AutoNation CEO Mike Jackson sees the scandal as a "systemic" issue inside VW.
Less than a week after the EPA revealed that Volkswagen had cheated on emissions tests involving its popular diesel models, the automaker has been taking a beating. Its stock price has collapsed; authorities around the world are launching probes; and potential buyers appear to be steering clear of its showroom.
The situation has been growing worse by the day, CEO Martin Winterkorn resigning on Wednesday, with VW indicating a broader personnel shake-up likely. That’s no surprise, says Michael Jackson, CEO of the country’s largest auto retailer, Auto Nation. The crisis, he says, could not have been triggered by just a “few bad apples,” but reveals “systemic” corruption at Germany’s Volkswagen AG
Meanwhile, the impact is likely to extend beyond VW itself, Among other things, it could short-circuit the nascent revival of the American diesel car market. “This is another black eye for diesel,” Jackson told TheDetroitBureau.com.
(Overwhelmed by cheating scandal, Winterkorn resigns. Click Here for the latest.)
Volkswagen has been one of the big proponents of the high-mileage engines often called “oil burners.” A full 25% of the vehicles it has sold in the U.S. in recent years are diesel-powered, analysts crediting claims that the latest versions of the powertrain technology can pull off the seemingly impossible, boosting mileage, improving performance and reducing emissions.
VW CEO Winterkorn took responsibility for the crisis, but claims he didn't know about the cheating.
With more and more manufacturers now offering diesels – a list including Mercedes-Benz, BMW, General Motors and Fiat Chrysler – demand has been rising rapidly. Americans are now buying more diesels than hybrids like the Toyota Prius, according to industry data. But AutoNation’s Jackson fears “The outlook for diesels in the U.S. becomes much more suspect,” even if other makers aren’t caught up in their own scandals.
(Not the first time VW caught cheating. For more, Click Here.)
Part of the problem is that diesel buyers are “a passionate constituency that feels betrayed,” he says.
There are actually two different diesel communities among auto buyers, and Jackson says those who buy the technology for work trucks are less likely to care about the VW scandal. That segment of the market should largely be unaffected.
While the VW brand accounts for only 1% of the sales at AutoNation’s vast retail network, the chain’s dealers have been hearing lot from owners worried about the cheating scandal. On the other hand, “Our VW showrooms are very quiet now,” suggesting the impact of the scandal could seriously hurt a brand that has been struggling to reverse a half-decade of declining U.S. sales.
Jackson stresses that VW must take a series of proactive steps to “rebuild trust,” much as Toyota did when it was caught up in the unintended acceleration scandal at the beginning of the decade. The Japanese maker took whatever steps necessary, including providing loaner vehicles to worried owners, only later tallying up the cost. In the end, that helped Toyota’s image rebound rapidly.
VW could pull off the same turnaround, Jackson suggests, though he also warns that if they “procrastinate and drag it on, things are going to get more difficult.”
The potential cost of the diesel cheating scandal is expected to run into the billions of dollars, VW setting aside $7.3 billion this week. But the impact on the company’s management could be equally costly.
Though he claimed not to have any specific knowledge of the cheating effort, CEO Winterkorn said he “accept(s) responsibility for the irregularities,” in a statement issued as part of his resignation.
For his part, AutoNation’s Jackson calls that an “important accountability step.” Now, VW has to move forward to regain the trust of its customers and work its way through the myriad legal challenges it will be facing.
Part of that process will be a broader housecleaning. Apparently confirming Jackson’s comments, the VW board is quickly expected to appoint a successor, but its executive committee also says it is “expecting further personnel consequences in the next days.”
(To see more about the U.S. Justice Dept.’s probe into VW’s cheating scandal, Click Here.)
I had a 2012 TDI Sportwagen for couple of years and its performance and economy were great. Sadly, like a certain American pro cyclist’s career, its accomplishments were built on cheating. Sucks to realize you’ve been taken for a fool. Makes you wonder if VW and diesels are the only examples of this, or if it’s systemic like advanced PED use was in cycling for a couple of decades. I think the right response to this is to end the system of self certification of emissions and mileage that is currently in place. The fox shouldn’t be certifying that the henhouse is predator free.
I agree that the emission certification should be taken away from the Auto Makers and let them pay a 3rd party to do the testing.
Also, VW should be restricted from selling diesels in the USA for the next ten years.
Some management people needs to be fined and go to jail.
Instead, it will be blamed on some wage slave guy working in the line at VW.
VW knew about this problem about 2yrs ago, when the WV.University emission unit that told them and Germany govt. aware about their emissions findings ….Along with the EPA and the Calif. emission testing dept.
VW was so brazen and confident that they could continue to rip off the USA and other countries and buyers that they did NOTHING!
All diesel auto makers and Auto makers in General, will suffer a great loss of trust and credibility with this VW ripoff.
Bob,
See our story citing AutoNation CEO Mike Jackson (link below), who calls it a “systemic” issue, and not a case of “a couple bad apples.” There is no chance that this could have occurred without a fairly large number of people knowing it…and working on it. The VW exec committee has said there will be a number of terminations to come. How far up the food chain? Can’t tell. Will it eventually show Winterkorn was aware (or perhaps Piech) and complicit? We’ll have to wait and see for outside investigators to determine. VW can no longer be trusted to do its own investigation, of course.
The fact that the maker so long and so brazenly ran this scheme — and that it continued to deny it almost to the day the EPA issued the recall order — is flabbergasting and says too much about corporate hubris. The penalties, one might say, while wipe off those smug smiles.
Sadly, the scandal will tar all diesel makers. I would be surprised if some don’t intentional try to validate their claims by asking for outside audits now. See also our story of Tuesday on how this likely will change the industry’s relationship with regulators.
Paul A. Eisenstein
Publisher, TheDetroitBureau.com
http://www.thedetroitbureau.com/2015/09/vw-cheating-scandal-reveals-systemic-problem/
http://www.thedetroitbureau.com/2015/09/nhtsa-chief-signals-crackdown-on-auto-industry-testing/
Don’t punish consumers for the failings of VW or a group within VW. Anyone who can do basic math can determine that any clean Diesel gets much better fuel economy over a petrol engine. Diesels also require less maintenance. The engines typically last longer before needing any serious mechanical reconditioning. Clean Diesels with all properly operating emissions controls are still an excellent choice and preferred by many people who should be able to buy VW clean Diesels that comply with all emissions standards.
There is an online survey today along with the VW Diesel saga disclosure and over 2/3rds of the respondents said they would still buy a Diesel.
It’s no surprise that the lawyers have already filed class action lawsuits against VW in several states. There may be some issues with jurisdiction that gets these rush to file claims dismissed.
Until we know exactly what transpired it’s inappropriate to be making broad brushed character attacks on VW employees whom may not have had anything to do with the device defeat software or knowledge of same. FWIW – Winterkorn immediately announced an outside investigation when the story broke. Naturally he resigned because investors want someone’s head for their loss in stock value. It remains to be seen who else may be a scapegoat. I hope those who are actually responsible are found and convicted.