Volkswagen under fire after scandal

By: Micah Price ~Guest Writer~

In the wake of the scandal that caused Martin Winterkorn, former Volkswagen Group CEO, to step down, more questions than answers loom over the world’s top selling automaker and world auto markets. U.S. regulators revealed early last week that Volkswagen had rigged its diesel model cars to significantly reduce emissions when tested, while road models gave off emissions well above legal limits. As expected, Volkswagen’s stock (VLKAY) took a major hit in the immediate aftermath of the company admitting to the allegations made by the Environmental Protection Agency.

There was some hope that the scandal could be stymied with the naming of Winterkorn’s successor, Porsche CEO Matthias Müller. Porsche, a subsidiary of Volkswagen, is not yet implicated in the scandal, although there are some worries among industry experts that Volkswagen may not be alone in its misdeeds and that similar revelations about other automakers could be brought to light.

This fear has been a catalyst in the fairly steady decline of Volkswagen stock. The appointment of Müller held investors in a short-lived state of stability as major world markets closed at the end of last week. However, if weekend exchanges are any indication, the price of stock in the 78-year-old company may continue to decline. It is expected that more executives from the German automaker will be ousted as a consequence. As Volkswagen conducts internal investigations and deals with forthcoming fines and litigation, which could total more than $18 billion in the U.S. alone, the company’s long-term future could depend on how the scandal is handled publicly. It is still unclear how Müller plans to regain the trust of consumers.

“My most urgent task is to win back trust for the Volkswagen Group — by leaving no stone unturned and with maximum transparency, as well as drawing the right conclusions from the current situation,” Mueller said in a Friday press release.

“I think that’s a pretty good statement,” Leslie Rasmussen, associate professor of communication arts at Xavier, said. “The statement is vague, but at this point they might not know what they’re going to do or how to do it.”

Rasmussen voiced her confidence that the auto titan, which has until now garnered a strong reputation, could recover with the right steps.

“Their biggest problem here is that they were not being transparent. There is really no room for error when it comes to transparency,” Rasmussen said. As for the speed with which the company responded, Rasmussen is concerned that it took as long as it did for statements like Müller’s to be issued. Only time will tell if Volkswagen can get up to speed.