Unraveling Volkswagen's emissions scandal: Part 3

What factors contributed to Volkswagens success in overcoming the crisis?

To analyse the factors which contributed to Volkswagens success in overcoming the crisis, Coomb’s Situational Crisis Communications Theory (Coombs,2014) will underpin the analysis. The theory provides an insight into how reputation can be impacted by the scenario of the crisis and which strategy to implement to protect the organisation's reputation. Also, the framework helps organisations to understand how stakeholders might respond. 

There are three factors that shape reputation threat; crisis responsibility, crisis history and prior relationship reputation (Coombs,2014). These factors will help to analyse in-depth Volkswagens success in overcoming the crisis. 

The first step is crisis responsibility, this addressed who the stakeholders blame for the crisis which can be heavily influenced by the media coverage and the type of crisis (Coombs,2014). Volkswagens crisis communication strategy arguably involved; agenda setting, media framing and denial posture. 

The first step is crisis responsibility, this addressed who the stakeholders blame for the crisis which can be heavily influenced by the media coverage and the type of crisis (Coombs,2014). Volkswagens crisis communication strategy arguably involved; agenda setting, media framing and denial posture. 

Agenda Setting (McCoombs and Shaw,1968) has two basic assumptions; the media filters and shapes what we see instead of reflecting stories to the audience and the more attention the media gives to an issue, the public will view the information as important. Looking at the first notion which McCoombs and Shaw (1968) present, it can be said that the media is filtering and shaping stories, as media outlets such as the Financial Times (2015), BBC News (2015) and Bloomberg (2015) are covering stories on Volkswagens previous crisis during the outbreak of the September 2015 scandal. It can be said that these media outlets are viewed by society as a credible source, with this being said media agenda setting is present in this scenario. 

Media framing is another technique that can be examined to analyse the success Volkswagen encountered to overcome the crisis. Tankard et al., (1991) defines the practice as placing emphasis and elaborating on news content. Framing is viewed as important as it shapes how people define a problem, causes problems, attributions of responsibility and solutions to a problem (Cooper,2002 and 2007). The framing technique that media outlets adopted when covering Volkswagen’s crisis was stories (Fairhurst and Sarr,1996). Media outlets relayed information to the public on the misconduct of senior managers within the organisation with various stakeholder groups such as employees, suppliers and partners (Odell,2015).

The next step that follows is the crisis history, which focuses on whether the organisation has had accounts of crises previously, and if that is the case, what are the perceptions held by stakeholders. Volkswagen has a history with scandals and a series of episodes in which they did not abide by the law, which each time they were able to escape without any consequences (Fortune,2018). Volkswagen’s history of scandals has been recorded from 1987, the company shocked the market by announcing it was taking a 480m Deutsche mark provision which is equivalent to £160m, to cover losses it incurred as the victim of a foreign exchange fraud (Odell,2015). This scandal led to shares almost plunging to a third and forced the German government to postpone plans to sell a 16% stake in the carmaker (Odell,2015). The government had plans to invest in the company to help finance the nation’s budget. Here it can be said that there is a weak stakeholder culture, as this ideology is defined as the organisation addressing their stakeholder issues and maintaining a positive relationship (Carroll and Bychholtz,2012). Here it can be argued that due to previous scandals relating to not abiding by the law, the relationship with the government and Volkswagen are not favourable. 

Another stakeholder group that has been influenced by Volkswagen’s scandals are employees, as in 2005 the state's prosecutors opened an investigation into allegations of bribery involving a senior Volkswagen executive, this scandal became popularly known as the perks and prostitution scandal (Odell,2015). Peter Hartz, was eventually given a two-year suspended sentence in 2007 for breach of trust over his role (Odell,2015). Arguably if employees feel a lack of trust between the organisation and themselves this prevents good communication (Ilgen et al., 2005). As employees are identified as primary stakeholders whose actions can be harmful or beneficial to an organisation (Ledingham and Bruning, 2000) and as two-way communication is important especially during a crisis (Coombs,2007) this strategy should have been implemented to increase the rate of success. 

The theme of bribery embedded in the culture of the organisation continues in 2006, as another primary stakeholder group, suppliers have accused of bribing Volkswagen (Odell,2015). Suppliers may know of Volkswagen’s culture of ‘success at all costs’ (Fortune,2018) and used this to their advantage by bribing Volkswagen. Here it can be said that a mutually beneficial relationship has been established which is ideal for an effective relationship (Lamb and McKee, 2005). 

The final step is evaluating prior relationships with stakeholders such as treating them correctly as this may have a direct and indirect impact on the reputation of the organisation (Coombs,2014). Coombs (2007) addresses the importance of protecting your stakeholders as this should be the priority to respond to a crisis ethically. 

It can be said that Volkswagen did not adopt Coombs (2007) ethical practise when responding to a crisis, as the employees of the company were blamed for the crisis (Fortune,2018). In addition, Volkswagen issued 204 staff to be fired from the company and 903 formal warning to employees for misconduct in the aftermath of the diesel-cheating scandal (Rauwalk,2019). By blaming stakeholders for the crisis can generate emotions of anger (Coombs, 2007) and to manage reputation it is important to address the emotions that stakeholders feel towards a firm (Hall,1992). Volkswagen’s actions of firing staff and writing formal warnings to employees are not arguably addressing the stakeholder emotions, which can hinder the reputation of the organisation. 

It can be said that customers were treated correctly as the company put aside £4.8 billion to deal with the costs of recalling and repairing the affected vehicles (Ruddick,2015). However, the awaking of the scandal arose outrange amongst customers as 86% of Volkswagen drivers stated their concern about the environmental impact of their car (Ruddick,2015). In response to customers concerns, Volkswagen has communicated to the stakeholder group via social media. Dimitriadis and Tsimonis (2014) have noticed that social media has been commonly adopted amongst businesses to interact and exchange information with their consumers. This two-way communication that social media allows creates meaningful relationships with consumers and the organisation (Bruich et al.,2012). Al-Menayes (2015) found that people use social media to gain information, with this in mind is can be said that this was an appropriate strategy for Volkswagen to use during the crisis. However, Volkswagen did not adopt a two-way communication strategy as they were broadcasting information (Davis,2015), which is not good public relations practice (Grunig and Hunt, 1984). However, they included links to the website directing consumers to the FAQ on September 27th on the topic of the information (Davis,2015). By including the link in the social media post is arguably a strong tactic as it provides the user with a positive customer journey due to the accessibility of the information available (Chaffey and Smith,2017).

From the response shareholders encountered after the crisis, Volkswagen experienced a drop in the share price of nearly 20% and has fallen to just 66% of the price it was on September 21st (Wall Street Journal,2015). The drop-in shares could be due to shareholders feeling a sense of mistrust between them and the organisation due to the illegal behaviour and severe financial harm Volkswagen has inflicted. In order to have a successful interpersonal relationship with stakeholders, it is important to have control mutuality and commit to the extent to which both parties believe and feel the relationship is worth investing in and promote (Hon and Gruing, 1999). Arguably, due to the deceptive nature of Volkswagen of not abiding by the law, it can be said that shareholders did not feel morally comfortable investing in a company as it would promote the support of malpractice. 

Overall, it can be said that the Volkswagens strategy was not successful as various stakeholders had a negative relationship with the organisation. However, the success which aided the organisation to overcome the crisis can be due to Volkswagen’s culture of ‘success at all costs’ (Fortune,2018). As stakeholder groups at first were upset initially but, the strong culture embedded in the organisation created support for future projects.