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VW faces grim future with Winterkorn’s exit

Updated on: Sep 24, 2015
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German carmaker is in for a long haul ahead to get its house in order

Martin Winterkorn would have ideally liked to bow out in style. For a man who steered Volkswagen to the top slot in global car sales just a couple of months ago, the rapid fall from grace was completely unexpected.

Earlier this year, he had successfully weathered another storm in the form of former Chairman, Ferdinand Piech who was keen on having him ousted but ended up exiting instead. However, the emissions scandal in the US had gathered such monstrous proportions that Winterkorn really had no choice but to step down as CEO on Wednesday.

Tough road ahead The Executive Committee of the Supervisory Board was succinct in its observations following this decision. It made known that it had “discussed in detail the manipulation of emissions data of Volkswagen Group diesel engines” and was taking this issue extremely seriously.

The Committee recognised not only the economic damage caused but also the loss of trust among customers worldwide. In its view, these incidents needed to be clarified with “great conviction” and the mistakes corrected. Necessary “decisive steps” would be taken to ensure a credible new beginning.

On Winterkorn’s offer to resign, the Committee noted that he had no knowledge of the manipulation of emissions data. Despite this, it had “tremendous respect” for his willingness to nevertheless assume responsibility. “Dr Winterkorn has made invaluable contributions to Volkswagen. The Executive Committee thanks him for his towering contributions in the past decades and willingness to take responsibility in this critical phase for the company,” it said.

It quickly struck an ominous note by expecting “further personnel consequences” in the next days.

Internal group investigations were continuing at “a high tempo” and all participants in these proceedings that had resulted in “harm for Volkswagen would be subject to the full consequences”.

The Committee said it was only well too aware that coming to terms with the “crisis of trust” would be a long-term task that needed a high degree of “consistency and thoroughness”. Yet, it would work on these tasks with the employees and Board.

“Volkswagen is a magnificent company that depends on the efforts of hundreds of thousands of people. We consider it our task that this company regains the trust of our customers in every respect,” it declared.

Abrupt ending For Winterkorn, it marks an abrupt end to an otherwise astonishing tenure at the top which saw VW snare up brands in a hurry as it raced away to the top. The list is staggering and includes Porsche, Audi, Bentley, Skoda and Lamborghini as well as Scania and MAN Trucks.

Winterkorn had set a clear agenda to see VW race ahead of Toyota and emerge the world’s top selling brand by 2018. He would have doubtless been enormously satisfied to see this happen in the first half of this calendar itself. A setback soon followed in the form of a divorce with Suzuki thanks to legal intervention. VW would not have been too happy with the outcome; this was perhaps the first time in ages that it was at the receiving end.

Yet, all this was nothing compared to the typhoon that blew away everything that Winterkorn had so carefully built over the years. The emissions fudging scandal has not only been a huge blow to VW’s image but could hurt other German counterparts like Daimler and BMW. It is also a setback to the overpowering aura of Germany which had been receiving kudos for its compassionate handling of the refugee crisis.

VW will seek solace from the fact that other carmakers have courted their share of controversy in the recent past. General Motors is coughing up to close to a billion dollars for faulty ignition switches while Honda was in the eye of a storm during the airbags recall. Like Winterkorn, its CEO at that point in time also stepped down.

Larger impact The problem with the VW issue, however, is that it adds up to deliberate fudging of data which is hardly becoming of a top global brand. The following days will see more skeletons tumbling out of the cupboard and it will be one long rebuilding exercise thereafter. Eventually, things will be back to normal as was the case with other automakers which used these experiences to create an even stronger ethical foundation for the future.

Does this episode have lessons for India’s own auto industry? If VW is facing the backlash for a fudging job that could have impacted human lives, our policymakers need to seriously introspect on this subject. Some of them may have sneered at the Global New Car Assessment Programme’s verdict on car models deemed unsafe and insisted that it was a motivated campaign. Yet, there is no running away from the fact that India heads the global list of road accidents which kill nearly 150,000 people every year.

As the country heads out to becoming the world’s third largest producer of cars by 2020, this drive will need to go hand in hand with protecting human lives. India could be serious about its emissions roadmap but policies on road safety and their implementation are just not adequate enough. If this apathy continues, it could end up paying a costly price. Policymakers would do well to use the VW saga as a wakeup call.

Published on January 22, 2018

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