VW could become a far bigger crisis for Merkel than Pig-Gate or Coke-Gate are for Cameron
Posted on 23 September 2015 | 2:09pm
I am not really a car person but I drive a Volkswagen. It is a strong brand. It says reliable. It says German. Which emphasises reliable. And, translated, it means People’s Car, which is kind of nice.
That brand has taken many years to build, the reputation decades to cement. Now all of that is at risk. VW is in crisis, and that has implications for the broader German and therefore European economy as well as for the broader automotive industry.
My book WINNERS has a chapter on crisis management and spells out that the first rule of crisis management is that most of the things that we call crises are not crises at all. They are problems, setbacks, challenges. My definition of crisis is ‘an event or situation that threatens to overwhelm you unless the right decisions are taken.’ It is why in ten years in Downing Street with Tony Blair I reckon we had five maybe six full blown crises, no more.
The second part of the definition is important – it can remain a ‘potential’ crisis ‘provided the right decisions are taken’. But it may be the only decision that matters in this is the one that has already been taken – the one to deceive about diesel emissions. The US having been the first country clearly to establish the veracity of long-running rumours of dirty dealing, other governments are bound to follow suit with the kind of investigations and punishments that could present the company with an existential threat. This is big stuff.
In a crisis people look to leaders, both for leadership – obvious – and also for blame. CEO Martin Winterkorn is resisting any pressure to quit. But if he is shown to have been close to the decision making process himself, and known what was being done, he will have no choice. Leaders can only lead in a crisis if there is both internal and external trust. It is far from clear Mr Winterkorn can command it.
If he feels deep down that there is a good chance of him being forced out, he would do well to go now. And even if he did not know about the ‘defeat devices’ there will be a strong argument that he should have done. [VERY PRESCIENT IF I SAY SO MYSELF! AN HOUR AFTER I POSTED THIS, AS I WAS WATCHING SCOTLAND HAMMER JAPAN IN THE RUGBY, A BBC NEWSFLASH TOLD ME THAT HERR WINTERKORN HAD INDEED RESIGNED.]
Other automotive company leaders are drawn into this crisis whether they like it or not. In the modern suspicious world, where small campaigns and small complaints can be quickly ventilated on social and 24/7 media, they are all going to have to go through that horrible process of proving a negative. ‘No, we did not do a Volkswagen, and here is all the evidence we can provide.’
Angela Merkel is another leader who is almost certain to have to take a role in this, because of the damage it does to the German economy and the – currently incredibly strong – German national brand. She will be furious at what has been exposed. But she is also a pragmatist and she knows there will come a point where she has to step in both to deal with consequences and also help restore the strength of a sector that is hugely important to the German economy.
Her British counterpart is currently having to contend with something far more embarrassing, but far less serious. The fall-out from Piggate, Michael Ashcroft’s brutal act of literary revenge, will reduce David Cameron’s standing a little, make him the butt of more jokes than his thin skin will be able to enjoy. But it will blow over. It is not a crisis and will only become one if it is mishandled, or if the Prime Minister or his office says anything untrue in response to the allegations.
Of course having your PM as something of a global laughing stock is not good for a country’s reputation. But the lasting impact on Germany of VW’s act of deception will be far greater than anything David Cameron did or did not put up his nose, or did or did not put inside a dead pig’s mouth.