Volkswagen Values

Der Speigel puts the issue plainly: Is Volkswagen committing suicide?

How can the iconic automaker restore its position?

The Volkswagen problem and its solution are a matter of values.

From Watergate to Winterkorn

In his departure, CEO Martin Winterkorn declared, “I did nothing wrong.”

Winterkorn was disclaiming moral and legal accountability for the installation of software intended to defeat emissions testing. The result was that millions of “clean diesel” vehicles were polluting far beyond their allowable amounts.

Winterkorn’s defense is revealing. He had driven Volkswagen to surpass Toyota as the leading global automaker. Mere months after having achieved this milestone, the malfeasance was discovered.

As the facts emerge, it may be that Winterkorn’s leadership failure is consistent with that of President Richard Nixon. Nixon, too, was not involved in the specific skullduggery that set off the scandal. No one has credibly suggested that he conceived or ordered the break-in at Democratic National Committee headquarters in June 1972.

Nixon’s failure was in driving his organization toward a historic victory in the 1972 election, with diminished attention to ethical constraints. Almost immediately after his landslide reelection, Nixon’s Watergate nightmare would rise inexorably, destroying his administration.

Values Create Value

Volkswagen presented its “clean diesel” vehicles as consistent with the values of consumers who seek to advance their values through their purchases. Cultivating an image we now see as “greenwashing,” VW vehicles would also represent strong environmental standards as they were used.

The company had gone to considerable lengths to establish bona fides as an environmental leader. Just weeks prior to the disclosures of malfeasance, the Dow Jones Sustainability Index had named VW as “best in class.” In the wake of the scandal, the VW was removed from the prestigious corporate sustainability rankings.

As discussed in Serve to Lead, the value proposition, from the evaluation of the purchaser, has thereby changed. Now, the VW case will take this in new directions. What is the appropriate compensation? Will VW argue that it should only be liable for technical fixes? Will the auto giant offer pro-rata refunds based on length of ownership? Or, in acknowledgment of its failure to fulfill the complete value proposition of environmentally sensitive purchasers, will VW offer refunds of the entire purchase price?

Will shareholders have corresponding claims? Many doubtless relied on the company’s reputation and representations. Environmental stewardship was, as the company urged, a key part of its market value. So, too, their failure—perhaps, their fraud—consumed staggering market value.