As I See It
VW crisis: are multi-nationals out of control?
For greedy bankers, now read car industry technicians who have come up with their own version of “playing the system.”
Volkswagen, the world’s biggest car maker, has been found guilty of installing “defeat devices” in certain models to falsify diesel emission figures.
It’s the car industry’s equivalent of foreign exchange fixing. A deliberate and pre-meditated move to rig the numbers.
And who is supposed to be keeping an eye on these avaricious executives and their compliant underlings? Answer: the companies themselves.
Individuals responsible for VW’s misdemeanour are still to be identified, but one thing is certain. Those at the top will be trying to cover their tracks.
So far, one scalp has been claimed by the regulators. Inevitably, the man at the top had to go and soon a portrait of ousted CEO Martin Winterkorn will hang in the world’s corporate hall of shame alongside those of Fred Goodwin (RBS), Dick Fuld (Lehman Brothers) and their like.
VW’s fall has been sudden and spectacular. In just one week its reputation has been trashed worldwide. New boss Matthias Mueller has pledged to restore it, but this is the mother of all crisis PR jobs. It will also mean spending a colossal sum on top of fines and other penalties expected to run into billions.
Can VW survive? The worry for the Germans is that the crisis which has wiped a third off its value will spread to consumers who will return the lack of trust by switching to other models.
Ironically, the company’s salvation may be similar to that which engulfed the banks – that its rivals are shown to have been up to the same tricks, leaving consumers with nowhere else to run.
In the meantime consumer groups are revving up for a battle with their own governments – including the British government – to investigate this affair and take action.
But what should the government do?
Just like too many other industries the “self-policing” model is deeply flawed. In the case of the VW outrage independent regulators must be introduced to ensure car makers cannot repeat their data fiddling.
The search for justice and compensation could ultimately find its way into the courts, another cost for VW to withstand.
What this episode has shown us is that multinational businesses are too powerful and too capable of abusing their own power. Banking, accountancy, pharmaceuticals, energy and now the car industry.
Without action being taken to rein in this abuse of power, the VW scandal won’t be the last.