retail news in context, analysis with attitude

by Kevin Coupe

So, let me see if I have this straight...

Volkswagen has admitted - under duress - that about 11 million of its diesel automobiles were equipped with some piece of software that essentially allowed the cars to cheat on their emissions tests - meaning that cars they claimed to have "clean diesel" technology weren't nearly as clean as claimed.

We all know that auto companies lie about miles-per-gallon ... but emissions? Horrors!

Most of the cars probably were sold in Europe, but about 10 percent of them may be in the US ... where the emissions regulations are a lot stricter than in Europe. It also so happens that while the US is the world's second biggest car market, it is a place where Volkswagen is woefully under-represented ... and a place where the company had high hopes of growing sales, profits and market share.

Good luck with that...

I also gather that Volkswagen CEO Martin Winterkorn has pretty much denied any responsibility for the deception; the New York Times writes that he says it "was a result of 'the grave errors of very few' employees, and promised to cooperate with officials on a 'ruthless examination' of how vehicles were programmed to evade emissions tests." Of course, the Times also writes that Winterkorn has a "reputation for delving deeply into the minutiae of automobile design and construction," and became CEO two years before the software apparently was installed in the cars.

Winterkorn reportedly is scheduled to meet with the top folks at Porsche Holding, which owns the majority of Volkswagen, today. It probably will not be a pleasant meeting.

If I understand the story correctly, Volkswagen is saying it is putting aside about $7.3 billion (US) to upgrade the cars that were deceiving the emissions testers, and while that's a lot of money - half the company's annual profit - I have to believe that it won't be enough to defend itself from the inevitable lawsuits and settle with angry car owners and shareholders.

The Los Angeles Times this morning writes that "the federal government paid out as much as $51 million in green car subsidies for Volkswagen diesel vehicles based on falsified pollution test results, according to a Times analysis of the federal incentives." Y'think maybe there will be some fines coming down the pike?

It seems to me that there are certain sure things about the Volkswagen situation.

There will be firings. There will be investigations. There will be lawsuits. And more lawsuits. There will be an enormous impact on the company's image. And profits.

Volkswagen, it seems to me, has done nothing less than put all of its brand equity at risk by making stupid, irresponsible, short-term and small-minded decisions.

Perhaps they'll learn, too late, the lesson from Jurassic Park ... that just because you can do something doesn't mean you should do something.

And maybe they'll even change their slogan.

It used to be "Das Auto."

Now, it'll be "Das Arschlöchers."
KC's View: