The Volkswagen scandal has been leading the headlines, particularly because the company had built a brand based on reliability, quality and trust for decades. So what will the Volkswagen emissions scandal cost the company? The answer is very complicated.
Government Fines and Settlements
Since 2008, Volkswagen has sold 482,000 cars in the USA with the defeat device which cheated emissions testing. The fine for each vehicle that did not comply with federal clean air rules could be up to $37,500 USD which could equal a worst case scenario of up to $18 billion dollars in fines for the company.
Volkswagen has admitted that a staggering 11 million diesel model cars have been fitted with the cheater device, all of which will be recalled and fixed. The cost to the company? Volkswagen has said to expect to pay in the area of $7.25 billion dollars.
Already 50 class action suits are pending in the USA against Volkswagen. The results remain to be seen but private settlements could easily total in the billions of dollars.
Loss of Future Sales
Here is where Volkswagen will really suffer. The loss of consumer confidence in a brand can be cataclysmic. Studies show that for the average company involved in fraud, the financial punishment imposed by the market was 7.5 times greater than its legal penalties.
Whether Volkswagen can recover from this scandal will remain to be seen, but it is a good time for business owners to evaluate their own crisis management strategy to protect their company against the unexpected. What do you think? Can Volkswagen survive? Leave us your thoughts below.