Paulo Whitaker / Reuters A visitor passes by an installation titled "Autorotation" by Austrian artist Leo Schatzl during the 26th Sao Paulo International Biennial, September 29, 2004.

The End of the People's Car

How Volkswagen Lost Its Corporate Soul

The Environmental Protection Agency’s announcement on September 18 that Volkswagen had manipulated diesel engines during emissions tests sent shockwaves around the Western world. Facing hefty fines in the United States and elsewhere, the corporation soon revealed that no fewer than 11 million of its vehicles were powered by an engine that it had previously praised as ecologically friendly and now revealed as a generator of hazardous exhaust. The company’s stock took a dive, CEO Martin Winterkorn had to resign, and drivers on both sides of the Atlantic filed class action lawsuits. German engineering, once a catchword for excellence, has now gained a set of decidedly undesirable connotations.

Beyond anger, the international response to Volkwagen’s fraud has been tinged with disbelief. Politicians, experts, and ordinary citizens alike have struggled to comprehend why Volkswagen, of all companies, engaged in systematic cheating. Observers were not only flabbergasted that a high-profile car manufacturer had risked sizeable fines from regulators as well as claims for damages by consumers, stockholders, and dealers. They were also stunned at the reputational risk. For Volkswagen, as a U.S.-marketing expert pointed out, being caught cheating was “significantly damaging” because “this is such an iconic brand.” In Germany, the business-friendly Frankfurter Allgemeine Zeitung simply declared that Volkswagen had lost its “honor”—a concept rarely evoked in the context of global corporate giants.

Volkswagen thus finds itself at the center not just of an economic disaster, but a moral scandal of international reach.

A Volkswagen Beetle toy is seen in front of Beetle cars during celebrations of the National day of the Beetle in Sao Bernardo do Campo, January 23, 2011.

A Volkswagen Beetle toy is seen in front of Beetle cars during celebrations of the National day of the Beetle in Sao Bernardo do Campo, January 23, 2011.

In all this, the strange thing is how out of proportion the reaction in the United States has been to Volkswagen’s actual commercial position. Although the company’s market share has hovered below four percent for decades, its name retains strong cultural resonance due to memories of the legendary Beetle. Small, indestructible, unconventional, cute—these are the

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