15. February 2017

How the clouds over Volkswagen have begun to lift

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When the Volkswagen emissions scandal first broke less than two years ago, few seriously believed it would finish off the German car giant. But it was reasonable to assume that it would take many years, if not decades, to fully recover. And yet, it was revealed this week that Volkswagen outsold Toyota in 2016, making it the world’s largest car manufacturer. While sales to China were crucial in Volkswagen seizing the crown, sales have also risen in Europe over the last 12 months.

Bigger companies than Volkswagen have collapsed before and consumers certainly haven’t lost our propensity to be shocked and appalled by corporate scandals. So, how has Volkswagen reached number one?

A number of other car producers have also been implicated in emissions scandal, so it is clear that Volkswagen is not the only company to break the rules. The work of Alva, our reputation tracking partner, shows that companies within a sector are bound together in how they are perceived. A scandal that affects one leading brand inevitably has an impact on others. Conversely, this does mean when one firm steps out of line, its reputation is at least partly protected by those of its competitors (assuming they are at a reasonable level).

A central reason for Volkswagen’s resilience is the fact that they had enormous amounts of reputational capital to spend after building an exceptionally strong and trusted brand before the scandal. Secondly, and more importantly, it has implemented an intelligent and disciplined PR strategy in the months since.

This was not always the case. Early on, Volkswagen’s senior team made the situation worse through poor communication, with initial information ranging from insufficient to downright untrue. Soon, however, it changed tack by admitting its wrongdoing, apologising and removing Martin Winterkorn as CEO. This gave it a foundation stone on which to rebuild its reputation.

Since then, the company has set up a team to monitor its integrity and launched an investigation into how the misconduct was allowed to happen. It is showing itself to be a company that admits its misdeeds, is eager to understand them, and is willing take clear steps to stop them happening again. This package of measures has been key to winning back trust.

Volkswagen still has a long way to go before it is clear of the reputational and legal damage of the crisis. But if it continues with its current strategy of contrition, transparency, self-examination and a determination not to repeat its misconduct, it stands a good chance of accelerating even further ahead of its competitors.

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