other than greed is ever present in corporate America?

Brand loyalty is built on trust. Trust isn’t bought, it’s earned. Volkswagen has a tough row to hoe.

 

 

 

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