Volkswagen chief executive Martin Winterkorn has resigned following revelations that the German global giant has been caught manipulating US emissions tests and creating false impressions about the environmental performance of its machinery. This is a major crisis not only for VW but for the industry as a whole because there is no doubt that this was a deliberate action, rather than a mistake. The gravity of the situation has been highlighted by the fact that Winterkorn has resigned, saying that he is acting in the interests of the company, allowing the firm to make a new start. He said that he was not personally aware of the activities going on. VW has already budgeted $7.2 billion to meet the costs of the scandal, but the real impact could be three times that figure, without taking into account the loss of consumer trust in the firm. The firm’s reputation and brand will be affected by the scandal, although it must be remembered that VW is a huge company and has the financial clout to survive, with $14 billion in operating profits last year. The company’s share price has tumbled this week as revelations about what was going on have come to light.
Volkswagen has now formally admitted that it illegally programmed software used by its engines to detect when the car was being tested for emissions standards and to change the performance when such tests were being performed. The scandal is believed to involve at least 482,000 vehicles sold in the US between 2008 and 2015, but the same software is believed to feature in more than 11 million cars worldwide. The company’s cars are now being investigated in other markets. Until these inquiries have been completed the full extent of the scandal will not be clear. Having said that, the story is unlikely to end with VW, as the entire automotive industry will come under scrutiny as a result of the scandal – and it is not certain that further transgressions will not come to light. It will also mean that the automobile industry is likely to face even more scrutiny in the future.
Winterkorn became head of VW in 2007, replacing Bernd Pischetsrieder as CEO. Prior to that he was in charge of Audi. The key question in all of this is who in the top management of the company knew what was going on. The firm needs to investigate this and remove those involved because without such action the company – and the industry as a whole – is not going to be trusted by consumers. There have already been a flurry of lawsuits in the U.S. From private individuals claiming that the company has defrauded them, while the U.S. Justice Department is conducting a criminal investigation into the affair.
Winterkorn’s replacement will be chosen at a board meeting on Friday. It is expected that others who were involved in the scandal would also be departing. It is rumoured that the likely new CEO will be Matthias Mueller, the current boss of Porsche.
In the circumstances, Volkswagen’s involvement in Formula 1 is fairly irrelevant. We will have to see what the long-term damage will be to the firm.