I guess Volkswagon's engineers aren't angels after all.
In what has been dubbed the "diesel dupe," German car giant, Volkswagen, has admitted cheating emissions tests in the US. According to the Environmental Protection Agency (EPA), some cars being sold in America had devices in diesel engines that could detect when the emissions were being tested and change the performance accordingly to improve results.
The company’s shares have already fallen by about 37% since news of the emissions scandal broke on September 18th. In addition to the cost of recalling 11 million cars, lawsuits from customers and government agencies are imminent. Credit Suisse estimates that the total cost to the company could hit 78 billion euros ($87 billion) in a worst case scenario. For a little prospective, that's about 60% more than the cost of the Deepwater Horizon spill to BP.
This Crisis is Especially Bad
Car companies face PR challenges over recalls all the time. Sometimes problems with automobiles actually cause accidents involving deaths. But those problems are generally caused by flaws in processes, design or materials. They are unfortunate, but not intended. Volkswagen is in a different boat. At some point, someone made the decision to add the defeat software. This was no accident or oversight. In order to get the performance they wanted and still pass American emissions standards, someone (or more likely, many people) decided to cheat on the test.
The other thing that sets this situation apart is that it will be very difficult to fix in a way that will make customers whole. Volkswagen has recalled the cars and will remove the offending software, but then what? Customers will be left with cars that don’t provide the same performance or gas mileage that they were sold. It is yet to be seen how Volkswagen will address this.
What We Can Learn
The situation is fluid and I’m sure there are more hurdles for VW to cross, but here are some early takeaways:Act is if everything you do will become public, because it will
I doubt that a PR person was in the room when the decision to cheat on emissions tests was made, but this is a good reminder that we should be reinforcing this message at every opportunity. Companies should operate under the guidance that if you wouldn’t do it in full view of the world, don’t do it. We need to do our best to make sure every decision maker understands this.When you’re caught, you’re caught
When first confronted with the EPA’s finding, Volkswagen’s strategy was to blame the test and the testers. The company offered many explanations from weather conditions to driving styles. It claimed there were technicalities that the researchers and regulators did not understand. This only spurred the EPA to dig deeper and caused the situation to drag out longer. In the case of wrongdoing, casting doubt for someone else to blame is a major mistake.Dribbling out information only keeps the crisis in the headlines
People have short memories. Let’s face it, we get worked up over one scandal only until we move on to the next. But sometimes organizations, VW included, decide it is better to release a little bit of information at a time. This makes matters worse, as Justin Joseph, associate professor of crisis communications and management at Boston University’s College of Communication told Marketwatch, “The biggest thing you’re starting to see is this trickling of information. Everything is kind of slow. It keeps the story on the front pages.”
It’s easy to play arm-chair-quarterback, but the truth is there is no PR guide on what to do when your organization is caught red-handed doing something that breaks the law, hurts the environment and leaves customers in the lurch. Every decision maker in the world should think about this situation and heed the wise words of Mr. Miyagi in The Karate Kid, “Best defense … don’t be there.”