For Lack of Sense, Automotive Companies Pay Billions

Volkswagen, Takata, crisis management, The Knight Canney Group,

This week was a bad one for overseas automotive companies. The CEO of Takata announced his resignation, and Volkswagen agreed to shell out as much as $14.7 billion.

Shigehisa Takada was caught up in his company’s defective-airbag crisis that engulfed more than a dozen automakers and resulted in the recall of 60 million vehicles in the U.S. and millions around the globe. Fourteen deaths and more than 100 injuries have been linked to those faulty airbags.

Scarier still is that last month the Senate Commerce Committee reported that Fiat Chrysler, Mitsubishi, Toyota, and Volkswagen were still selling new vehicles equipped with defective Takata airbags – airbags that will eventually need to be recalled.

Takata and its car-company customers are arguing over who will pay the costs of the recalls and the lawsuits. As one of only three major airbag manufacturers, Takata controls about a quarter of the market. If it is forced to repay the entire expense, not only will the company be bankrupt, carmakers will lose a key supplier.

Takata’s lack of crisis management is a textbook example of what not to do. According to industry observers:

  • Shigehisa Takada never personally addressed the crisis head-on during its almost two-year span
  • He instead instructed his underlings to deal with regulators and journalists
  • The company issued no public statements for almost a year

Then there’s Volkswagen.

It agreed this week to pay up to $14.7 billion to settle diesel-emissions claims in the U.S. That tab will chew up most of the $18 billion that it had set aside to resolve the scandal over 11 million so-called “clean diesel” vehicles that had been engineered to purposely cheat on air-quality tests.

But that’s not the end of Volkswagen’s woes. The U.S. and other countries – notably Germany– are weighing criminal probes and additional fines. As U.S. Deputy Attorney General Sally Q. Yates said, “The settlements do not address any potential criminal liability, though I can assure you our criminal investigation is active and ongoing.”

So… what about Volkswagen’s crisis management?

John Voelcker, writing in the Christian Science Monitor, noted that “there’s a known crisis management playbook; VW has ignored it.

  • “Volkswagen’s PR and communications tactics during the crisis may go down as a case study in crisis communications that equals the 1989 Exxon Valdez oil spill in wrong-footedness.
  • “Denials by executives that the company did anything wrong or illegal – after its own engineers had admitted to the EPA that VW deliberately lied and deceived regulators and the public for eight years – haven’t helped.
  • “Nor has the paucity of customer and public outreach, which contrasts with that demonstrated by Johnson & Johnson during the 1982 Tylenol poisoning scare, considered a model of crisis response and communications.”

Takata, Volkswagen, Exxon Valdez, and Tylenol: Three wrong ways and one right way to deal with a crisis.

We’ve said it before, but since we know that Takata and Volkswagen never took our advice, here it is again. When dealing with a crisis:

  1. Utilize an internal or an external crisis management team
  2. Communicate often with the public and your customers
  3. Always be honest and transparent about the problem

One more tip: Drive your Takata-airbag-equipped Volkswagen Jetta diesel safely, and fill up often.

Volkswagen Has Fallen and It Can’t Get Up

From bad PR to a crisis of public confidence--Volkswagen’s tarnished image gets worse.

Take II on the PR disaster that has tarnished Volkswagen. In September, we learned that VW equipped millions of its diesel vehicles with software that allowed it pass EPA emissions tests, while otherwise polluting at a rate that would never pass regulatory muster.

Caught red-handed, Volkswagen ’fessed up, agreed to fines, fired some high-level executives, dumped the CEO, Martin Winterkorn, and moved the head of its Porsche division, Matthias Müller in as the new CEO. All necessary steps. Except maybe the last one.

Because, wait. There’s more. The EPA has discovered more un-sanctioned software on more cars—this time on vehicles from Audi and Porsche, both divisions of Volkswagen.

Herr Müller has some erklären-ing to do. Especially since he vowed to thoroughly investigate VW’s cheating, and because these new revelations came from outside investigations by regulators in California and Canada, not from Volkswagen. Oh, and this time, VW is denying the findings.

Much of the media coverage surrounding the initial appointment of Müller noted that he had a gargantuan task ahead: regaining public trust, dealing with multiple international investigations, paying billions of dollars in fines and the costs of fixing millions of vehicles, not to mention keeping the company afloat. There were, however, a few questions regarding Müller as an appropriate choice. He had deep and long-held ties to Volkswagen and to Winterkorn.

