tag:theconversation.com,2011:/au/topics/volkswagen-6915/articlesVolkswagen – The Conversation2024-03-08T13:37:46Ztag:theconversation.com,2011:article/2231622024-03-08T13:37:46Z2024-03-08T13:37:46ZUAW’s Southern strategy: Union revs up drive to get workers employed by foreign automakers to join its ranks<figure><img src="https://images.theconversation.com/files/580189/original/file-20240306-16-zhfgjh.jpg?ixlib=rb-1.1.0&rect=135%2C63%2C5068%2C2506&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A UAW supporter in 2017 outside a Nissan plant in Canton, Miss., ahead of a vote the union lost.</span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/Nissan-Union/90212afb1edb40979e133f3d7931592a/photo?Query=mississippi%20uaw&mediaType=photo&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=91&currentItemNo=18">AP Photo/Rogelio V. Solis</a></span></figcaption></figure><p>Persuading Southern autoworkers to join a union remains one of the U.S. labor movement’s most enduring challenges, despite persistent efforts by the United Auto Workers union to organize this workforce.</p>
<p>To be sure, the UAW does have members employed by Ford and General Motors at facilities in <a href="https://apnews.com/article/general-motors-strike-united-auto-workers-uaw-f16005a7b20a6f1772947957854d1017">Kentucky, Texas, Missouri and Mississippi</a>.</p>
<p>However, the <a href="https://www.reuters.com/article/us-volkswagen-uaw-idUSKBN0TN2DE20151205/">UAW has tried and largely failed</a> to <a href="https://www.nytimes.com/2019/06/14/business/economy/volkswagen-chattanooga-uaw-union.html">organize workers</a> at foreign-owned companies, including Volkswagen and Nissan in Southern states, where about <a href="https://www.cnn.com/2023/09/20/business/uaw-jobs-south-auto/index.html">30% of all U.S. automotive jobs are located</a>.</p>
<p>But after the UAW pulled off its <a href="https://theconversation.com/united-auto-workers-union-hails-strike-ending-deals-with-automakers-that-would-raise-top-assembly-plant-hourly-pay-to-more-than-40-as-record-contracts-216432">most successful strike in a generation</a> against Detroit’s Big Three automakers, through which it won higher pay and better benefits for its members in 2023, the union is trying again to win over Southern autoworkers.</p>
<p>The UAW has <a href="https://uaw.org/uaw-announces-40-million-commitment-to-organizing-auto-and-battery-workers-over-next-two-years/">pledged to spend US$40 million through 2026</a> to expand its ranks to include more auto and electric battery workers, <a href="https://www.nytimes.com/2024/03/02/business/economy/uaw-auto-workers-union.html">including many employed in the South</a>, where the industry is <a href="https://uaw.org/we-are-the-majority-workers-at-mercedes-benzs-largest-us-plant-announce-majority-support-for-movement-to-join-uaw/">quickly gaining ground</a>.</p>
<p>Based on my five decades of experience as a <a href="https://scua.uoregon.edu/agents/people/33456">union organizer and labor historian</a>, I anticipate that, recent momentum aside, the UAW will face stiff resistance from Toyota, Volkswagen, Mercedes-Benz and the other big foreign automakers that operate in the South. The <a href="https://www.thenation.com/article/economy/uaw-chattanooga-union-drive/">pushback is also coming from Southern politicians</a>, many of whom have expressed concern that UAW success would undermine the region’s carefully crafted approach to economic development. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/580185/original/file-20240306-20-vztbm6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="The back of a worker wearing a UAW t-shirt indicating employment in Brandon, Mississippi." src="https://images.theconversation.com/files/580185/original/file-20240306-20-vztbm6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/580185/original/file-20240306-20-vztbm6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/580185/original/file-20240306-20-vztbm6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/580185/original/file-20240306-20-vztbm6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/580185/original/file-20240306-20-vztbm6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/580185/original/file-20240306-20-vztbm6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/580185/original/file-20240306-20-vztbm6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">A sign of things to come?</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/AutoWorkersStrikeMississippi/f5cb369d2cd245a99b3081ff2af50396/photo?Query=uaw%20alabama&mediaType=photo&sortBy=&dateRange=Anytime&totalCount=21&digitizationType=Digitized&currentItemNo=0&vs=true">AP Photo/Rogelio V. Solis</a></span>
</figcaption>
</figure>
<h2>Lauding the ‘perfect three-legged stool’</h2>
<p>After the region’s formerly robust <a href="https://doi.org/10.5744/florida/9780813037950.003.0010">textile industry imploded</a> in the 1980s and 1990s because of an influx of cheap imports, Southern business and political leaders revived the region’s manufacturing base by successfully recruiting foreign automakers. </p>
<p>The strategy of those leaders reflects what the <a href="https://www.bcatoday.org/the-united-auto-workers-labor-union-must-not-do-to-alabama/">Business Council of Alabama</a> has described as the “perfect three-legged stool for economic development.” It consists of “an eager and trainable workforce with a work ethic unparalleled anywhere in the nation,” accompanied by a “low-cost and business-friendly economic climate, and the lack of labor union activity and participation.”</p>
<p>The prospect of a low-wage and reliable workforce has <a href="https://www.cnbc.com/2022/08/14/automakers-investing-in-the-south-as-evs-change-the-auto-industry.html">lured the likes of Nissan, BMW</a>, Mercedes-Benz, Kia, Honda, Volkswagen and Hyundai to the South in recent decades.</p>
<p>Although many of those companies <a href="https://www.reuters.com/business/autos-transportation/volkswagen-ig-metall-agree-wage-deal-2021-04-13/">negotiate constructively</a> with unions on their home turf, the lack of union membership and the protections that go with it have proved a draw for them in the United States.</p>
<p>As journalist <a href="https://www.latimes.com/opinion/la-xpm-2011-may-15-la-oe-meyerson-europeans-20110515-story.html">Harold Meyerson has noted</a>, these foreign automakers embraced the opportunity to “slum” in America and “do things they would never think of doing at home.”</p>
<p>The absence of union representation is a major reason why.</p>
<p>Less than 5% of workers in six Southern states are union members, and only Alabama and Mississippi approach union membership levels above 7%, <a href="https://www.bls.gov/news.release/pdf/union2.pdf">according to the Bureau of Labor Statistics</a>. </p>
<p>That’s below the national average, which <a href="https://theconversation.com/1-in-10-us-workers-belong-to-unions-a-share-thats-stabilized-after-a-steep-decline-221571">slid to 10% in 2023</a>.</p>
<h2>Blaming unions for bad job prospects</h2>
<p>One way automotive employers in the South have blocked unions is by <a href="https://muse.jhu.edu/book/59212/">portraying them as outdated institutions</a> whose bloated contracts and rigid work rules destroy jobs by making domestic auto companies uncompetitive.</p>
<p>Automotive leaders in the South argue the region has developed an alternative labor relations model that <a href="https://www.automotivedive.com/news/is-unionizing-foreign-automakers-next-uaw-strike/698260/">provides management with flexibility</a>, offers wages and benefits superior to what local workers have earned previously and frees employees from any subordination to union directives. </p>
<p>Southern automakers also draw on another powerful resource in resisting the UAW: public intervention by top elected officials.</p>
<p>In 2014, when the UAW attempted to organize a Volkswagen plant in Chattanooga. Bob Corker, Tennessee’s junior U.S. senator and a former mayor of Chattanooga, weighed in as voting commenced.</p>
<p>Corker claimed he had received a pledge from Volkswagen’s management to expand production in Chattanooga <a href="https://newrepublic.com/article/116653/bob-corkers-uaw-intervention-chattanooga-vw-vote-speaks-volume">if workers voted against the union</a>. </p>
<p>Three years later, Mississippi Gov. Phil Bryant similarly urged Nissan workers to reject the UAW. </p>
<p>“If you want to take away your job, if you want to end manufacturing as we know it in Mississippi, just start expanding unions,” <a href="https://www.mpbonline.org/blogs/news/state-leaders-unionizing-nissan-will-not-help-mississippi/">Bryant said in 2017</a>.</p>
<p>A majority of the autoworkers <a href="https://www.nytimes.com/2017/08/05/business/nissan-united-auto-workers-union.html">heeded their conservative leaders’ advice</a> in both cases and <a href="https://www.washingtonpost.com/news/wonk/wp/2014/02/14/united-auto-workers-lose-historic-election-at-chattanooga-volkswagen-plant/">voted against joining the UAW</a>.</p>
<h2>Making dire warnings</h2>
<p>With the UAW ramping up its organizing efforts again, Southern governors are sounding alarms once more.</p>
<p>“The Alabama model for economic success is under attack,” <a href="https://www.madeinalabama.com/2024/01/gov-ivey-unions-want-to-target-one-of-alabamas-crown-jewel-industries-but-im-standing-up-for-alabamians-and-protecting-our-jobs/">warned Alabama Gov. Kay Ivey</a>. </p>
<p>She then asked workers: “Do you want continued opportunity and success the Alabama way? Or do you want out-of-state special interests telling Alabama how to do business?”</p>
<p>Unions “have crippled and distorted the progress and prosperity of industries and cities in other states,” <a href="https://governor.sc.gov/news/2024-01/2024-state-state-address-governor-henry-mcmaster">South Carolina Gov. Henry McMaster</a> declared in his Jan. 24, 2024, State of the State address. He then issued an ominous call: “We will fight” the UAW’s labor organizers “all the way to the gates of hell. And we will win.” </p>
<p>The UAW counters that union membership means workers will get predictable raises, <a href="https://uaw.org/join/#toggle-id-14">better benefits and improved workplace policies</a>.</p>
<h2>Changing context</h2>
<p>Although these arguments from anti-union politicians haven’t changed much over the years, the context certainly has.</p>
<p>The <a href="https://www.npr.org/2023/11/12/1211602392/uaw-auto-strike-deals-ratified-big-three-shawn-fain">UAW’s big wins on pay and benefits</a> resulting from its 2023 strike against General Motors, Ford and Stellantis have increased its clout and credibility. </p>
<p>Many automakers with a U.S. workforce not covered by the UAW – including Volkswagen, Honda, Hyundai and other foreign transplants – responded by raising pay at their Southern plants. The union justifiably describes those raises as a “<a href="https://www.cnn.com/2023/11/14/cars/uaw-labor-toyota-honda-hyundai/index.html">UAW bump</a>.”</p>
<p>The UAW will presumably cite these pay hikes in its outreach to <a href="https://theconversation.com/next-on-the-united-auto-workers-to-do-list-adding-more-members-who-currently-work-at-nonunion-factories-to-its-ranks-217064">workers at Tesla</a> and other nonunion companies involved in electric vehicle and battery production in which the industry is investing heavily. </p>
<p>“Nonunion autoworkers are being left behind,” <a href="https://uaw.org/join/">the UAW’s recruiting website</a> warns. “Are you ready to stand up and win your fair share?”</p>
<p>The pitch continues: “It’s time for nonunion autoworkers to join the UAW and win economic justice at Toyota, Honda, Hyundai, Tesla, Nissan, BMW, Mercedes-Benz, Subaru, Volkswagen, Mazda, Rivian, Lucid, Volvo and beyond.”</p>
<p>Some Southern autoworkers, meanwhile, have been <a href="https://uaw.org/wp-content/uploads/2024/02/IMPROVING-WORK-LIFE-BALANCE-AT-VOLKSWAGEN.pdf">expressing concerns over scheduling</a>, safety, two-tier wage systems and workloads that they believe a union could help resolve.</p>
<p>It’s also clear they’ve been emboldened by the gains they have seen UAW members make. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/TXMNbGS2Hy0?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Southern autoworkers applaud the union-organizing drive underway at a VW factory in Chattanooga, Tennessee.</span></figcaption>
