At the start of this past Friday, Volkswagen sat as one of the success stories of the auto industry. It had a market capitalization of $87 billion. Then word came out about its cheating emissions tests on diesel vehicles, and lost 30 billion of that valuation in just 48 hours. And now, we receive word that Mark Winterkorn has stepped down as CEO of VW Group.
According to CNBC, VW issued a statement on behalf of Winterkorn, saying he was “shocked by the events of the past few days.” The statement continued, “Above all, I am stunned that misconduct on such a scale was possible in the Volkswagen Group.” Winterkorn claims he was unaware of any wrongdoing, but accepted responsibility for the recent diesel engine fiasco.
Things are not looking good for VW, and NPR’s Marketplace talked to the Wall Street Journal Autos columnist Dan Neil before this latest news broke. Through Neil’s comments, we got a glimpse into just how bad things might get for Volkswagen. You may think VW is large enough to weather this scandal, but when asked to predict the fate of the German automaker, Neil’s response was a damning, “No one knows.”
For the last decade, Volkswagen was the model for success. It sold 10 million cars globally last year, earned €12 billion in profit, and represented 12 percent of the global car sales. VW’s internal goals were to sell 10 million cars a year by 2018—something they achieved last year—and to get more aggressive about diesel. It is now clear that to achieve that goal, corners were cut.
But this goes beyond cutting corners. Neil called the cheating tactics “brazen,” and summarized VW’s moral issues as, “Receipt as a business strategy.” He also regarded the hack as something, “You’d expect from a local tuner shop.” We have to think local tuners would take offense to that.
In theory, Volkswagen could survive this. They had put away an emergency fund for this scandal, and an automaker that large could get creative with its finances. The German government could also bail out its largest native automaker. But there is also the real possibility that the road ahead could be extremely dire for VW.
According to Neil, “This is the biggest scandal I’ve ever seen.” For a journalist covering the industry for over 20 years, that says something.