Volkswagen is struggling to respond after the U.S. Environmental Protection Agency (EPA) accused the company of installing “defeat device” software on its diesel-powered vehicles to cheat emissions tests. Essentially, EPA says the cars were programmed to turn on emissions equipment during tests, then turn the equipment back off when the testing was complete. As a result, although the cars performed better on the road, they produced as much as 40 times the allowed amount of pollutants. Latest reports say 11 million diesel cars worldwide are equipped with the software used to cheat on U.S. emissions tests.
Make no mistake, this is a self-inflicted crisis. Someone within Volkswagen decided to cheat so they could sell more cars. We don’t know yet who authorized this or even who knew about it. Before resigning, CEO Martin Winterkorn said they will get to the bottom of this and “rebuild trust,” but how reassuring is that coming from a CEO whose role in the scandal is clouded with suspicion?
Let’s face it, the company was caught red-handed violating its brand promise. Many consumers drive small cars like VWs because they want to minimize the environmental impact. Now, consumers feel doubly deceived. They worry about the environmental damage they’ve caused and about the resale value of their cars. Their anger is all over social media platforms.
It will take a while to comprehend the full impact of this crisis but it’s already being compared to the BP oil spill. The lawsuits started almost immediately, with a Seattle firm filing for class-action status within hours of EPA’s announcement. The stock price fell precipitously and the CEO resigned.
Winterkorn apologized for breaking “the trust of our customers and the public.” He unfortunately said they will “reverse the damage this has caused,” but of course they can’t reverse the environmental damage. Michael Horn, chief executive of the Volkswagen Group of America, was more direct. “Our company was dishonest, with the EPA and the California Air Resources board, and with all of you and in my German words, we have totally screwed up.” But apologies are not enough.
A good reputation is built by first doing the right thing. Too many crises can be traced to people and companies claiming to be something they’re not. When the truth comes out, their apologies fall on deaf ears because they have lost credibility.
Volkswagen can’t recover from this self-inflicted damage by saying the right thing. They have to actually do the right thing.