Scandal Threatens VW Brand
Das Auto -- or Das Cheaters? That phrase twisting Volkswagen's classic slogan was among the scathing comments flooding the German automaker's Facebook page in recent days. And it pretty much sums up the consumer backlash faced by the company amid a growing scandal that has cost the CEO his job, sparked a wave of investigations and forced the marketer to pull some advertising -- so far.
The crisis, which involves allegations that VW evaded emissions testing on its diesel vehicles with software trickery, will shave $10 billion from the VW brand's value of $31 billion, according to valuation consultancy Brand Finance. "The very future of the VW brand is in doubt," said Brand Finance CEO David Haigh.
Beyond the regulatory probes, VW's biggest long-term concern is reclaiming consumer trust. YouGov BrandIndex, which tracks consumer perception, found that Volkswagen's U.S. score plummeted to -24 as of Sept. 22 from 12 just before the scandal broke. Negative tweets about VW jumped to 99,900 during the week from Sept. 18 through 24, compared with 1,187 in the seven days before the crisis, according to Amobee Brand Intelligence.
VW's PR agency in the U.S. is Edelman.
What could make the scandal stick is that VW poured so much energy -- and cash -- into environmental marketing that now looks hypocritical. Shortly after he took the job in late 2013, Vinay Shahani, VP-marketing at Volkswagen of America, cited "clean-diesel technology" as one of the messages he wanted to hammer home, according to a 2014 interview with Ad Age's sibling publication Automotive News.
Dan Hill, president of public affairs firm Ervin Hill Strategy, suggested that VW will have a tough time clawing its way back because the issue involves trust and, possibly, deception. "When it's an integrity issue, that could pervade an entire enterprise," he said. Still, he applauded some of VW's initial moves, including the resignation of CEO Martin Winterkorn. People want to see accountability, which "tends to be better when it comes from the very top," he said.
On Friday VW tapped Porsche boss Matthias Mueller as its replacement CEO and created a new North American business unit that will be led by Winfried Vahland, who previously oversaw VW-owned Skoda. The U.S. will continue to be led by Michael Horn.
Mr. Haigh suggested that VW's comeback plan should involve ads that "continue to emphasize the brand's green credentials." Tim Calkins, a marketing professor at Northwestern University, said VW "might be tempted to advertise and say that it will fix all the problems. But after deceiving customers and regulators, why would anyone believe them?"
As of Friday, the only noticeable paid message involving the scandal was a promoted tweet sent Thursday from Volkswagen USA that included an apology and pledge to earn back the trust of customers, dealers, the government, employees and the public. A VW spokesman said "we are not in the position to discuss future marketing plans."
Update from Volkswagen regarding the EPA investigation: pic.twitter.com/fcmMcFWt3G— Volkswagen USA (@VW) September 24, 2015
A TV campaign by Deutsch Los Angeles that launched just before the crisis broke and touts VW's smartphone-integration technology remained on the air as of Friday. VW-owned Audi continued to run its regular TV ads that include its "Truth In Engineering" tagline. On VW's Facebook page, one commenter twisted that slogan to say "Engineering the Truth."
The automaker has estimated that roughly 11 million vehicles worldwide had the software in question, which affects some diesel versions of Volkswagen cars as well as the Audi A3. The company stopped sales of 2015 and 2016 models with a 2.0-liter TDI engine.
VW's environmental marketing includes a global program called "Think Blue" that is a riff on the brand's classic "Think Small" tagline. It aims to support projects around the world that "all show how much fun it can be to live a little bit more eco-conscious." While that initiative remained on the VW website as of last week, the company pulled other digital marketing touting diesel technology, including a native ad program with Wired magazine. That program featured content about "how diesel was re-engineered." VW "has decided to remove promotion of diesel vehicles until TDI models are available for sale," said the VW spokesman.
Sen. Bill Nelson, D-Fla., called on the FTC to probe whether VW ads touting the environmental benefits of "clean diesels" ran afoul of laws prohibiting unfair or deceptive practices. An FTC spokesman said "staff will review the concerns raised by Sen. Nelson."
"If in fact they installed software that was designed to circumvent emissions testing and they therefore had knowledge that their environmentally friendly claims were not true, it could certainly fall within the jurisdiction of the FTC," said Linda Goldstein, an ad lawyer and partner at Manatt, Phelps & Phillips.