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Volkswagen must act fast says London Business School expert

22 Sep 2015

Window to recover reputation is closing fast

Ioannis Ioannou 482x271

Volkswagen must act fast if it is to save its reputation, a London Business School expert has said.

Ioannis Ioannou, Assistant Professor of Strategy and Entrepreneurship, London Business School, made the comments following a public apology from Michael Horn, US Chief Executive of Volkswagen, over revelations the car manufacturer used a defeat device to falsify car emissions data. Shares in Volkswagen fell 5% on Tuesday after already losing almost a fifth of their value on Monday. 

“Whereas under different conditions companies could claim ignorance, it is obvious that in the Volkswagen case there is an explicit intentionality of fraud, at least by some people at the company,” said Dr Ioannou.

Dr Ioannou believes that since the scandal erupted Volkswagen has taken the wrong approach. 

“It has been doing a lot of talking and not so much doing. Apologies are useful only to the extent that they are accompanied by concrete action focused on rectifying this mess.” 

“Volkswagen needs to be as transparent as ever in terms of the process and the outcome of any internal investigation, and about the consequences for those who are found to be responsible for the fraud, no matter how high up they might be. It is the time to be as open and as frank as possible, not a time to hide.” 

The car manufacturer faces bigger challenges ahead in terms of fixing the violation of trust with customers and policy makers.

“It might well be the case, of course, that corporate culture and core values at Volkswagen are not as cohesive and as consistent as top management might have assumed,” Dr Ioannou says. “This should lead to a close examination of structures and processes as well as incentives at the company.”

But there is hope yet for Volkswagen, says Dr Ioannou - but only if it is quick to get into gear. 

“In the past, some companies have not only recovered from major scandals but importantly, they subsequently became leaders in their industries on issues of responsibility and accountability. It is not clear at this point whether Volkswagen will be one such company, but that window of opportunity is closing down quickly.”