Kiroyan Partners - Verlyana Virgousa Hitipeuw‘What happens in Vegas stays in Vegas!’ For a fair reason, this US tourism tagline does not apply to the emissions scandal faced by Volkswagen (VW). Since the US Environmental Protection Agency (EPA) announced on Sept. 18 that the biggest German carmaker installed software to make its diesel cars ‘greener’ during emissions tests, the company has been out on a limb to salvage its once spotless reputation.

Observers are still divided on the extent of the crisis: whether it will also taint Germany’s strong image for engineering excellence and whether VW can truly recover its reputation.

However, we can be certain that the scandal requires VW to undertake fully sensible crisis management that is characterized by a highly responsive and purposive communication strategy to regain public trust.

As VW’s crisis management is already underway, a critical look at the company’s communication strategy thus far, its strengths and shortcomings will serve as a crucial reminder about ideal practices of crisis communication and missteps to avoid during execution.

This is especially relevant in Indonesia, where companies tend to be reluctant to communicate, or else become defensive during a crisis.

There was admittedly a blatant misstep by VW that led an issue already identified two years ago to escalate into the full-blown crisis that we see today.

The research on the discrepancies of emission levels was commissioned by the International Council on Clean Transportation (ICCT) in late 2012 and completed by West Virginia University in May 2013.

VW was fairly warned. And regardless of what accounted for its decision to use a defeat device in the first place, VW should have paid more attention to the research findings and quickly applied corrective measures before the EPA’s investigation that has now exposed the company not only for its wrongdoing but also voluntary inaction.

In other words, the failure of managing and responding to a foreshadowing issue swiftly has led VW into the biggest scandal in its history.

It is understandable that VW was busy with internal reorganization during the first days after the scandal broke out.

It was expected for the company to disassociate itself from the outgoing management in order to signal seriousness in handling the crisis and restore public confidence.

However, it took more than a week for VW to communicate the action plan to address technical matters of the affected cars and even longer to provide online service for customers to check about their cars.

Such a slow response to reach out to disgruntled customers indicates the cautious nature of VW’s focus on drawing the action plan and assuring shareholders and employees about its business continuity.

This strategy is, however, not a very thoughtful one, as the cautiousness ‘while crucial’ is done at the expense of the right of customers to the earliest update on the crisis and its corrective measures. Moreover, being cautious should not diminish VW’s ability to be prompt in appeasing its customers, especially considering the sense of loss and violated trust they share.

Despite being slow in its response, ‘the people’s car’ (the literal meaning of Volkswagen) also deserves credit for being thoughtful in delivering its messages.

The firm apologized for breaking public trust and assured full cooperation in the examination.

VW has put the right measures in place by acknowledging its wrongdoing despite the investigation still going on at that time and conveying consistent messages through its top management.

Looking at reputation crises facing business in Indonesia in the past few years, the observed points of weakness and strength are often part of the challenges that many companies still underestimate.

The sluggish response may remind us of Lion Air’s scandal this year, when hundreds of stranded passengers were enraged as the budget carrier canceled their flights after hours of waiting without explanation.

With regard to claiming responsibility, when some companies were accused to have initiated haze in Sumatra and Kalimantan, their responses tended to be inconsistent and often defensive.

One company even threatened to file a lawsuit against the accuser instead of showing a willingness to cooperate in the investigation and help solve the issue.

The VW scandal proves that no business is fully protected against crisis. Learning from this particular experience should help companies in Indonesia get prepared for the worst-case scenario.

That is, after all, what crisis communication is about.

It is imperative for a company to stay abreast of every issue in order to recognize potential threats or opportunities at hand and immediately apply corrective measures to prevent issues from escalating into a crisis.

The cautiousness in preparing responses and action plans needs to be balanced with promptness to reduce customers’ panic and growing distrust. Today, where technology accelerates the spread of information, there should be better and faster ways that enable customers to know if their purchases are affected.

Finally, it is crucial to claim responsibility, assure full cooperation and deliver consistent messages from top management during the crisis. VW has been a good example in this matter. And hopefully it will recover from this crisis through the realization of its promises, because good reputation is the result of good performance that is communicated appropriately.


Verlyana Hitipeuw is a senior consultant at Kiroyan Partners. The views expressed are her own.

Source: The Jakarta Post, December 1, 2015, page 7.

share this insight

Share to Facebook Share to Linkedin

let's work together

Tell us about your project brief or just contact us
read other insights