We have previously reported on a number of automotive industry recalls but, even if all examined together, these are eclipsed by the sheer scale of the crisis that is facing VW now following the confirmation that they have been using defeat software to pass emissions tests. Whilst the current focus is on VW diesel cars, there is already discussion as to other diesel cars in the VW stable (Skoda, Audi, Seat), other manufacturers and even petrol cars. The Daily Telegraph quotes investment house Bernstein, stating that “the scandal “probably does” signal the end of diesel, after several decades of the European authorities promoting the fuel on the grounds that it produces less carbon dioxide than gasoline.” Peter Spence, of the Daily Telegraph, suggests that this “is likely the greatest corporate scandal since the global financial crisis, and that includes the BP oil spill of 2010.”
It is interesting that news reports discuss the fact that the research highlighting the discrepancies was done in 2014, and VW denied the results until early September 2015, when they were threatened with further action. VW have now issued a statement on their website in the UK. Given the scale of the situation, it is unlikely that an earlier admission to existence of the software would have mitigated this crisis to any great extent, but it is possible that VW would not find itself in quite such a perilous position.
Whilst the threat of bankruptcy hangs over VW, it is worth noting that the ripples of such a corporate crisis will impact many businesses throughout the supply chain. With some 44 production plants in 13 Europe, the Americas, Asia and Africa, VW sells its vehicles in more than 150 countries worldwide. The annual volume of procurement is about € 60 billion. Any significant impact to VW manufacturing will have possibly catastrophic impacts on suppliers as well as any businesses supplying services in the vicinity of the production plants.
It is unlikely that the collapse of a major customer of the size of VW has featured in many risk registers, but this serves as a timely reminder to all businesses that it is important to understand both suppliers and customers as part of an effective business continuity programme. It also demonstrates the need for honesty, transparency and for senior management to have full ownership of all the company is doing.
Written by Helen Molyneux