Did Volkswagen sell us a lemon?

September 22, 2015

 

Hitler would have been appalled by sullied reputation stories in this week’s global press concerning the love-child of KdF (Kraft durch Freude ‘Strength through Joy’) the Third Reich’s official state-controlled leisure organisation.

 

In addition to KdF-led enterprises such as swanky concerts, trade shows, opera, free physical education, and gymnastics, the organization collaborated with manufacturers DAF to teach capitalist America a lesson in mass production of cars for the common man.

 

Hitler, who admired cars but couldn’t drive, ordered DAF to subsidise and provide a “Volks” (People’s) car. A marketing program was launched with the slogan: “Fünf Mark die Woche musst Du sparen, willst Du imeigenen Wagen fahren” (“Save five Marks a week, if you want to drive your own car”).  The idea would be than the people could aspire towards owning a car featuring the best in German engineering excllence. 

 

Designed by Ferdinand Porsche to be safe, economical, and easy to drive, the Volkswagen VW Käfer (better known today as the VW Beetle) was promised to any aspiring German worker who could scrimp and save for it. The first models rolled off the production line in February 1939. Yet despite all the efforts of the industrious workers, not one of ever received a vehicle through the advertised aspirational scheme.

 

(Still, a Type 1 Cabriolet was presented as a 49th-birthday present to Hitler on April 20, 1938).

 

Thanks to smart marketing, during the Sixties and Seventies, the iconic VW Beetle was eventually reinvented as a Hippy-peace-loving people carrier.  Then, as flower-power wilted, and dollar-power blossomed, along with many German automotive brands, the icon was repackaged to embody premium-priced excellence in engineering, design and, through implication, attention to detail… from the drawing board to final hand-over of keys to consumers.

 

 

 

Seven Year Itches, Coughs and Gasps.

According to much publicised reports, VW (which also makes Audi and Seat) faces fines of around £11.6bn.  This follows admitting having installed so called, ‘defeat-device’ software in certain Audi and VW diesel models.   When activated, the software conceals up to forty times as much Nitrogen Oxide (N02) pollution as allowed by America’s Clean Air Act.

 

N02 is reportedly linked to a range of health problems.  These include asthma attacks and other respiratory diseases that can contribute to premature death. According to reports, the practice may have been going on for some seven years.  (Related to this, in November 2014, Hyundai and Kia were fined some $300m in the US for overstating vehicle fuel economy standards on 1.2m cars).

 

The US Environmental Protection Agency (EPA) has also warned that the practice of using ‘defeat-device’ software could turn out to be featured by other global automotive brands.

 

In Britain and the rest of Europe, from September 2015, all new diesels must meet the Euro 6 Emissions standard.  The European Commission has been in contact with VW and US regulators to discover the full extent of the deception. So far regulators have found 482,000 diesel cars were sold in America between 2008 and 2015.  (At one point VW shares fell by twenty-three per cent). BMW and Mercedes owner Daimler - - also saw market falls.

 

The Daily Telegraph reported that a recent report by campaigners Transport & Environment (T&E) found that in terms of Euro 6 compliance, so far just one car brand far had complied. T&E cites one BMW model allegedly gushing out more than ten times the legal limit of N02.

 

 

The future for German Engineering– more lemonade than Champagne?

Where this story of a brand damage leads promises to be fascinating.

 

VW has a relatively low market share of US car sales. Rumours are already spreading of problems concerning its Brazilian and Chinese markets.  A major high profile glitzy international car show in Frankfurt is just around the next corner. 

 

VW’s company’s Board has been reeling from political infighting.  Questions will be asked of ex and current people at the top. Did they know?  If so; “Guilty as charged” for being complacent.  If not, “Guilty as charged” – for being incompetent.   

 

Within days, VW's CEO - Martin Winterkorn was left with no other choice but to step down.

 

Will there be a mass-worldwide recall of vehicles with numbers in terms of vehicles and refunds, reaching biblical levels?

 

France's finance minister called for a "Europe-wide" probe while Germany, South Korea and Italy all launched independent inquiries. German Chancellor Angela Merkel called for ‘full transparency’ from Volkswagen as it emerged that transport ministry investigators were sending a fact-finding committee to factories with immediate effect.

 

  • Volkswagen saw almost €30bn (£21.7bn) slashed of its market value after it admitted 11 million vehicles worldwide were affected 

  • Health experts claimed nearly 12,000 lives a year in Britain were being lost because emissions have not fallen 

  • The United Nations said the scandal was ‘deeply troubling’ 

  • The European Commission said it would ‘shed light’ on Volkswagen’s actions. 

 

… Add to all this, the brand, along with many other German iconic marques, will shortly introduce a range of plug-in and hybrid vehicles – promising to feature that ‘famous attention to detail’ German engineering.

 

The story so far features all the elements of a ‘Wolf of Wall Street’ [or “Mergenthalerallee Straße ”] novel.  These recent chapters could turn out to be pivotal events portending the last days of old era of automobile brand cartels - ousted by the likes of American founded Hi-Techs like Google and Apple cars.

 

Perhaps runners in the US 2016 Presidential election race will look to leverage political and compensation mileage by playing the xenophobic card against ‘not born and bred in America’ (as dealt out against British Petroleum).

 

All in all, in hindsight, maybe Herr Hitler’s choice of an American Type1 Cabriolet for his birthday, was particularly telling.  When it comes to premium car branding, hype and moody commercials – was after all. always targeted at the common person who aspired to one drive a slickly engineered dream that would be the envy of the Volks back home.

 

JONATHAN GABAY     WWW.JONATHANGABAY.COM

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