What VW must do as it embarks on long road to recovery

For regular readers of the business pages, there has been one dominant rumbling news story of the past fortnight. A brown cloud of diesel scandal now hangs above Volkswagen – former pride of Germany and the world’s biggest-selling car manufacturer. As the story has unfolded, it has quickly appeared increasingly grimy, with the chief executive’s inevitable departure followed rapidly by news of German prosecutors launching an investigation into the potential fraud aspects of the scandal.

To say that the company’s new chief executive, Matthias Muller, has a big task on his hands is to drastically reduce the situation he faces. Shareholders, employees and customers are all clamouring for clarity, while the threats of monster fines and unprecedented product recalls promise to make the next few months and years decidedly uncomfortable. Perhaps, given the scandal, this is exactly as it should be.

In a rather depressing reflection of the corporate world, there are reams of material on how companies should approach the delicate and lengthy process of restoring reputation. VW now stands at the start of this same road, with its leader, in particular, needing to quickly set a new direction for the long way back to recovery. This raises the question of how a chief executive even begins to direct such an effort.

With VW, there are two principle dents in its reputation that the incoming leader will need to deal with. There is obviously the basic underhandedness of the deception, which will be no small stench to remove in itself. But this will be compounded by the nature of the deception – the environmental effect it may have had. Such sustainability issues are always particularly emotive, and readily attract attention and strong opinions from many different parties. Incredibly, VW has managed to find a scandal that steps over, say, “mere” overstatement of profits or financial mismanagement, to a topic that is readily understood and passionately felt by a considerably wider population.

So where does Mr Muller begin? Much of it is unsurprising – focusing on quality; on drastically tightening up standards; on building trust through concrete efforts. There are already reports, for example, that unnamed but presumably not irrelevant employees are no longer with the firm. This is suggestive of a company that has started looking closely at its corporate culture and the people it employs in key positions. And that is important – there have been some suggestions that the “defeat devices” issue was not unknown to wider parts of the company, leading to concerns that information-sharing was being stymied by a corporate culture that lacked openness.

Another critical part of Mr Muller’s role is to make sure the company keeps communicating. VW now needs to speak with one voice – preferably his – and it should do so often and consistently. All of its stakeholders now need to hear that it is working to right the wrongs, and they need to see regular progress towards a genuinely cleaner business. It certainly isn’t enough to issue the classic (and expected) mea culpa after being caught doing something wrong. Issuing some form of admission of guilt and then shutting up will only drive an assumption that business is continuing as usual.

This open communication needs to be underwritten by tracked and measured progress towards solving the issues. The chief executive will need to set goals and benchmarks for various aspects of the business to work towards – be it in the area of corporate culture, the reporting of problems or the actual performance figures of their diesel engines. All of these issues need to have clear timetables for the measures to improve them, and they need to be continuously monitored to ensure the efforts are achieving what they need to.

It is going to take considerable time and a mammoth effort to clear the darkened air around the VW name. As the chief executive, Mr Muller will need to work quickly and with purpose if he wants to make sure that the loss of trust over those 11 million vehicles doesn’t become permanent.

Ahmad Badr is the chief executive of Abu Dhabi University Knowledge Group.

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