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Expert Comment: Volkswagen – a perfect storm, or something else?

Volkswagen logo Thursday 24 September 2015

Tony Bradley, Tutor in Social Enterprise & Innovation, discusses the impact of the Volkswagen emissions scandal.

Last week saw the publication of a major new book on business and society, by the former CEO of British Petroleum Lord Browne. John Browne’s Connect – how companies succeed by engaging radically with society is the latest cri de Coeur from the business establishment. The former oil man, who is credited with turning BP into a global brand - and who left before Deepwater Horizon! - makes the plea for companies and corporations to clean-up, transparently. Clearly, it came a little too late for Volkswagen.

The question that is exercising the minds of so many is, ‘why did the German uber-manufacturer take such a risk in seeking to dishonestly cheat US emissions testing?’ If you go onto the VW UK website today, it continues to run its consumer marketing campaign entitled “build your perfect car”. Maybe not! Even so, there could be some other high octane issues that are fuelling the current troubles at Germany’s iconic brand, although no-one is suggesting that Lewis’ surprise exit from the Singapore GP on Sunday meant that Mercedes had caught the contagion!

Things have been stalling in the VW Boardroom for some months. In early April, the former Chairman and patriarch of the car-maker’s modern transformation Ferdinand Piech (78) surprisingly stood down, in a top ‘gear change’. He cited irreconcilable differences with his CEO Dr Martin Winterkorn, widely regarded as Piech’s long-term adopted son. Since then, there have been undercurrents of discontent between the Supervisory and Management Boards (German industry remains a model of democratic governance, with Labour representatives enshrined as 50 per cent overseers by law), each siding with one or other protagonist. The glacial statement about Winterkorn’s departure from VW, by the Chair of the Supervisory Board yesterday, epitomised this.

Apparently, none of the senior Board knew what was going-on under the bonnet in the US. This has been a very tricky market for European diesel engines to accelerate into. Not only are US allowable emissions 40 per cent of those in Europe, diesel engines account for less than 1 per cent, compared to 50 per cent in the comparable territories. The US is a very hard market to convert – catalytic or otherwise – and required special measures, by the digi-tech team at VW. These have raised a host of business issues.

As the head of the Dax (Germany’s blue-chip stock market) commented last night, the future for the car industry rests on software programmers, more than on engine efficiency. Vorsprung durch technik (Audi’s slogan, everywhere, except the US, which is “Truth in Engineering” – they don’t like foreign language strap-lines) is beginning to mean something new. Globalisation of production and markets are becoming equally matched by the speed of communication about ethical problems, movements on stock markets and the potential for reputational damage. Corporate engineering is as much about governance, policing internal teams and getting the message right as it is about having the correct engine filters in place.

Of course, it is highly unlikely that VW was acting alone. This is the motor industry’s Libor moment, with the German giant taking the role of Barclays – primus inter pares to hang their heads in shame.  So, this storm over rigging emissions test data may turn out to be something quite different. It may be the point at which German industry takes a European lead in answering the call that John Browne makes in Connect.

“I am acutely aware” says Browne, “that when I succeeded in businesses it was so often because I engaged effectively and sustainably with the external world.  When I failed it was usually because I got this wrong.” (2015, p15) 

VW now has the opportunity to demonstrate ‘connected leadership’ that places European corporations on a new road towards moral vitality. Failure to do so could be catastrophic for so many of our industries. It may be too late for Winterkorn and, even VW, in the short term. But, there is a bigger prize – that of gaining (not re-gaining) the trust of consumers across our Continent.  To fail to do so could see the VW moment as yet another tipping-point on the road to the emergence of an alternative ‘green capitalism’. We aren’t there yet, but there is a sharp bend up ahead.  What the subsequent straight looks like – well, time will tell.

Reference

Browne, J. (with Nuttall, R. and Stadlen, T.). 2015. Connect – how companies succeed by engaging radically with society.  London: W H Allen.

Picture: By Narcisvidal (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

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