The systematic fraud committed by Volkswagen, threatens not only to reshape how we see the automotive industry, but it may reshape the world’s perception of what ‘German Engineering’ means. The inclusion of software intended to bypass EPA regulations in Volkswagen’s diesel powered vehicles has undoubtedly damaged the firm with its shares falling by more than a third and the possibility of financial penalties in the billions of dollars. Yet what concerns many German officials is the potential this scandal has on Germany’s export brand. In this regard, one of Germany’s economic strengths is the idea that products that are ‘made in Germany’ are trustworthy, reliable and expertly crafted, an idea that seems to be in stark contrast with Volkswagen’s activity of late. The greater fear among men like Martin Schulz, head of the European Parliament, is that the reputational consequences of Volkswagen’s actions will reverberate throughout the entire German car industry, with the possibility that consumers worldwide will elect to purchase from competitors on moral grounds. This possibility also has incredibly severe financial implications, as Germany now may be seen as a dangerous place to invest and to do business in the eyes of foreign investors. The supply of foreign capital may be less accessible to German companies and may slow the growth of the entire German economy.
In order to combat the notion that VW’s actions are representative of the rest of German industry, the nation’s chancellor, Angela Merkel publicly denounced this possibility. Instead, Merkel advocated that Volkswagen needed to provide more transparency to the public on its actions but that “[She believed] the reputation of German industry… is not so shaken that we are no longer considered a good place to do business”.
Perhaps Merkel is correct and Volkswagen’s scandal isn’t powerful enough to shake the very foundation of Germany’s international reputation holistically, but then again it may be unwise to underestimate the devastating impact these last few weeks have had on the world’s largest automotive company. In the end at least one thing is certain, it will take more than just transparency to repair the company after the biggest business crisis in its 78-year history.
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