VW response can be model for crisis-hit firms

By Wang Xiaonan Source:Global Times Published: 2015-10-7 22:38:01

Illustration: Liu Rui/GT



It has been over a week since the US Environmental Protection Agency (EPA) revealed that German automobile giant Volkswagen cheated on emissions tests.

Volkswagen startled not only the whole auto industry but also the international community at large by fitting deceptive software in engines of its diesel-powered vehicles to trumpet a low carbon footprint while ensuring high mileage and superior performance. The unfolding incident has plunged the 78-year-old automaker into an unprecedented trust crisis among its customers and tarnished the established reputation of Germany's manufacturing industry. Despite its name meaning the "people's car," the world's second biggest carmaker has fooled the people.

Apart from harsh criticism from mainstream media outlets, the reaction online has been fierce, expressing disappointment with Volkswagen. "I'm really upset," a Passat diesel user in the US complained. She felt "jilted" upon learning Volkswagen might spew 1 million more tons of hazardous pollution into the air every year.

"I will probably NEVER buy another. #BoycottVW Shame on you," said a veteran owner who has been loyal to the brand for more than 40 years.

Given Beijing's concern that diesel engines will further aggravate the already intractable pollution situation, Volkswagen has exported few diesel-powered cars to its largest single market. Nonetheless, Chinese Net users have also followed closely the progress of the fiasco.

Some take delight in seeing the collapse of a German miracle while others urge Chinese automakers to reflect on the quality and supervisory systems of their products. There are those who apply nationalist or conspiracy theories.

However, besides focusing on Volkswagen's plummeting stock price and attempts to cheat the system, we should take a holistic view of the scandal. For instance, we can pay attention to how the automaker itself, the German government and the country's media outlets handle it, which will be of greater practical value to China's emerging auto industry.

Volkswagen gave a swift response just two days after the "diesel dupe" broke. The German government immediately launched an investigation into the rigged diesel emissions test as well as into whether other auto makers are doing similar tricks. The reasonable and transparent approach is praiseworthy and helps prevent the incident growing worse. 

Volkswagen has also adopted a proactive attitude toward mitigating the negative influence of the fallout. Within five days, it recalled nearly 500,000 diesel cars from the US market, set aside around $7.3 billion to cover the cost, and accepted a future fine from the US EPA, likely to be as high as $18 billion.

In addition, though the scandal has harmed the image of "Made in Germany" and caused irreparable pain to the whole country, Germany's media outlets are still scolding the auto giant rather than trying petulantly to defend it in national solidarity.

A leading German newspaper called the scandal the "most expensive act of stupidity in the history of the car industry." One of the German daily Bild's columnists said that the slogan "made in Germany" is in an "extreme danger."

Even the conservative Frankfurter Allgemeine Zeitung asked with a sour tone in a recent editorial why the idea of consumer protection always came from the US authorities rather than Germany itself. "Siemens' slush funds, Deutsche Bank's swindles on pretty much every market in the world, Volkswagen's huge fraud and even the scandal over Qatar's winning bid to host the World Cup would never have come to light or been prosecuted without investigators from the US," said the newspaper.

Such frank, vigorous and resolute responses are worthy of note, and provide a solid model for business administration and crisis management.

No company or government is perfect. Everyone may commit mistakes, whether intentionally or unintentionally. How to tackle the blunders is key to preventing them from turning into a catastrophe. In particular, it is not easy for global corporations like Volkswagen to properly deal with their wrongdoings. It takes courage and wisdom. Compared with other shocking scandals over the past few years, notably the Enron incident that eventually led the US energy giant to bankruptcy, Volkswagen has made a much more sincere and prompt response.

Amid incredibly fast development, Chinese enterprises are likely to blunder, especially when exposed to a wide spectrum of social ills that are inevitable during their dramatic expansion. Therefore, how to cope with crisis is a must-learn for all firms. Today, the fate of a company lies in how it handles its slips when it can't completely eradicate quality or supervision loopholes. If companies fail to treat customers with honesty and sincerity, then they are heading for a fall no matter how big they are.

The author is a Beijing-based freelance writer. opinion@globaltimes.com.cn



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