I’m not implying, nor should the reader infer that Müller was in on the installation of cheating software in Volkswagens, Audis, or Porsches. But this latest revelation makes one wonder, was anyone asking the difficult questions internally before Müller was put in the heated driver’s seat?

  1. Did you know anything about this? Tell us now—don’t let us find out in three months.
  2. Is there more bad news for investigators to find? Tell us now—don’t let us find out in three months.
  3. With a crisis this huge, regardless of who it is, what are the optics of promoting from within? Should we bring in a “white knight” CEO?

To be sure, this crisis goes way beyond bad PR for Volkswagen—and now Audi, and Porsche. This is a crisis of everything: public trust, investor confidence, government compliance, company solvency, and legal liability. But these latest revelations come at the worst possible time—when the company was trying to portray a posture of contrition and reparation—and their impact could have been mitigated had someone who was thinking about public relations in the truest sense, spoken truth to power, and had power told the truth.


Coming Soon: The Apple iCar GT?

Great #PR for #Apple & #Google at #GenevaMotorShow. But can they actually build cars?

For those of you unable to attend this week’s Geneva International Motor Show, the pre-convention talk centered on two of the tech world’s biggest players’ desire to get into the car business.

Talk about a public relations coup. Neither tech company is even at the show, yet both are sucking up the Switzerland convention-space oxygen, leaving both domestic and overseas automakers concerned.

As Jack Ewing of The New York Times reported: “Apple and Google…are using their domination of smartphone operating systems to take over car dashboards, elbowing aside the carmakers’ proprietary systems. Someday, they or other upstarts could try to build entire vehicles. Apple has reportedly assembled a team of about 200 people to develop technologies for an electric car.”

We’ve already seen Google’s attempt at developing an autonomous car that would drive itself and – provided the technology works flawlessly – avoid accidents and allow driver and passengers to work, play Candy Crush, nap, or eat a Denny’s Grand Slam on their way to the office.

But, as Ewing points out, Apple and Google and their tech-giant colleagues have yet to face car-manufacturing reality:

  • It takes at least seven years to develop and sell a car, compared with 18 months for a smartphone
  • Auto manufacturing relies on a complex network of suppliers, not just a handful of low-wage factories in China
  • A car is a much more complex machine then the relatively simple smartphone

We never count out Apple or Google, of course. Given enough funding and the right staffing, both companies could dive into car and truck manufacturing anytime they desired. They wouldn’t make much profit – at least initially – but that has never stopped Silicon Valley before.

In the April Car and Driver, editor-in-chief Eddie Alterman notes: “Countless pieces of research already confirm that buyers care more about a new car’s infotainment system than its engine.” In a more tongue-in-cheek fashion, he writes: “We should…reimagine the car itself as a magical device that can transport you to the world of your fantasies – kind of like an iPhone but with, y’know, the actual capability of physically transporting you to a real place. The solution must certainly be to adopt all of the conventions and sleights of hand so fruitfully employed by the electronics business, including the freedom to launch products before they’re fully baked.”

Since beta versions of products and frequent software updates are part of Apple and Google’s modus operandi (modi operandorum?), pivoting company culture to launching products that are as fully baked as possible might prove impossible.

But if anyone can, as the putative cool kids say, “disrupt” the car business, it will most likely be Apple or Google or Microsoft or maybe even Facebook (Click “like” if you are enjoying your new SUV).

The challenge will be to develop, safe, fool-proof, attractive, reasonably-priced, quality vehicles that can be serviced and refueled or recharged almost anywhere. BWM, Mazda, Ford, GM, Mercedes, Volkswagen, Toyota, Nissan, and the others have been doing this for decades. They know how to make crankshafts, pistons, suspensions, steering linkages, and the thousands of other components work as a whole.

“Car companies can’t afford to create works in progress,” writes Alterman. “No amount of magical thinking will keep carmakers from paying for their slip-ups, and they shouldn’t be seduced by the siren call of Silicon Valley. Such radically higher stakes are proof enough that cars are more important than phones.”

Nearly every automotive company has experienced the communications and PR nightmare of faulty equipment. From exploding tires to lethal air bags to faulty ignition switches, the car companies know malfunctions will earn as much bad press as malfeasance. And, sadly, both can be fatal.

Our advice: If the iCar ever does go on sale, and if you decide to buy or lease one, you would be well advised to have a standing appointment at the Apple Genius Bar.

Just sayin’.