The current slogan for Volkswagen is “Das Auto”, the English
translation of which is “The Car”. This
may seem to be a bold tagline, however if anyone could pull it off, it would be
VW. That is, until a few weeks ago. Volkswagen Group, the parent company of
Volkswagen, is the second biggest car manufacturer in the world, behind General
Motors, owning and producing some of the most globally recognised brands,
including Audi, Lamborghini and Bentley.
Ultimately, with such a broad reach the emissions scandal that erupted
within Volkswagen a few weeks ago was going to have broad ramifications.
The Environmental Protection Agency (EPA) found that many VW cars
being sold in America had software installed in diesel engines that detected
when the engine was being tested and adjusted the performance to improve
results, creating emissions figures completely unconnected to reality. This was perhaps particularly grating in the
US as VW had gone on a charm offensive for the fuel and according to the BBC, the primary focus
of the campaign had been the benefits of diesel’s low emissions.
So how did Volkswagen handle the scandal initially?
Initially, the scandal was handled quite well. The
Guardian reported that Martin Winterkorn, the then CEO of Volkswagen Group
had apologised stating that Volkswagen was “endlessly sorry” and Michael Horn,
CEO of the US arm of the business similarly acknowledged that Volkswagen had “totally screwed up”. There appeared to
be a united front in the VW camp, however, from this position of strength, the
story quickly unravelled. Winterkorn was
forced to deny rumours that he was set to be replaced by Porsche chief Matthias
Müller, however, a few days after the scandal broke the rumours were proven
true as Winterkorn was indeed replaced with Müller. On the other side of the pond Michael Horn is
clinging to his job, when, from the Company’s perspective, it might have been
better for him to fall on his sword. As
details of the scandal emerged, VW fronted up, and admitted that in fact 11
million cars could have been affected not the lesser figure of almost 500,000,
as outlined in the EPA report.
The Company, initially, appeared to get ahead of the scandal and
be upfront about mistakes, potentially garnering some positive public
opinion. However this was quickly lost,
as more details of the scandal emerged and the initial response seemed to no
longer be up to scratch, and instead reflected at worst deception and at best
that those at the top were out of touch with their own organisation. VW has lost nearly €30 billion off its market
cap since the scandal emerged, and has set aside €3.7bn to cover costs. As a result, the Company has posted its first
quarterly loss for 15 years of €2.5bn.
As the scandal has gone global, The
Telegraph reported that 1.2 million cars in the UK were fitted with the
illegal emissions-cheating software. And
now a fresh scandal appears to be brewing, as a poll of 2,000 of the affected
drivers revealed 90% of them believed they were entitled to compensation,
whilst Paul Willis VW’s UK boss has said that it is “premature” to talk about
refunds. In addition the German government
is now urging the car giant to retest all of its vehicles in order to clear up
the scandal – the dramatic fall in the VW share price has pushed down the
entire German market forcing the government to get involved. Finally, it was hoped that Matthias Muller’s
appointment from Porsche would be untainted by the scandal, however, as new
details of the crisis emerge it is clear that Porsche is also affected. According to Reuters, up to 800,000 cars sold in Europe could be affected
by the deception.
Ultimately the full repercussions of the VW scandal are as yet
unknown. It is unclear whether the brand
has been irreparably damaged or if it will recover over time. One thing is for certain, it is a long road
for Volkswagen to get back to its pre-crisis share price of €134.81. At its
lowest point, so far, during the crisis the share price was €68.51, with more
loses predicted. From all this, we can
see that VW have produced neither the “people’s car” or even “the car”, they
have created a situation from which it may never fully recover.
Last week, Abchaps hosted a market lunch, where topics from opportunities in the standard listing market and cyber security issues were discussed. We also met with Arden Partners at our offices, and enjoyed canapes and drinks with the team by the end of the week.
Last week Nathalie Merrens was appointed as head of investment solutions for its private office, she joins from Kleinwort Benson with over 25 years’ experience in financial services having held roles at Citibank and UBS wealth management.
Allianz gain a Director in Tim Bird, he will be directing their UK institutional sales and client services team and joins from the institutional relationship management team. At T Rowe Price. Bird has also held roles at Goldman Sachs Asset Management, HSBC Asset Management and Mercury Asset Management.
Law firm Clyde & Co have appointed Mark Sutton as senior equity partner in its professional and financial disputes group. Mark has over 15 years’ experience, and specialises in large claims against directors, banks, corporate trustees, Lloyd’s brokers, financial advisers, fund managers, stock brokers, accountants and corporate services providers.
Follow us on Twitter @AbchurchComms
