Following revelations of wholesale cheating, it’s time to focus on customers, not engineers
As you’ve probably heard, Volkswagen is in deep trouble. The world’s largest automaker admitted to rigging its diesel models to falsely pass emissions tests, resulting in the resignation of VW’s CEO Martin Winterkorn and setting off a ripple effect serious enough to undermine the German economy. This is no isolated incident; the auto industry has a history of evading regulations to enhance its performance, both on Wall Street and in the marketplace.
But you have to ask, why would VW do this? And, how can the company recover from this massive scandal?
First, stop listening to a minority of customers
With the goal of becoming the #1 car maker in the world (VW also owns the highly profitable brands Porsche and Audi, along with Bentley, Lamborghini and Bugatti), the company focused on some of the right things, including affordability and fuel economy.
But then, the thinking became polluted by focusing on what internally VW engineers value more: Performance. Here are some stats to consider:
- VW Golf TDI’s 0-60 MPH performance is only enhanced 5% without emissions controls
- This means that the Golf TDI would achieve 0-60 MPH in 8.8 seconds with emissions controls engaged
- By contrast, the Chevrolet Cruze, a similarly sized American diesel, carries a 0-60 MPH rating of 8.6 seconds.
The impact of all that performance on fuel economy isn’t yet clear, but customers may be even more upset once emissions controls are fully in place. One VW Jetta owner reported getting 50 MPG on the highway versus the EPA rated 42MPG highway (similar to the 38-40 MPG on the highway that Chevy Cruze owners report).
Who is it that most values this sort of performance? Well, men who love the VW drive experience and don’t have a lot of cash for a car. And they are a small, if vocal, portion of the market.
The statistic that matters most: You, the 85%
Women buy or influence the purchase of 85% of all U.S. auto sales, and 60% or more globally. That’s right. 85 percent.
And women are largely unconcerned with the 0-60 MPH performance as long as the car they are driving has enough power to merge, pass, and cruise while carrying passengers in every seat. That .04 of a second is not a game-changer. If it were, VW would have a much better presence in U.S. driveways.
So how does VW fix the big issue—winning back the customer?
Certainly, there are a lot of angry customers, and a lot of potential customers who will bypass VW for a while. But we don’t want VW to go out of business. A competitive car market is good for the consumer. What they need to do is what our mothers told us when we hurt someone: Apologize, make it right and make sure it doesn’t happen again.
Then, VW needs to focus on the largest, most powerful customer base: You. Not the enthusiasts, critics or its own engineers. By building cars we can live our lives in, not just cars that are fun to drive from point A to point B, they will win customers back.
To do this, VW needs to integrate more women into its company and culture: Women engineers, managers, leaders and mentors. It’s been proven that if your workforce reflects your customer base, you’ll be much more closely in touch with what your customers want and need.
Where VW Should Look for Guidance: Ford and General Motors
Many automakers have learned not only how to recover from a scandal, but how to build authentic customer appeal. Ford nearly went out of business when it got caught in a scandal over the under inflation of Firestone tires; the company restructured and brought in outsider Alan Mulally as CEO. Mulally refocused Ford’s vision on what customers want and need: innovative, comfortable products that will last, and a company that will stand behind its products.
General Motors was recovering from bankruptcy when it was found that faulty ignition systems had caused fatal accidents and threatened millions of drivers and passengers. The company’s survival was led by Mary Barra’s leadership of transparency and dedication to finding the cause, fixing the problem and putting protections in place that ensure nothing like that happens again (just as our mothers told us).
Knowing what the customer wants leads to success
Both Ford and GM, focused squarely on the customer, flourished in a highly competitive marketplace: Fiat Chrysler Automobiles (FCA), Nissan, Toyota, Hyundai, Kia, Jaguar and others are ramping up both the value that customers get in their cars—leading safety technology and all the features and luxuries you can imagine—and new levels of accountability (i.e. long warranties and standard roadside assistance). With all this competition, there is no room in the auto marketplace for arrogance or mediocrity.
What will it take for VW to get back in your good graces?
Making good with current owners and regulators is the first step. But then, outfitting their models with quality, long-lasting interiors, offering solutions to consumers biggest needs, bringing more flexible vehicles to its lineup—a focus on crossovers versus sedans and wagons—and adapting to the fuel sources customers want rather than what their engineers think customers should have. Maybe that means more hybrids, more plug-ins, or more innovation?
The 2016 Passat—a step in the right direction?
VW threw a huge party in Brooklyn last week to introduce the 2016 Passat. The buffet dinner, open bar and Lenny Kravitz performance was overshadowed by the EPA charges. Some thought the party was in bad taste given VW’s admission to cheating on emissions tests, and the mood reflected this; the crowd was thin and conversation focused on the scandal, its causes and who might be fired. But had the company canceled the party, the message might have been taken as a signal that VW would retreat from the U.S. market and its customers.
But VW’s US President Michael Horn touted design changes to the Passat that show that the company has been thinking about the competitive environment; the 2016 Passat offers some nice features and refined styling, and pricing will start at $22,000; our guess is the fully decked out model we saw will have a price tag of closer to $30,000 (full pricing hasn’t yet been announced).
But discounts off the sticker price could be significant, and customers in the market for a true bargain will likely get the best deals from VW in the coming years as it tries to keep its U.S. business from sinking.
Disclosure: I was VW’s guest and accommodations were provided for me to attend the 2016 Passat event. Opinions and ideas expressed here are all my own.