</figure>
<h2>Revving up</h2>
<p>The UAW’s campaign is just starting to rev up.</p>
<p>In accordance with its “<a href="https://uaw.org/join/#toggle-id-6">30-50-70</a>” strategy, the union is announcing the share of workers who have signed union cards in stages. Once it hits 30% at a factory, the UAW will announce publicly that an organizing campaign is underway. At the 50% mark, it will hold a public rally for workers that includes their neighbors and families, as well as <a href="https://www.motortrend.com/news/2024-motortrend-person-of-year-shawn-fain-uaw-president/">UAW President Shawn Fain</a>.</p>
<p>Once it gains support from 70% of a plant’s workers, the UAW says it will seek voluntary recognition by management.</p>
<p>A recent National Labor Relations Board ruling provides unions with additional leverage in this process. If management refuses to recognize the union’s request, the employer would then be required to seek an NLRB representation election.</p>
<p>To win, unions need a majority of those voting. Under the new rule, if management is found to have interfered with workers’ rights during the election process, it could then be <a href="https://www.nlrb.gov/news-outreach/news-story/board-issues-decision-announcing-new-framework-for-union-representation">required to bargain with the union</a>.</p>
<p>So far, the UAW has announced that it has obtained the support of more than half the workers at factories belonging to two of the 13 nonunion automakers it’s targeting: a <a href="https://uaw.org/were-taking-the-lead-over-half-of-volkswagen-workers-in-chattanooga-tennessee-sign-cards-to-join-the-uaw-in-less-than-60-days/">Volkswagen plant in Chattanooga</a>, Tennessee, and a
<a href="https://www.theguardian.com/us-news/2024/jan/10/uaw-union-mercedes-benz-alabama">Mercedes-Benz factory near Tuscaloosa</a>, Alabama. It has also obtained 30% support at a <a href="https://thehill.com/business/4440930-hyundai-workers-alabama-uaw/">Hyundai plant in Alabama</a> and a <a href="https://labornotes.org/2024/03/toyota-workers-critical-engine-plant-launch-uaw-union-drive">Toyota engine factory in Missouri</a>.</p>
<p>I believe that the stakes are high for all workers, not just those in the auto industry.</p>
<p>As <a href="https://www.politico.com/news/2023/09/05/unions-south-labor-organizing-ussw-seiu-00114085">D. Taylor, the president of Unite Here</a>, a union that represents workers in a wide range of occupations, recently observed: “If you change the South, you change America.”</p><img src="https://counter.theconversation.com/content/223162/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>I was briefly a UAW local union member in the 1970s.</span></em></p>Despite intermittent efforts over the past three decades, the UAW union has been unable to organize employees of foreign-based automakers in states such as Alabama and Tennessee.Bob Bussel, Professor Emeritus of History and Labor Education, University of OregonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2024062023-03-26T12:51:07Z2023-03-26T12:51:07ZDid Canada and Ontario pay too much money for Volkswagen’s battery plant?<figure><img src="https://images.theconversation.com/files/517051/original/file-20230322-28-ykgcz3.JPG?ixlib=rb-1.1.0&rect=0%2C78%2C2614%2C1350&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A driver backs a Volkswagen e-Golf into a parking spot in Peterborough, Ont. Volkswagen has announced plans to build an electric vehicle battery plant in St. Thomas, in southwestern Ontario.</span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Doug Ives</span></span></figcaption></figure><p>Volkswagen recently announced its intention to <a href="https://www.cbc.ca/news/canada/london/a-volkswagen-ev-battery-plant-is-coming-to-st-thomas-ont-but-not-everyone-s-charged-up-1.6777757">build a plant in St. Thomas, Ont.</a> for electric vehicle batteries.</p>
<p>While the <a href="https://lfpress.com/business/local-business/thousands-of-spinoff-jobs-expected-from-vws-st-thomas-electric-battery-plant">news is being described as a major victory</a>, until more information emerges, the deal raises lots of questions about what we actually won, why we won it and whether it was worth the price — which I assume is the range between $1 billion and $10 billion.</p>
<h2>What does it mean?</h2>
<p>Let’s start with the good news.</p>
<p>First, Volkswagen chose a Canadian location over jurisdictions across the United States and Mexico, affirming our residual competitiveness for automotive manufacturing. “Residual” because <a href="https://www.oica.net/category/production-statistics/2022-statistics/">Canadians now make about half as many vehicles as we did just a decade ago</a>.</p>
<p>Second, until now, Volkswagen has not had a manufacturing presence in Canada. Now, in addition to Toyota, Honda, Stellantis, GM and Ford, Canada can add a sixth automaker.</p>
<p>Third, the St. Thomas investment may spur additional investment by current and future suppliers.</p>
<p>Fourth, it’s possible that someday Volkswagen will look at its <a href="https://www.stthomas.ca/">St. Thomas battery plant</a> and the 1,500 acres of industrial land surrounding it and say: “We ought to build a vehicle assembly plant here too.”</p>
<p>Finally, the Volkswagen decision confirms the longstanding impact that active industrial policy measures combined with prolonged, visible support at senior levels of government has on investment attraction. </p>
<p>Indeed, much of the foundation of the Canadian automotive manufacturing industry as it exists today is the result of Ed Lumley’s work as Pierre Trudeau’s industry minister in the 1980s. That’s when companies like Honda, Toyota and others established assembly plants here.</p>
<p>While subsequent international obligations and trade agreements have curtailed the industrial policy tools available to our current federal minister, François-Philippe Champagne, and his Ontario counterpart, Vic Fedeli, those ministers’ performance on the Volkswagen file demonstrates the enduring relevance of the Lumley approach: persistence and visibility.</p>
<h2>Big questions</h2>
<p>The Volkswagen announcement engenders more confounding news too. These include doubts about Champagne’s and Fedeli’s claim that their pitch hinged on <a href="https://news.ontario.ca/en/release/1002817/canada-and-ontario-welcome-historic-investment-from-volkswagen">Canada’s offer of clean energy, critical minerals and a highly skilled workforce</a>. There are even bigger questions about the financial incentives they’ve offered.</p>
<p>While the clean energy narrative fits nicely with the EV low-carbon storyline, automakers’ practice shows that most battery plants in the U.S. are in locations where electricity <a href="https://www.theguardian.com/environment/2016/dec/08/electric-car-emissions-climate-change">is generated from sources that include coal, gas and oil.</a></p>
<p>When it comes to Canada’s much-promoted reserves of critical minerals, the reality is those minerals are still in the ground, and in very remote locations. The transition from “known reserve” to “operating mine” takes at least a decade, and Volkswagen plans to open its St. Thomas battery plant in 2027.</p>
<p>On the matter of skilled labour, automakers have long provided better pay than most other employers, assuring access to employees with above-average skills. Therefore, differences in overall worker education among jurisdictions has a limited effect, an outcome of automakers’ capacity to hire the cream of the available local crop, regardless of location.</p>
<figure class="align-center ">
<img alt="An autoworker with a ponytail, ball cap and face mask carries a box at an auto manufacturing plant." src="https://images.theconversation.com/files/517221/original/file-20230323-24-h3epng.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/517221/original/file-20230323-24-h3epng.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/517221/original/file-20230323-24-h3epng.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/517221/original/file-20230323-24-h3epng.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/517221/original/file-20230323-24-h3epng.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/517221/original/file-20230323-24-h3epng.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/517221/original/file-20230323-24-h3epng.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">An autoworker carries a box on the production line for the Honda CRV at a Honda plant in Alliston, Ont., in March 2022.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Chris Young</span></span>
</figcaption>
</figure>
<h2>Did Canada overpay?</h2>
<p>Finally, let’s examine the financial incentives. Because Canada is neither the <a href="https://www.tecma.com/low-cost-manufacturing-labor-in-mexicos/">low-cost North American location for automotive manufacturing</a> (that’s Mexico) nor the big North American market (the U.S.), it’s quite likely we overpaid.</p>
<p>So far, no one’s saying how rich the Volkswagen package is, citing sensitivity about ongoing negotiations with other potential automotive investors. </p>
<p>We can only assume the range is between $1 billion — that’s what LG-Stellantis got for its <a href="https://www.cnbc.com/2022/03/23/stellantis-lg-to-invest-4point1-billion-in-canadian-ev-battery-plant.html">$5 billion battery plant in Windsor last year</a>, then a record for Canada — and at least $10 billion. That amount is what a U.S.-placed battery plant can now expect via a combination of <a href="https://www.orrick.com/en/Insights/2022/11/Section-45X-of-the-Inflation-Reduction-Act-New-Tax-Credits-Available-to-Battery-Manufacturers">new measures put in place through the Inflation Reduction Act recently passed in the U.S.</a> and <a href="https://www.oklahoman.com/story/news/2023/03/13/volkswagen-electric-vehicle-plant-built-canada-not-oklahoma/69966935007/">individual state-backed support</a>.</p>
<p>Beyond that, the only thing we can be confident of is that the Canada-Ontario package did not mimic the approach of Nuevo Leon, Mexico, the location of a $10 billion Tesla battery factory. When that plant was announced earlier this month, it was confirmed <a href="https://www.reuters.com/technology/mexico-cant-match-us-incentives-proposed-tesla-battery-plant-minister-says-2023-03-04/">no government incentives had been offered</a>.</p>
<p>If the Canada-Ontario package turns out to be near the top of the scale, it was too expensive.</p>
<p>The all-in payroll for a 3,000-person battery plant in Canada over 30 years is about $10 billion, an amount that would effectively eliminate the payroll gap with Mexico. Matching Mexico’s labour costs is not a sustainable approach to industrial policy.</p>
<figure class="align-center ">
<img alt="Two men shake hands while two other men look on. A Canadian flag and a German flag stand in the background." src="https://images.theconversation.com/files/517046/original/file-20230322-984-6q37kh.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/517046/original/file-20230322-984-6q37kh.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/517046/original/file-20230322-984-6q37kh.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/517046/original/file-20230322-984-6q37kh.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/517046/original/file-20230322-984-6q37kh.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/517046/original/file-20230322-984-6q37kh.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/517046/original/file-20230322-984-6q37kh.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Former Volkswagen CEO Herbert Diess and Canadian Minister of Innovation François-Philippe Champagne sign an agreement as Canadian Prime Minister Justin Trudeau and Chancellor of Germany, Olaf Scholz, look on at an event hosted by the Canadian-German Chamber of Industry and Commerce in Toronto in August 2022.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Chris Young</span></span>
</figcaption>
</figure>
<h2>How else could $10 billion have been spent?</h2>
<p>For $10 billion, Canada could have launched its own EV maker. Instead of making batteries in a single plant in Ontario using technology developed in Europe for vehicles designed in Germany and assembled in the U.S. and Mexico, Canadians could have been steering their own creation, directing the most knowledge-intensive, highest-value aspects of the automotive value chain to Canadians.</p>
<p>That’s the approach planned or pursued <a href="https://www.hurriyetdailynews.com/togg-first-turkish-vehicle-sharing-pride-of-85-million-turks-erdogan-178088">by Turkey</a>, <a href="https://europe.autonews.com/automakers/poland-chooses-geely-ev-platform">Poland</a> and <a href="https://www.aljazeera.com/economy/2021/4/29/is-saudi-arabia-going-to-rev-up-a-homegrown-ev-maker">Saudi Arabia</a>.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1625253558227464216"}"></div></p>
<p>That said, the likelihood of a Turkish, Saudi, Polish or Canadian-inspired start-up becoming an enduring industrial policy-driven triumph is highly uncertain.</p>
<p>As it is, within a few years, the contractual production, employment and investment commitments that Volkswagen has agreed to in return for our governments’ largesse will lift, loosening Volkswagen’s ties to Canada. The point: throwing billions of dollars at an automotive enterprise, whether to build a single battery plant or to launch a brand-new automaker, is risky.</p>
<h2>The devil’s in the details</h2>
<p>Until we see details, we can only hope the Volkswagen package lies at the lower end of the scale: closer to the amount extended to LG-Stellantis for its Windsor battery plant last year. </p>
<p>While an offer in the $1 billion range does not say “we’ll build you your plant” or “we’ll use government money to eliminate a labour cost gap with Mexico,” it does telegraph: “We’re serious; we want you here; we want to help you succeed.” And if Volkswagen accepted an amount closer to $1 billion than $10 billion, it would suggest a similar commitment by the automaker.</p>
<p>In the end, the Volkswagen investment represents an important victory for St. Thomas and the southwestern Ontario automotive industry. Right now, it’s also a win for the economic development ministers in Ottawa and Queen’s Park. </p>
<p>What we don’t know yet is if the St. Thomas plant was “facilitated” with an incentive in the $1 billion range, or “bought” with a $10 billion cheque. When we learn that, we’ll know if the Volkswagen plant is truly a victory for Canada, Ontario and the people who paid for it.</p><img src="https://counter.theconversation.com/content/202406/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Greig Mordue receives funding from Social Science and Humanities Research Council (SSHRC)</span></em></p>For the kind of money the federal and Ontario governments probably spent for a Volkswagen EV battery plant in southwestern Ontario, Canada might have been able to launch its own EV maker.Greig Mordue, Associate Professor, ArcelorMittal Dofasco Chair in Advanced Manufacturing Policy, Faculty of Engineering, McMaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1827872022-05-11T10:52:31Z2022-05-11T10:52:31ZElectric car supplies are running out – and could drastically slow down the journey to net-zero<figure><img src="https://images.theconversation.com/files/462442/original/file-20220511-16-nh15g8.jpg?ixlib=rb-1.1.0&rect=1424%2C0%2C4059%2C2593&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/power-supply-electric-car-charging-station-1603896640">Shutterstock/ALDECA studio</a></span></figcaption></figure><p>The road map to replacing old fashioned carbon emitting cars with electric vehicles is well developed – at least in theory. All the major car makers (and even some of <a href="https://www.lotuscars.com/en-GB/eletre/">the smaller ones</a>) are publicly committed to electric. </p>
<p>But actually buying a new electric car? That’s another matter entirely.</p>
<p>Volkswagen, the largest car manufacturer in the world, recently announced it had <a href="https://www.ft.com/content/96b7acaf-7984-4eab-83d7-940aa4ca20d4">sold out</a> of electric vehicles in the US and Europe for the rest of 2022. Ford’s E-Transit sold out before it had even <a href="https://insideevs.com/news/545291/ford-etransit-sold-out/">started making them</a>.</p>
<p>Even the most basic (lower specification) version of Tesla’s Model 3 vehicle will now not be <a href="https://www.tesla.com/en_gb/model3/design#overview">delivered for over a year</a>, despite the company being capable of the largest production volumes in the world – a recent <a href="https://www.reuters.com/world/asia-pacific/tesla-others-prepare-shanghai-factory-restarts-city-aims-ease-lockdown-2022-04-18/">halt in production in China</a> notwithstanding. </p>
<p>Turn the clock back to 2019, just when the electric vehicle revolution was really getting going <a href="https://www.smmt.co.uk/2019/07/bump-in-the-road-to-zero-as-low-emission-car-demand-reverses-in-june/">in terms of sales figures</a>, and Tesla had stockpiles of cars in the UK they could deliver to customers within days. Now, even though they can produce vastly more vehicles, you will likely wait a long time for delivery of a new one.</p>
<p>For now, then, motorists who aspire to own a brand new electric vehicle will struggle to move forward. So too will those governments who have plans to ban the sale of new petrol and diesel cars. In Norway for example, a ban is due to come into force <a href="https://www.autocar.co.uk/car-news/industry/norway-phase-out-petrol-and-diesel-cars-2025?msclkid=96fca194d10a11ecb5761e950a1a5abb">in 2025</a>; in the UK, it is <a href="https://www.bbc.co.uk/news/science-environment-54981425?msclkid=ba6a0184d10a11ecb5dcfb5b8b323802">2030</a>.</p>
<p>These targets rely in large part on the usual cycle of <a href="https://www.fleetfinancials.com/155875/how-to-calculate-optimal-replacement-cycles">vehicle replacement</a>. And for old vehicles to be replaced by new ones, the supply needs to be at a level that can replenish those being scrapped, as well as allowing for some growth in demand. </p>
<p>At the moment, there are simply not enough electric vehicles being made to meet that demand. I am involved in <a href="https://aru.ac.uk/business-and-law/research/projects/eastern-new-energy-ene">ongoing research</a> looking into how and when various firms are replacing their old internal combustion engine vehicles with electric ones – and one of the major barriers seems to be sourcing them. Government targets for roads full of electric vehicles may soon seem hopelessly unrealistic.</p>
<h2>End of the road?</h2>
<p>So what has gone wrong? To begin with, in the early days of electric vehicles, manufacturers were playing their cards safe. This was a new and unknown world for them, and it wasn’t clear if other competing technologies (<a href="https://theconversation.com/hydrogen-cars-wont-overtake-electric-vehicles-because-theyre-hampered-by-the-laws-of-science-139899">such as hydrogen power</a>) might be more popular with consumers. But batteries won out, and consumer demand – helped along by those plans to ban petrol and diesel – soared. </p>
<p>Current issues have been brought on in part by COVID-19 affecting global supply chains and a shortage of semiconductors, a vital component of modern vehicles. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-the-world-ran-out-of-semiconductors-156532">How the world ran out of semiconductors</a>
</strong>
</em>
</p>
<hr>
<p>In spring 2022, Tesla had to close its Shanghai factory <a href="https://www.reuters.com/world/asia-pacific/tesla-others-prepare-shanghai-factory-restarts-city-aims-ease-lockdown-2022-04-18/">for three weeks</a> due to lockdowns in China. Before that, it was producing around <a href="https://insideevs.com/news/581538/tesla-giga-shanghai-ramping-quickly/">2,000 cars per day</a> for the Asian and European markets, so may have lost production of around 42,000 vehicles. </p>
<p>This equates to around three months’ supply for a market like the UK. And just when it got the factory back open, it had to <a href="https://www.msn.com/en-us/money/companies/tesla-production-lags-in-shanghai-due-to-parts-shortages-covid-restrictions/ar-AAX85x9?ocid=uxbndlbing&msclkid=28fd0089d10b11ec84085b185b4613c8">reduce production</a> due to supply chain issues. </p>
<p>This is because Tesla doesn’t make all the parts to build the cars in the one factory (although it produces more than the <a href="https://cleantechnica.com/2022/01/19/vertical-integration-teslas-secret-to-overcoming-challenges/">industry average</a>), so as the factories that supply Tesla also shut due to lockdowns, the necessary parts do not arrive. CEO Elon Musk has now suggested his company may stop taking orders, <a href="https://www.standard.co.uk/business/toyota-tesla-elon-musk-inflation-supply-chains-vertu-b999312.html?msclkid=648e7944d11511ecb2d463ab118eb2fe">telling</a> the Financial Times: “The frustration we’re seeing from customers is being unable to get them a car.”</p>
<p>He added: “We are actually probably going to stop taking orders beyond a certain period of time because some of the timing is a year away.”</p>
<p>Again, it is certainly not just Tesla that is affected. Semiconductor issues are ongoing, and many vehicles are being <a href="https://thedriven.io/2022/02/25/polestar-cuts-price-of-pilot-pack-after-features-removed-due-to-chip-shortage/">shipped without features</a>, or parked in fields <a href="https://insideevs.com/news/584672/ford-f150-lightning-stockpile-supply-constraints/">waiting for parts</a>. </p>
<p>These backlogs will take a long time to clear, and will be a major headache for everyone concerned. Manufacturers and customers will be frustrated, while politicians relying on electric vehicles for the future of transport policy may need to adjust their expectations and demands. </p>
<p>Most importantly, the current situation is a terrible blow for global efforts to <a href="https://theconversation.com/polluting-suvs-will-be-on-roads-for-the-next-two-decades-what-should-we-do-with-them-158594">reduce carbon emissions</a> and deal with climate change.</p>
<p>Pushing back important targets on road vehicles could be catastrophic for the planet, but we still need vehicles. We may now have to shift towards using fewer cars through more ride-sharing, or look to alternative forms of transport, and even converting older cars to electric. If we don’t, the drive to net-zero could soon be running on empty.</p><img src="https://counter.theconversation.com/content/182787/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tom Stacey receives funding from ERDF. </span></em></p>Governments may be forced to put back deadlines to shift away from petrol and diesel.Tom Stacey, Senior Lecturer in Operations and Supply Chain Management, Anglia Ruskin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1762702022-03-10T11:14:01Z2022-03-10T11:14:01ZWhy big firms are rarely toppled by corporate scandals – new research<figure><img src="https://images.theconversation.com/files/450729/original/file-20220308-23-ibsoam.jpg?ixlib=rb-1.1.0&rect=53%2C29%2C3940%2C2634&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/modern-corporate-buildings-skyscrapers-city-london-1599442681">Shutterstock/Donatas Dabravolskas</a></span></figcaption></figure><p>Everyone makes mistakes. And that includes the world’s biggest companies, which are reliably prone to gaffes, errors of judgment and wrongdoing. </p>
<p>Some of these moments could even be labelled as corporate scandals – the kind of incident which shoves firms into the spotlight and places their activities under detailed public scrutiny. </p>
<p>But do these events do lasting damage? Does an oil spill, fraudulent activity or other unethical behaviour really affect highly valued reputations, sales and market value?</p>
<p>Our research suggests not. In fact, <a href="https://onlinelibrary.wiley.com/doi/10.1111/1467-8551.12365">our analysis</a> of the effects of a wide variety of business scandals shows that only rarely is the effect as severe as we might imagine. </p>
<p>Instead, it seems the public has a strong tendency to forget and move on. And even initial unplanned (and at the time unwanted) attention can lead to greater brand awareness, proving the old adage that any publicity is good publicity.</p>
<p>Take the recent <a href="https://news.sky.com/story/joe-rogan-and-spotify-who-is-the-us-podcaster-and-what-is-the-covid-misinformation-row-all-about-12529388">furore over Spotify</a>. In early 2022, the world’s largest music streaming service was accused by science and health professionals of offering a platform for misinformation about COVID.</p>
<p>So what happened next? At first, there was a dip in the stock market price <a href="https://www.businessinsider.com/spotifys-shares-dropped-by-12-after-neil-young-pulls-music-2022-1?r=US&IR=T">of about 12% </a> when artists including Neil Young, Joni Mitchell and Graham Nash announced they were withdrawing their music from the service. This financial hiccup was followed by an immediate <a href="https://theweek.com/coronavirus/1009616/spotify-stock-rebounds-after-joe-rogan-apology">stock price rebound </a> that is likely to climb beyond pre-scandal levels. Spotify went on to <a href="https://www.independent.co.uk/news/world/americas/spotify-joe-rogan-podcast-covid-label-misinformation-b2003821.html">add disclaimers</a> to its COVID-related content and removed some content. </p>
<p>So in the long term, this will probably turn out to be nothing more than a slight bump in the road for Spotify. As a business, it provides a hugely popular service and boasts 172 million premium subscribers around the world, 28 million of whom joined in 2020. How many of them will cancel their subscriptions and forgo access to their carefully curated playlists because Young and Mitchell have decided to walk?</p>
<p>And while it is true that the company’s business model relies on musicians and other content providers, the reality is that most artists cannot afford to not be on the platform. Giving Spotify the benefit of the doubt, it’s entirely possible it made an honest mistake and underestimated how sensitive some people have become to discussions about the pandemic. Customers will probably make peace with this. </p>
<p>Likewise, Netflix will doubtlessly survive recent controversies over some of its content, such as the British comedian <a href="https://www.theguardian.com/culture/2022/feb/04/jimmy-carr-condemned-for-joke-about-gypsies-in-netflix-special">Jimmy Carr’s comments</a> about the Holocaust. With so many subscribers around the world attracted by the service’s wide range of content, Netflix is another example of an industry giant that can shrug things off. </p>
<p>And remember <a href="https://www.cbsnews.com/news/facebook-stock-price-recovers-all-134-billion-lost-in-after-cambridge-analytica-datascandal/">Facebook’s market collapse</a> after it was linked to the personal data of millions of users being collected by the political consulting firm Cambridge Analytica? Don’t feel bad if you don’t, it lasted about seven seconds (OK, maybe seven days). The company then recovered <a href="https://www.cbsnews.com/news/facebook-stock-price-recovers-all-134-billion-lost-in-after-cambridge-analytica-datascandal/">all of the US$134 billion</a> (£102 billion) it had previously lost in market value.</p>
<h2>Law and disorder</h2>
<p>So what makes some scandals stick? In our research, we found that only certain scandals tend to have significant negative effects on corporate reputations and performance. One apparently vital element is a company being found liable in a court of law. The legal process gives weight and depth to a scandal that might otherwise have quickly disappeared.</p>
<p>The <a href="https://www.bbc.co.uk/news/business-34324772">Volkswagen emissions scandal</a> for example, started in 2015. Seven years later, the company is still negotiating settlements in class action lawsuits brought against it for cheating on emissions tests. </p>
<figure class="align-center ">
<img alt="The Royal Courts of Justice in London." src="https://images.theconversation.com/files/450756/original/file-20220308-27-19gyrvm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/450756/original/file-20220308-27-19gyrvm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=407&fit=crop&dpr=1 600w, https://images.theconversation.com/files/450756/original/file-20220308-27-19gyrvm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=407&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/450756/original/file-20220308-27-19gyrvm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=407&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/450756/original/file-20220308-27-19gyrvm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=512&fit=crop&dpr=1 754w, https://images.theconversation.com/files/450756/original/file-20220308-27-19gyrvm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=512&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/450756/original/file-20220308-27-19gyrvm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=512&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">It’s the court that counts.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/royal-courts-justice-london-136279025">Shutterstock/chrisdorney</a></span>
</figcaption>
</figure>
<p>The company’s share price dropped 30% immediately <a href="https://money.cnn.com/2015/09/24/investing/volkswagen-vw-emissions-scandal-stock/">after the scandal</a> (it has improved since the move towards electric vehicles) and Volkswagen’s reputation is still tarnished by the event, as it continues to attract significant regulatory scrutiny, affecting its <a href="https://www.morningstar.co.uk/uk/news/216954/stock-of-the-week-volkswagen.aspx">status among investors</a>. </p>
<p>Similarly, years after being found responsible for the <a href="https://www.epa.gov/enforcement/deepwater-horizon-bp-gulf-mexico-oil-spill">Deepwater Horizon disaster</a> in the Gulf of Mexico in 2010, BP is still paying the price of its negligence, as it continues to be embroiled in <a href="https://www.reuters.com/legal/transactional/5th-circuit-revives-bps-fight-over-deepwater-cleanup-workers-claims-2022-01-20/">many lawsuits</a>. And following regulatory intervention, German financial services provider Wirecard is not even around anymore to tell the story of how €1.9 billion (£1.6 billion) <a href="https://www.cnbc.com/2020/06/29/enron-of-germany-wirecard-scandal-casts-a-shadow-on-governance.html">disappeared from its balance sheet</a>. </p>
<p>Yet without corporate culpability determined by the court of law, very few accusations stick, even in the face of media scrutiny. Without clear evidence of harm caused to a group of people, there is very little in the way of measurable negative impact, or demand for compensation for the damage caused. </p>
<p>As consumers, we often like to signal moral superiority and enjoy some of the drama provided by the corporate discomfort of a juicy scandal. But our research found that people’s response to a company is driven by more mundane considerations. These are price, convenience, loyalty, ease of use and habit – and there aren’t many scandals considered quite scandalous enough to make us change any of those.</p><img src="https://counter.theconversation.com/content/176270/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Irina Surdu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The mud rarely sticks.Irina Surdu, Associate Professor of International Business Strategy, Warwick Business School, University of WarwickLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1742612022-01-04T19:00:56Z2022-01-04T19:00:56ZFrom Facebook to Volkswagen and Samsung: why national stereotypes matter during corporate crises<p>At the end of 2021, Facebook experienced the perfect storm.</p>
<p>On October 4, the company’s services experienced an outage that <a href="https://www.nytimes.com/2021/10/04/technology/facebook-down.html">lasted six hours</a> during which 2.9 billion users were not able to access Facebook, Instagram, WhatsApp, and Oculus due to a <a href="https://www.bloomberg.com/news/articles/2021-10-04/explaining-the-protocol-failure-that-triggered-facebook-s-outage">technical error</a>. The <a href="https://www.snopes.com/news/2021/10/04/facebook-ad-revenue/">estimated loss</a> to the global economy was estimated at almost US$ 1 billion, or US$ 150 million per hour.</p>
<p>At the same time, another crisis was rapidly picking up pace. On October 1, the Wall Street Journal had published <a href="https://www.wsj.com/articles/the-facebook-files-11631713039">“The Facebook Files”</a>, a collection of leaked documents that provide rare insight into the inner workings of the organization and the findings of its internal research.</p>
<p>The documents suggest that Facebook is aware of the ill effects its services have, but does little to fix them. Facebook’s own <a href="https://www.theverge.com/2021/9/29/22701445/facebook-instagram-mental-health-research-pdfs-documents">internal research</a> found that Instagram harms teens’ mental health and contributes to eating disorders and suicidal thoughts. On October 5, just one day after the global outage, Frances Haugen, the whistle-blower behind the leaked documents, appeared before U.S. congress and stated that Facebook prioritises <a href="https://www.bbc.com/news/technology-58784615">growth over safety</a>.</p>
<hr>
<p><strong>Lire cet article en français</strong>: <a href="https://theconversation.com/facebook-volkswagen-samsung-comment-les-stereotypes-nationaux-influent-sur-le-pardon-accorde-aux-entreprises-fautives-170486">Facebook, Volkswagen, Samsung… Comment les stéréotypes nationaux influent sur le pardon accordé aux entreprises fautives</a></p>
<hr>
<p>Two crises at a time, calling Facebook’s ability and morality into question. But will these corporate crises hurt the company long-term? And if so, how much and in what ways?</p>
<h2>The aftermath of corporate crises</h2>
<p>Corporate crises can result in severe <a href="https://link.springer.com/article/10.1057%2Fbm.2015.38">retaliation</a> against the companies at fault.</p>
<p>Consumers may spread negative information about the company on social media, shun the brand, or boycott the company’s products. Whether consumers will seek revenge depends in part on whether the crisis calls a company’s ability or morality into question.</p>
<p>In 2016, Samsung suspended sales of the Galaxy Note 7 and announced a global recall after it was found that a manufacturing defect in the phones’ batteries had caused some of them to generate excessive heat, resulting in <a href="https://www.theverge.com/2016/9/2/12767670/samsung-galaxy-note-7-recall-fire-risk">fires and explosions</a>.</p>
<p>The scandal affected consumers’ perceptions about the safety of their smartphones and caused the company to lose billions in value in the stock market. But the problem with Samsung Galaxy Note 7 <a href="https://www.washingtonpost.com/business/how-samsung-moved-beyond-its-exploding-phones/2018/02/23/5675632c-182f-11e8-b681-2d4d462a1921_story.html">did not largely affect customer trust</a> the brand and nearly <a href="https://www.reportlinker.com/insight/samsung-galaxy-s8-trust.html">nine out of 10 existing customers</a> said they would consider a Samsung phone for their next purchase just a few months after the scandal. This was partly because it was seen as a crisis of ability rather than morality.</p>
<p>By contrast, when Volkswagen was caught cheating on emissions testing, making its diesel cars appear up to 40 times less polluting than they actually were, the German company was not just hit by <a href="https://hbr.org/2016/09/what-100000-tweets-about-the-volkswagen-scandal-tell-us-about-angry-customers">social media firestorms</a> and long-running boycott campaigns, but also recorded its <a href="https://www.theguardian.com/business/2016/may/31/vw-volkswagen-profits-down-20-diesel-emissions-scandal">first annual loss</a> in more than 20 years. Years later, Volkswagen <a href="https://fortune.com/2020/10/06/volkswagen-vw-emissions-scandal-damages/">emissions damages</a> are still rolling in. Because it relates to a perceived ethical lapse, this crisis was seen as a moral failing.</p>
<p>But another factor seems influence how the public reacts to a corporate crisis: a company’s country of origin. During “dieselgate”, for example, the words “German” and “Germany” were among the <a href="https://hbr.org/2016/09/what-100000-tweets-about-the-volkswagen-scandal-tell-us-about-angry-customers">five most frequently used words</a> relating to the scandal on Twitter. As these searches make clear, Volkswagen is closely associated with Germany. South Korean Samsung, on the other hand, is frequently <a href="https://doi.org/10.1016/j.jbusres.2017.05.014">misclassified as Japanese</a>.</p>
<p>Our <a href="https://doi.org/10.1177/1069031X20983806">new research</a> adds to existing evidence which shows that where a company comes from can influence how consumers react to corporate crises.</p>
<h2>Warm and cold countries</h2>
<p>The basic premise is that a company’s country of origin can evoke certain stereotypes. That is, the associations of brands with countries, for example, Facebook and the United States or Volkswagen and Germany, activate national stereotypes.</p>
<p>Previous research has shown that consumers stereotype countries in terms of two dimensions: <a href="https://www.emerald.com/insight/content/doi/10.1108/02651330810851881/full/html">warmth and competence</a>. Countries consumers perceive as friendly, cooperative, and trustworthy are considered “warm”, while “cold” countries are viewed as having antagonistic, competitive intentions. Meanwhile, countries consumers perceive as powerful and capable of acting on their intentions are considered <a href="https://doi.org/10.1108/02651330810851881">“competent”</a> or “incompetent,” if they are not. Consumers extend the warmth and competence they associate with a particular country to the companies that come from that country.</p>
<p>This “country-company” <a href="https://doi.org/10.1037/0022-3514.35.4.250">halo effect</a> is something we regularly see in non-crisis settings, in which we blindly believe in the superior quality of French wine, Swiss chocolate, and German cars, simply based on their origins.</p>
<p>Using several experiments, our research tested the presumed psychological process of this effect in times of crisis. We found that consumers’ negative emotional responses (such as contempt, anger, and disgust) and their intention to retaliate against the wrong-doing company (for example, through a boycott) depend on their <a href="https://doi.org/10.1016/j.obhdp.2008.06.001">perception of corporate greed</a>. Put simply, public outrage is likely to form only if consumers believe that the damage caused is due to the company’s pursuit of profits.</p>
<p>Country stereotypes matter in this psychological process because consumers may rely on them to make inferences about the company’s underlying intentions. We found that perceived country warmth can lead consumers to discount negative information about any potential greedy intentions, which in turn prevents negative emotions and retaliation.</p>
<p>But the buffering effect of country warmth is limited to corporate ability crises. Negative information that calls the company’s adherence to moral norms into question is <a href="https://doi.org/10.1016/j.jbusres.2013.12.007">harder to discount</a>, no matter the country stereotype.</p>
<p>Our findings indicate that a warm country-of-origin acts as an “insurance policy” for companies from that country against the unfavourable consequences of a crisis. Companies should be aware of this effect and have a clear understanding of the extent to which consumers associate their brand with a specific country, and the extent to which they perceive that country as warm, friendly, and trustworthy.</p>
<p>The public condemns companies more when they violate ethical standards than when their professional competence is at issue. If consumers perceive a crisis to be morally concerning, the buffering effect of country warmth vanishes and can no prevent the company from consumers’ potential retaliatory actions, like negative word-of-mouth or boycotting.</p>
<p>So, what could this mean for Facebook in 2022? In late 2021, Facebook <a href="https://www.nytimes.com/2021/10/29/business/dealbook/facebook-meta-rebranding.html">rebranded itself as Meta</a>, reflecting the company’s reorientation toward virtual reality. These rebranding efforts may also help to leave behind the bad press surrounding Facebook. Whether Meta really starts with a clean slate or carries the baggage of the past remains to be seen. Certainly, the public will keep a close eye on it.</p><img src="https://counter.theconversation.com/content/174261/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Les auteurs ne travaillent pas, ne conseillent pas, ne possèdent pas de parts, ne reçoivent pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'ont déclaré aucune autre affiliation que leur organisme de recherche.</span></em></p>A company’s country of origin can affect how consumers react to a scandal.Timo Mandler, Associate Professor of Marketing & International Business, TBS EducationCamilla Barbarossa, Professeure en marketing RSE, TBS EducationLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1734632021-12-10T16:32:25Z2021-12-10T16:32:25ZWhy Nissan is probably the most serious threat to Tesla out of the traditional automakers<figure><img src="https://images.theconversation.com/files/436943/original/file-20211210-68670-ve1moz.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Getting into gear</span> <span class="attribution"><a class="source" href="https://www.alamy.com/ukraine-kyiv-20-april-2021-blue-nissan-leaf-car-moving-on-the-street-editorial-image425031447.html?pv=1&stamp=2&imageid=177179B2-A2DF-49A9-992E-E97F63E55AB1&p=184237&n=0&orientation=0&pn=1&searchtype=0&IsFromSearch=1&srch=foo%3dbar%26st%3d0%26pn%3d1%26ps%3d100%26sortby%3d2%26resultview%3dsortbyPopular%26npgs%3d0%26qt%3dnissan%2520leaf%25202021%26qt_raw%3dnissan%2520leaf%25202021%26lic%3d3%26mr%3d0%26pr%3d0%26ot%3d0%26creative%3d%26ag%3d0%26hc%3d0%26pc%3d%26blackwhite%3d%26cutout%3d%26tbar%3d1%26et%3d0x000000000000000000000%26vp%3d0%26loc%3d0%26imgt%3d0%26dtfr%3d%26dtto%3d%26size%3d0xFF%26archive%3d1%26groupid%3d%26pseudoid%3d196110%26a%3d%26cdid%3d%26cdsrt%3d%26name%3d%26qn%3d%26apalib%3d%26apalic%3d%26lightbox%3d%26gname%3d%26gtype%3d%26xstx%3d0%26simid%3d%26saveQry%3d%26editorial%3d%26nu%3d%26t%3d%26edoptin%3d%26customgeoip%3dGB%26cap%3d1%26cbstore%3d1%26vd%3d0%26lb%3d%26fi%3d2%26edrf%3d0%26ispremium%3d1%26flip%3d0%26pl%3d">iurii Vlasenko</a></span></figcaption></figure><p>Nissan <a href="https://www.thetimes.co.uk/article/nissan-to-invest-billions-in-sunderland-plant-to-drive-electric-car-revolution-j70j95fmn">recently announced</a> a new £13 billion investment to help transition its business to being focused around electric vehicles (EVs). The investment is centred around its Sunderland plant in the north east of England, which already makes the popular Nissan Leaf, and a plan to build 23 new electric models by 2030. </p>
<p>But Nissan, like most traditional automakers, has a long way to go if it wants to catch Tesla. Elon Musk’s company <a href="https://autobala.com/these-are-the-top-10-best-selling-evs-in-the-world/220082/">is easily</a> the biggest seller of EVs in the world, with the Model 3 and Model Y shifting around <a href="https://ir.tesla.com/press-release/tesla-q3-2021-vehicle-production-deliveries">230,000 vehicles</a> per quarter between them worldwide. China’s SAIC is in second place thanks to its Wuling Hingguang Mini, which is the best selling EV in China. After that come Volkswagen, BYD and Hyundai. </p>
<p>So why are many of the traditional players that have built their businesses on internal combustion engines so far behind Musk, and can Nissan buck the trend?</p>
<h2>Why some have struggled</h2>
<p>Tesla created the first serial production EV with lithium-ion batteries in 2008 with the launch of the Roadster sports car. It has gone on to evolve a suite of vehicles whose range, performance and efficiency are arguably the best in the business – as reflected by <a href="https://www.bbc.co.uk/news/business-58993848">the company’s impressive</a> growth and profitability.</p>
<p>It makes sense that if you have been making EVs for the last decade, you’re probably more successful at making them now. You will have vastly more data in terms of how drivers use your vehicles, what goes wrong with them, and how to best manage suppliers of motors and batteries. </p>
<p>Nissan has certainly served its time, having debuted the Leaf in 2011, which is one of the best selling EVs of all time, having sold <a href="https://insideevs.com/news/443096/500000th-nissan-leaf-produced-sunderland-uk/">half a million</a> units over a decade. But if there has been a lesson in this sector, it’s that being successful at making vehicles with internal combustion engines does not guarantee success at making EVs. </p>
<p>An example is General Motors (GM). GM was there all the way back in the late 1990s with its ground-breaking EV1. These little cars, loved by their owners, showed how an all-electric future could look. But GM went on to crush the EV1s en-masse, saying <a href="https://www.nextpit.com/tbt-general-motors-ev1-controversy-and-crushed-innovation">they were</a> insufficiently popular, though conspiracy theorists have questioned whether it was ever serious about taking them to mass market. In the process, EV1s became the star of their <a href="https://www.imdb.com/title/tt0489037/">own documentary</a>. </p>
<p>GM tried again to crack EVs with its Volt in 2010, which was also popular until being killed in 2018 (the demise was blamed on an ageing production facility). It also launched the Bolt in 2017, which was designed to be a relatively cheap, long range EV. But while it achieves this, it has been plagued with battery issues. The knowledge that Bolt packs can catch fire has become so pervasive that car parks in the US <a href="https://insideevs.com/news/543282/parking-lots-ban-chevy-bolts/">have reportedly</a> been banning them from entering. </p>
<p><a href="https://www.electrive.com/2021/09/21/gm-declares-bolt-battery-problems-solved/">GM says</a> it now has a solution, and has recalled tens of thousands of Bolts to have their battery packs replaced. But as a result, production of new Bolts <a href="https://techcrunch.com/2021/12/02/gm-delays-production-of-new-chevy-bolt-evs-until-end-of-january/">is currently suspended</a> until late January. GM also promises some 20 new EV models by 2023, but recently came in <a href="https://electrek.co/2021/11/18/gm-promised-20-new-evs-by-2023-they-brought-zero-to-the-la-auto-show/">for criticism</a> after displaying no EVs at the 2021 LA Auto Show (whose theme was electrification). Given that President Biden <a href="https://www.bloomberg.com/news/articles/2021-11-24/biden-s-praise-for-gm-overlooks-tesla-s-actual-ev-leadership-kwdh01el">recently credited GM</a> with leading the industry in EV manufacture, this surely raises eyebrows. </p>
<p>Toyota was also a key player in moving the industry to greener vehicles with its hybrid cars of the late 1990s, but is now also playing catch up. It has only just, in December 2021, released its first volume production EV, <a href="https://www.toyota.co.uk/electric/bZ">the bZ</a>, after going much further than others with developing hydrogen-powered vehicles. Toyota’s hydrogen-powered Mirai failed to gain market share in the way that EVs with batteries have, <a href="https://newsroom.toyota.eu/toyotas-first-half-year-sales-growth-maintains-record-market-66-share/">selling just 316</a> in Europe in the first half of 2021. Toyota is <a href="https://electrek.co/2021/12/02/toyota-partners-byd-affordable-electric-car/">reportedly also</a> teaming up with China’s BYD to launch a US$30,000 EV in 2022. </p>
<p>Meanwhile, Volkswagen is the legacy automaker seen as most likely to catch up with Tesla’s EV production rate – <a href="https://www.ft.com/content/7e32dfb1-2282-40fa-9b10-181c01272ba3">potentially by 2024</a>. The German giant <a href="https://www.ft.com/content/398513ce-fc3e-4901-9670-382151acbb9c">is spending</a> some €35 billion (£29 billion) on the sector. But Volkswagen acknowledges that it takes them three times as long as Tesla to make its flagship EVs, making the gap in capabilities painfully apparent. It aims to narrow the gap to double in 2022. </p>
<h2>Nissan’s advantage</h2>
<p>If we have learnt anything from Tesla and also <a href="https://theconversation.com/china-is-on-course-to-build-the-best-cars-in-the-world-167661">Chinese EV entrants</a> such as NIO, BYD and XPeng, it’s that bespoke electric chassis make better electric cars. For example, Tesla’s Model 3 rival, the Polestar 2, was originally meant to be a petrol <a href="https://www.motorauthority.com/news/1122902_6-things-you-need-to-know-about-polestar">Volvo S40</a>, but adapting an internal combustion engine vehicle to be electric just doesn’t work as well. You end up with cars with <a href="https://cleantechnica.com/2021/12/08/what-is-the-key-difference-between-the-polestar-2-and-the-tesla-model-3-efficiency/">less range on the battery</a> and often less space inside. </p>
<p>Fortunately for Nissan and its alliance partner Renault, they already have such a bespoke EV platform. Known as <a href="https://www.renaultgroup.com/en/news-on-air/news/the-cmf-ev-platform-advances-the-new-generation-of-electric-vehicles/">CMF-EV</a>, it allows the group to share a number of components across different EVs and maximise the efficiency of manufacturing them.</p>
<p>From observing Tesla, the second vital factor to producing EVs at scale (and profitably) is to make your battery packs as <a href="https://electrek.co/2017/05/08/tesla-battery-director-gigafactory-supply-chain/">close to</a> the final assembly factory as possible, reducing transport cost and time. Again, Nissan ticks this box. Its Sunderland plant, which not only produces the Leaf but will also produce its successor, is situated very close to the <a href="https://www.theguardian.com/business/2021/oct/25/uk-battery-gigafactory-electric-car-sunderland-envision-nissan">Envision battery “gigafactory”</a> that supplies it. Chinese-owned Envision plans to produce 38GWh of batteries a year – enough to power 500,000 new cars, which would put Nissan on par with Tesla’s factories in the US and China.</p>
<p>So with its years of EV knowledge, efficient battery supply chains and bespoke EV platform, Nissan could very well be the legacy automaker that ends up being able to compete with the new kids on the block. But if it fails to capitalise on its advantages to reinvent itself as an EV-first company, we have seen from numerous other companies that being an early runner is certainly not enough on its own.</p><img src="https://counter.theconversation.com/content/173463/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tom Stacey receives funding from ERDF. </span></em></p>Elon Musk’s dedicated EV maker is miles ahead, but Nissan has several advantages over its legacy rivals.Tom Stacey, Senior Lecturer in Operations and Supply Chain Management, Anglia Ruskin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1717332021-11-12T05:15:08Z2021-11-12T05:15:08ZHigh Court decision on $125 million fine for Volkswagen is a warning to all greenwashers<figure><img src="https://images.theconversation.com/files/431615/original/file-20211112-25-t8ddhr.jpg?ixlib=rb-1.1.0&rect=0%2C639%2C6016%2C2998&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The High Court of Australia has today refused to hear Volkswagen’s appeal against the record A$125 million fine imposed on it for deliberately deceiving regulators and customers about the environmental performance of its cars.</p>
<p>The $125 million fine is the largest penalty ever imposed on a company in Australia for misleading consumers. It relates to the so-called “dieselgate” scandal, by which the German car company used secret software to beat emissions standards and tests in multiple countries.</p>
<p>This is a significant win for the <a href="https://www.accc.gov.au/media-release/high-court-denies-volkswagen-leave-to-appeal-125-million-penalty">Australian Competition and Consumer Commission</a> in its ongoing battle against “greenwash”, by which companies make false environmental claims to mislead consumers.</p>
<p><a href="https://journals.sagepub.com/doi/full/10.1177/1050651919874105">Research shows</a> greenwashing harms the market for environmentally friendly products. Without being able to distinguish between genuine and dubious claims, consumer cynicism about all claims increases.</p>
<p>The <a href="https://www.australiancompetitionlaw.org/legislation/provisions/acl18.html">Australian Consumer Law</a> adequately prohibits greenwashing claims through its provisions covering false and misleading practices. But this evidence the consumer watchdog is enforcing these laws, and that the courts are upholding them, will build confidence that environmental claims can be trusted. </p>
<h2>Background to the ‘dieselgate’ case</h2>
<p>The ACCC initiated Federal Court proceedings against Volkswagen in September 2016, a year after the US Environmental Protection Agency revealed the car company had used “defeat” software in diesel vehicles since 2009 to produce lower greenhouse gas emissions during “laboratory” tests. </p>
<p>This software shut off during road use, meaning the cars performed better, but then produced nitrogen oxide pollution <a href="https://www.bbc.com/news/business-34324772">up to 40 times that permitted</a> by US law. </p>
<figure class="align-center ">
<img alt="Volkswagen's software ensured cars produced lower nitrogen oxide emissions when being tested." src="https://images.theconversation.com/files/431640/original/file-20211112-19-bb47po.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/431640/original/file-20211112-19-bb47po.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/431640/original/file-20211112-19-bb47po.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/431640/original/file-20211112-19-bb47po.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/431640/original/file-20211112-19-bb47po.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/431640/original/file-20211112-19-bb47po.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/431640/original/file-20211112-19-bb47po.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Volkswagen’s software ensured cars produced lower nitrogen oxide emissions when being tested.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<p>Volkswagen had used its software globally. The ACCC alleged the car maker sold 57,000 cars with these defeat devices in Australia between 2011 and 2015.</p>
<p>Volkswagen initially fought the case by the ACCC, but <a href="https://www.smh.com.au/business/consumer-affairs/judge-warns-that-vw-fine-will-be-multiples-of-75m-imposed-by-accc-20191016-p531be.html">in 2019 agreed to settle</a> for a fine of $75 million (and $4 million in court costs).</p>
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Read more:
<a href="https://theconversation.com/volkswagens-record-settlement-payout-treating-the-symptom-not-the-disease-61811">Volkswagen’s record settlement payout: treating the symptom not the disease</a>
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<p>When this was taken to the Federal Court for ratification (approval) the judge, Justice Lindsay Foster, rejected the deal as “outrageous”. He called the “agreed statement of facts” about the harm caused “<a href="https://www.afr.com/companies/transport/outrageous-judge-slams-accc-over-vw-deal-20191016-p5313c">a bunch of weasel words</a>”. In his ruling in <a href="http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCA/2019/2166.html">December 2019</a> he doubled the penalty to $125 million.</p>
<p>Volkswagen appealed this judgement to the full bench of the Federal Court (the equivalent of a court of appeal), arguing it was manifestly excessive. In its ruling (in April 2021) the full bench disagreed and <a href="http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCAFC/2021/49.html">upheld the A$125 million penalty</a>. </p>
<p>This led to Volkswagen appealing to the High Court (Australia’s ultimate court of appeal). Today it refused “special leave” (permission to bring the whole case) to challenge the ruling and the large penalty. Which means the A$125 million fine stands.</p>
<h2>This sends a strong message</h2>
<p>This decision will send a very strong message to other manufacturers and sellers of products making environmental claims.</p>
<p>The Australian Consumer Law’s provisions against greenwashing are contained in <a href="https://www.australiancompetitionlaw.org/legislation/provisions/acl18.html">Section 18</a> of the act, dealing with misleading or deceptive conduct.</p>
<p>As the market for “green products” has expanded over the past few decades, so too has the temptation for unsavoury producers and marketers to make misleading statements.</p>
<p>In response, some consumer groups and activists have demanded new laws to prevent greenwash. But <a href="http://www.austlii.edu.au/au/journals/BondLRev/2012/2.pdf">my research</a> with Marina Nehme (now associate professor of corporate law at UNSW) led us to to the view the existing laws actually cover all the relevant situations. </p>
<p>The High Court decision today demonstrates this. There are hundreds of examples of the consumer watchdog successfully pursuing greenwashers, but the size of the fine in this case will stand out and serve to deter others.</p><img src="https://counter.theconversation.com/content/171733/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Adams does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>This is a big win for Australia’s consumer watchdog in its ongoing battle against misleading environmental claims.Michael Adams, Professor of Corporate Law & Head UNE Law School, University of New EnglandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1522792021-01-14T15:26:16Z2021-01-14T15:26:16ZPursuing Tesla’s electric cars won’t rev up VW’s share price<figure><img src="https://images.theconversation.com/files/378617/original/file-20210113-19-84yh5r.jpg?ixlib=rb-1.1.0&rect=66%2C11%2C7282%2C4869&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The 2015 diesel scandal resulted in a 40% drop in the company's share price at the time. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/vilnius-lithuania-august-05-2016-electric-465762503">A. Aleksandravicius/Shutterstock</a></span></figcaption></figure><p>Volkswagen’s chairman, Herbert Deiss, has been struggling to bring the company’s stock price back to its <a href="https://fortune.com/2015/09/23/volkswagen-stock-drop/">previous heights</a> since he took over the reins of the German car maker six years ago. The business has been embroiled in <a href="https://www.bloomberg.com/news/articles/2020-11-24/vw-chief-s-tensions-with-board-reemerge-in-clash-over-executives">infighting</a>, <a href="https://www.autocar.co.uk/car-news/industry-news/dieselgate-european-court-justice-deems-vw-defeat-devices-illegal">scandals</a> and board tussles.</p>
<p>Diess was appointed in 2015 at <a href="https://www.researchgate.net/publication/332327135_The_Volkswagen_emissions_scandal_and_its_aftermath#:%7E:text=The%20discovery%20in%202015%20that,share%20price%20in%202%20weeks.">the peak</a> of the <a href="https://theconversation.com/vw-emissions-testing-scandal-shows-that-environmental-governance-is-in-trouble-49250">diesel emissions scandal,</a> when VW was caught using software settings to under-report emissions. He was surprisingly mellow in a recent <a href="https://www.linkedin.com/pulse/how-we-transform-volkswagen-herbert-diess/">LinkedIn post</a> in which he acknowledged that there has been significant resistance within the company that he has yet to resolve. He went on to detail his plans to turn around the fortunes of an increasingly disrupted VW. </p>
<p>There is one thing Deiss is clear on: VW, which continues to be the world’s <a href="https://www.wheels.ca/top-ten/these-are-ten-biggest-automakers-in-the-world/">biggest</a> automaker in terms of cars sold, must catch up with Tesla, an electric-vehicle company, in order to survive. </p>
<figure class="align-center ">
<img alt="VW and Tesla share price" src="https://images.theconversation.com/files/378672/original/file-20210113-23-19r4o9e.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/378672/original/file-20210113-23-19r4o9e.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=283&fit=crop&dpr=1 600w, https://images.theconversation.com/files/378672/original/file-20210113-23-19r4o9e.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=283&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/378672/original/file-20210113-23-19r4o9e.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=283&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/378672/original/file-20210113-23-19r4o9e.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=356&fit=crop&dpr=1 754w, https://images.theconversation.com/files/378672/original/file-20210113-23-19r4o9e.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=356&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/378672/original/file-20210113-23-19r4o9e.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=356&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">VW’s share price has been tanking, its will take some effort to zoom past Tesla.</span>
<span class="attribution"><a class="source" href="https://uk.tradingview.com/chart/SVEQmywt/">TradingView</a></span>
</figcaption>
</figure>
<p>Catching up to Tesla might be a little tricky. Reminiscent of how Apple bolted past Nokia in market value in 2008, Tesla recently <a href="https://www.bbc.co.uk/news/business-53257933">became</a> the world’s most valuable automaker while selling only a fraction of the cars Volkswagen does. Nonetheless, VW’s “catch-up” project has been code-named “Mission T” and has a goal to match Tesla’s technological capabilities by 2024. </p>
<p>Deiss appears to believe that building better, more electric “products” will help him save VW. History, however, has repeatedly shown that building a better product rarely resolves disruption. The graveyard of technically superior products is extensive and includes the likes of BluRay, Windows Mobile and the <a href="https://www.extremetech.com/gaming/298147-pour-one-out-for-the-dreamcast-segas-awesome-quirky-gone-too-soon-console">Sega Dreamcast</a>.</p>
<h2>An alien ecosystem</h2>
<p>Tesla’s competitive advantage does not come from just its technology and agility, as Deiss indicates in his LinkedIn post. Far from it. The company has created a new automotive ecosystem where the rules are dramatically different from what has been the norm. Tesla is the <a href="https://www.forbes.com/sites/greatspeculations/2020/01/21/a-closer-look-at-teslas-supercharger-network/?sh=42814d017193">leader</a> amongst auto makers when it comes to electric charging networks, with faster charging exclusive to its models. This, combined with its increasing influence on the <a href="https://www.ft.com/content/b13f316f-ed85-4c5f-b1cf-61b45814b4ee">supply</a> of lithium ion batteries, means that any follow-on electric car entrants must play by Tesla’s rules as gatekeeper. Such a change in power dynamics rarely ends well for incumbents like VW.</p>
<p>Tesla has bent the cost structure of the industry itself. It has skipped the traditional (and expensive) car dealer network and replaced it with a more modern and cheaper <a href="https://www.tesla.com/en_GB/blog/tesla-approach-distributing-and-servicing-cars">direct-to-consumer</a> sales channel. It also barely spends anything on marketing, which continues to be a <a href="https://adage.com/article/deloitte-digital/automotive-marketing-shifting-gears-a-slowing-market/310392">major expense</a> for automotive companies. Tesla’s brand awareness is linked to the controversial, Twitter-powered presence of its CEO, Elon Musk. He was named <a href="https://www.bbc.co.uk/news/technology-55578403">the richest man in the world</a> on January 7. His rise to the top, albeit for just <a href="https://www.businessinsider.com/elon-musk-net-worth-jeff-bezos-rich-list-worlds-richest-2021-1?r=US&IR=T">four days</a>, was a reminder that the entrepreneur is bigger than the Tesla brand.</p>
<p>Deiss, however, doesn’t appear to recognise any of the above as Tesla’s advantages. As a result, Mission T’s focus is just technology parity – and that is myopic. Unless VW’s next move is about finding a sustainable position in this new automotive ecosystem, its struggles will not go away.</p>
<h2>The spectre of new business models</h2>
<p>The automotive industry has traditionally thrived on cyclical purchases. An average household buys at least one car for a family’s mobility needs. An average household buys a car, uses it for several years and then trades it in. Thanks to emergent mobility models such as car sharing and ride hailing, the <a href="https://www.iaai.com/Articles/ride-hailing-part-1-its-effect-on-vehicle-sales">need to own a car</a>, especially in busy, space constrained cities, has gone down. It is unclear how VW intends to deal with this longer-term decline in demand for new cars. Tesla is embracing this shift head on. In his investor-day presentation, Musk laid out a <a href="https://www.theverge.com/2019/4/22/18510828/tesla-elon-musk-autonomy-day-investor-comments-self-driving-cars-predictions">clear vision</a> of a future where Tesla uses self-driving technology to enable a “robo-taxi” function for its customers. The goal is for Tesla customers to be able to send off their self-driving cars to pick up and drop off other people and make rental income in the process. Musk went as far as to predict that an average Tesla owner could make $30,000 per year by sending their car away as a self-driving taxi when they are not using it.</p>
<figure class="align-center ">
<img alt="Finger pressing a push button to start a self-driving car. Composite image between a hand photography and a 3D background." src="https://images.theconversation.com/files/378779/original/file-20210114-17-e67fig.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/378779/original/file-20210114-17-e67fig.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=432&fit=crop&dpr=1 600w, https://images.theconversation.com/files/378779/original/file-20210114-17-e67fig.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=432&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/378779/original/file-20210114-17-e67fig.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=432&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/378779/original/file-20210114-17-e67fig.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=543&fit=crop&dpr=1 754w, https://images.theconversation.com/files/378779/original/file-20210114-17-e67fig.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=543&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/378779/original/file-20210114-17-e67fig.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=543&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Tesla plans to launch a robotaxi network.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/finger-pressing-push-button-start-selfdriving-643585552">Olivier Le Moal/Shutterstock</a></span>
</figcaption>
</figure>
<p>While it may seem premature given that we are still <a href="https://www.businessinsider.com/self-driving-cars-fully-autonomous-vehicles-future-prediction-timeline-2019-8?r=US&IR=T">several years away</a> from fully autonomous self-driving cars, the fact that Tesla is preparing to adapt for this change in business models is remarkable. And while it is true that VW has rolled out its own nascent autonomous driving unit <a href="https://www.theverge.com/2019/10/28/20936114/vw-self-driving-startup-spinoff-argo-announce#:%7E:text=Volkswagen%20is%20stepping%20up%20its,according%20to%20the%20Financial%20Times.">in 2019</a>, it is unclear how that will help in this shift in business models.</p>
<p>Despite my criticism of Deiss’ approach, it is only fair to recognise that he has one of the hardest jobs in the world. Large scale transformations the size and complexity of what VW needs are both significant and nerve wracking for people leading them – and Deiss is no exception. However, the only way that he can complete his mission to transform VW is to go wider and bolder on the strategic choices he makes for the automaker. Just challenging Tesla on the technology front will not be enough.</p><img src="https://counter.theconversation.com/content/152279/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hamza Mudassir does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Tesla has a lot more going for it than just its electric cars. VW must think wider and bolder to save the business.Hamza Mudassir, Visiting Fellow in Strategy, Cambridge Judge Business SchoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1395112020-05-28T13:33:49Z2020-05-28T13:33:49ZCar dealerships are reopening but the pivot to online sales has begun<figure><img src="https://images.theconversation.com/files/338216/original/file-20200528-51516-cz2h9v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/view-row-new-car-showroom-335320988">Shutterstock</a></span></figcaption></figure><p>Car dealerships are among the next establishments to reopen in England <a href="https://news.sky.com/story/coronavirus-markets-car-dealerships-and-garden-fetes-set-to-open-from-june-11993934">from June 1</a>. It’s welcome news to an industry that suffered an enormous drop in sales following the nationwide lockdown that started on March 30. New car registrations in Britain were down 97% in April 2020 <a href="https://www.autocar.co.uk/car-news/new-cars/uk-new-car-registrations-fall-97-april-due-coronavirus-lockdown">compared to April 2019</a>.</p>
<p>Coronavirus hit at an already tough time for the car industry. Competition from disruptors like car sharing companies had seen new UK car registrations drop by 5.8% in January and February 2020, <a href="https://www.smmt.co.uk/2020/03/february-ev-registrations-4/">with diesel sales especially hard hit</a>.</p>
<p>One company that’s particularly well placed to meet the challenge ahead of reviving sales is Volkswagen. The <a href="https://theconversation.com/how-volkswagen-got-caught-cheating-emissions-tests-by-a-clean-air-ngo-47951">dieselgate emissions scandal</a> cast a long shadow over VW, but the German car maker is going to great lengths to reposition itself at the front of the electric vehicle market. </p>
<p>To make this process more smooth, it recently announced that all its dealerships have signed up to a new click and pay sales model <a href="https://www.volkswagenag.com/en/news/2020/05/all-volkswagen-retail-partners-agree-new-sales-model-for-id-family.html">which will link its online sales with local retailers</a> from June 2020 across Europe. Instead of going to a dealer, buyers now make purchases directly from VW online and dealers act as agents that organise the test drive, process the transaction and deal with enquiries. The agreed upon price of the electric vehicle and the dealership’s commission will be fixed.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/338221/original/file-20200528-51462-1dezlof.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/338221/original/file-20200528-51462-1dezlof.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=519&fit=crop&dpr=1 600w, https://images.theconversation.com/files/338221/original/file-20200528-51462-1dezlof.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=519&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/338221/original/file-20200528-51462-1dezlof.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=519&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/338221/original/file-20200528-51462-1dezlof.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=652&fit=crop&dpr=1 754w, https://images.theconversation.com/files/338221/original/file-20200528-51462-1dezlof.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=652&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/338221/original/file-20200528-51462-1dezlof.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=652&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">2020 vs 2019 sales (March is normally a big month as new new plates are released).</span>
<span class="attribution"><a class="source" href="https://www.am-online.com/data/manufacturer-insight">SMMT</a></span>
</figcaption>
</figure>
<p>While initially only for new electric vehicles, this will make buying VW’s new electric range much easier, by combining the convenience of online sales with the benefits of having a local dealer point of contact. It heralds a strategic shift away from dealers that are highly incentivised by the commission they get from sales to a focus on service. And, at a time where retailers must implement social distancing, this slicker sales processes could help VW speed up its recovery.</p>
<h2>Old fashioned showroom charade</h2>
<p>Of course, finance friendly ways of purchasing a new car – like <a href="https://theconversation.com/are-we-facing-a-car-loan-credit-crunch-here-are-the-facts-83471">personal hire purchase (PHP) leasing</a> where you lease a car for a long period of time, making fixed monthly payments instead of buying it outright – have seen the automotive sector already embrace a strong service quality ethos. The regular payment model also locks in customer loyalty. Plus, car makers frequently measure the quality of service offered by their franchisees using <a href="https://www.edmunds.com/car-buying/why-car-salespeople-beg-for-top-customer-survey-scores.html">independent surveys of customers</a>. There are substantial penalties for below target performance metrics, such as the loss of the franchise. </p>
<p>But purchasing a car is often still a very old fashioned experience, in a sector that is still recognised as one of the most <a href="https://www.autonews.com/article/20171022/OEM02/171029978/sexism-alive-and-well-in-auto-industry">sexist industries to work in</a>. Buying can be a painfully slow charade that involves awkward conversations in a sterile, panoramic glass illuminated sofa and coffee area. <a href="https://link.springer.com/article/10.1023/A:1023529910567">Research shows</a> that ethnic minorities are more likely to end up paying more when buying a car in real life than online, notably due to a <a href="https://www.marketwatch.com/story/do-car-dealerships-discriminate-against-some-races-2018-01-11">sales push on more expensive finance options and add-ons</a>. It’s a <a href="https://www.autonews.com/article/20171022/OEM02/171029978/sexism-alive-and-well-in-auto-industry">similar story for women</a>, who dislike experiencing <a href="https://www.edmunds.com/car-safety/the-gender-gap-do-dealerships-treat-women-differently.html">patronising sales patter and uncomfortable price negotiations</a>.</p>
<p>Online car model design platforms have also been around for some time, allowing virtual shoppers to click through a multitude of options from engine size and paint colour to sound systems and even mud flaps. But the list price is often uncomfortable. </p>
<p>Hence, the importance of human interaction with junior sales reps, but which often leads to customers getting lured into making <a href="https://www.psychologytoday.com/intl/articles/200509/persuasion-battle-the-car-lot">different purchases to their initial intentions</a>. With VW’s new system of purchasing electric cars online, sustainability minded consumers will no longer be tempted by deals on combustion engine vehicles, <a href="https://www.bbc.co.uk/news/science-environment-44199160">as is common</a>. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/338222/original/file-20200528-51467-1ap1kzk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/338222/original/file-20200528-51467-1ap1kzk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/338222/original/file-20200528-51467-1ap1kzk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/338222/original/file-20200528-51467-1ap1kzk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/338222/original/file-20200528-51467-1ap1kzk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/338222/original/file-20200528-51467-1ap1kzk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/338222/original/file-20200528-51467-1ap1kzk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Driving up that commission.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/successful-businessman-car-dealership-sale-vehicles-1159954417">Shutterstock</a></span>
</figcaption>
</figure>
<h2>A smoother process</h2>
<p>This more efficient click and pay model should positively lubricate the buying process. It will help remove people’s fears of overpaying and not getting a good enough “deal” by eliminating the messy race-to-the-bottom price competition between micro-monopoly physical dealerships. It may also take some of the wind out of online new car price comparison sites, who create value by aggregating national dealerships’ pricing and highlighting any variations to buyers. </p>
<p>There will remain an important role for local showrooms, however. As online behemoth Amazon has acknowledged with its high street store concepts and rumoured interest in purchasing the iconic <a href="https://www.thestreet.com/investing/what-amazon-could-gain-by-buying-jc-penney">but failing department store JC Penny</a> for its <a href="https://www.cnbc.com/2020/05/15/jc-penney-bankruptcy-filing.html">860 store footprint</a>, real life retail stokes brand awareness. It also helps people make their product choices. So VW will need to pedal hard to keep its franchise partners afloat and happy.</p>
<p>But seismic restructuring of the sector is already unstoppably in train, with personal <a href="https://bettertransport.org.uk/blog/better-transport/mobility-service-next-big-idea-transport">mobility as a service</a> using autonomous vehicles on the horizon, and the likes of Zipcar, Hiyacar and easycar already well established in larger cities. Debt laden and Uber-savvy Gen Z’s and millennials are increasingly pondering the economic argument for <a href="https://www.npr.org/2017/12/08/568362029/generation-z-may-not-want-to-own-cars-can-automakers-woo-them-in-other-ways?t=1590606953600">owning a high value lump of steel</a> that rapidly depreciates in value, while spending most of its time on an expensive parking spot.</p>
<p>The prominent, physical car dealership was once crucial for new sales, but its future is far from guaranteed. Moves like VW’s to integrate them with more centralised online sales will simply be the first step of many in that direction.</p><img src="https://counter.theconversation.com/content/139511/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Professor Justin O'Brien does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Volkswagen’s new integration of online and offline sales offers insight into the future of the showroom experience.Professor Justin O'Brien, Senior Lecturer Marketing & Strategy, Royal Holloway University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1351702020-05-22T12:18:59Z2020-05-22T12:18:59ZWhy Ford, Chanel and other companies pitch in during a crisis – without the government ordering them to<figure><img src="https://images.theconversation.com/files/336859/original/file-20200521-102647-gbww8q.jpg?ixlib=rb-1.1.0&rect=50%2C179%2C3690%2C2311&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Ford employees assemble ventilators. </span> <span class="attribution"><span class="source">AP Photo/Carlos Osorio</span></span></figcaption></figure><p><a href="https://www.who.int/news-room/detail/03-03-2020-shortage-of-personal-protective-equipment-endangering-health-workers-worldwide">Severe shortages of critical medical supplies</a> have prompted governments to compel private companies to fill the gap. In the U.S., President Donald Trump invoked rarely used powers to force <a href="https://www.nytimes.com/2020/03/30/business/gm-ventilators-coronavirus-trump.html">General Motors</a> to make ventilators, while the leaders of <a href="https://www.ft.com/content/42f636be-751d-4ebf-9b55-bf313014769f">France</a>, the <a href="https://www.autocar.co.uk/car-news/industry/government-ask-uk-manufacturers-build-ventilators">U.K.</a> and <a href="https://www.japantimes.co.jp/news/2020/02/28/national/mask-makers-distance-abes-coronavirus-guarantee/#.XsbHpBNKgnc">Japan</a> have put pressure on companies to make more medical supplies. </p>
<p>But, judging by how many non-medical companies have voluntarily stepped up to shift their manufacturing might to produce health care supplies – including GM rival <a href="https://www.businessinsider.com/ford-making-ventilators-to-fight-coronavirus-how-many-when-ge-2020-3">Ford</a> – it seems hardly necessary. </p>
<p>Fashion brands such as <a href="https://www.ft.com/content/e9c2bae4-6909-11ea-800d-da70cff6e4d3">LVMH</a>, <a href="https://www.reuters.com/article/us-health-coronavirus-france-chanel/chanel-turns-its-workshops-to-making-face-masks-as-coronavirus-spreads-idUSKBN21G0JP">Chanel</a> and <a href="https://wwd.com/beauty-industry-news/beauty-features/loreal-launches-sweeping-program-to-combat-covid-1203539626/">L’Oreal</a> <a href="https://www.businessinsider.com/dior-reopens-baby-dior-factory-to-start-making-face-masks-2020-4">are transforming their factories</a> to mass produce face masks. Spirit and beer makers <a href="https://www.nasdaq.com/articles/anheuser-busch-starts-making-hand-sanitizer-alongside-its-beer-2020-03-23">Anheuser-Busch</a>, <a href="https://www.adweek.com/creativity/diageo-and-anheuser-busch-join-alcohol-brands-pivoting-to-free-sanitizer/">Diageo</a>, <a href="https://www.businessinsider.com/coors-beer-company-makes-hand-sanitizer-amid-coronavirus-pandemic-2020-3">Molson Coors</a> and <a href="https://www.bevindustry.com/articles/92934-bacardi-launches-production-of-hand-sanitizer-at-puerto-rico-distillery">Bacardi</a> are shifting some of their production and distribution towards hand sanitizer. And automakers <a href="https://www.bloomberg.com/news/articles/2020-03-27/toyota-shifts-factories-to-face-shields-will-help-device-makers">Toyota</a>, <a href="https://www.reuters.com/article/us-health-coronavirus-volkswagen-ventila/volkswagen-tests-ventilator-output-as-carmakers-join-coronavirus-fight-idUSKBN2172VH">Volkswagen</a> and <a href="https://www.reuters.com/article/us-health-coranavirus-fiat-chrysler-vent/fiat-chrysler-starts-ventilator-component-output-in-italy-idUSKBN21L1FA">Fiat Chrysler</a> are leveraging their 3D printing capabilities to produce face shields and are <a href="https://www.msn.com/en-us/money/companies/ford-partners-with-3m-and-ge-healthcare-to-make-respirators-ventilators-to-fight-coronavirus/ar-BB11DicJ">partnering</a> with other companies to make ventilators.</p>
<p>And that’s just three industries. In all, hundreds of companies across the globe have committed money, supplies and know-how to help with the COVID-19 response, according to the U.S. Chamber of Commerce Foundation’s <a href="https://www.uschamberfoundation.org/aid-event/corporate-aid-tracker-covid-19-business-action">corporate aid tracker</a>. </p>
<p>Why are these companies being so generous? </p>
<p>As <a href="https://kelley.iu.edu/faculty-research/faculty-directory/profile.cshtml?id=EMAFIKRE">scholars</a> of <a href="https://scholar.google.com/citations?user=DFjwsYUAAAAJ&hl=en&oi=ao">corporate social responsibility</a>, we believe altruism certainly plays a role for many of them, but it’s not the only motivator. Research on company behavior points to two others: <a href="https://www.ingentaconnect.com/content/mcb/168/2015/00000020/00000002/art00003">bolstering reputation</a> and <a href="https://www.doi.org/10.1086/467466?mobileUi=0&">avoiding regulation</a>. </p>
<h2>Burnishing the brand</h2>
<p>In normal times, companies often undertake socially responsible initiatives to <a href="https://www.inc.com/maureen-kline/how-to-manage-your-companys-reputation.html">enhance their brand</a> and build a stronger relationship with consumers, investors and employees in order to drive profits. </p>
<p>What’s a socially responsible initiative? <a href="https://www.doi.org/10.1002/csr.132">There are many definitions</a>, but the way scholars like us think of it is it means taking voluntary action that is not prescribed by law or not necessary to comply with a regulation. </p>
<p>Reputation Institute, a management consultancy, found that people’s willingness to buy, recommend, work for or invest in a company <a href="https://www.forbes.com/sites/jacquelynsmith/2012/12/10/the-companies-with-the-best-csr-reputations/#49e60e384404">is significantly influenced</a> by their perceptions of its corporate social responsibility practices. So doing something that benefits people in their community can lead to <a href="http://dx.doi.org/10.2139/ssrn.2062429">higher sales</a>, <a href="https://philpapers.org/rec/SHIEDS">increase the company’s valuation</a> and <a href="https://doi.org/10.1108/14720701011085544">keep good employees around longer</a>. </p>
<p>But these are anything but normal times. Rather, it is a global crisis that has created a need for an <a href="https://unfoundation.org/blog/post/weekly-update-all-hands-on-deck-against-covid-19/">all hands on deck</a> response from everyone, including corporate America. In other words, <a href="https://www.forbes.com/sites/pamdanziger/2017/10/20/fire-floods-hurricanes-how-and-why-corporations-must-help/#10231fb67388">just like during natural disasters</a>, people expect companies to do their part – and not appearing to do so could damage a brand’s reputation. A <a href="https://www.conecomm.com/news-blog/2013-global-csr-study-release">2013 survey of citizens of 10 countries</a> that included the U.S., France, Brazil and China found that 9 in 10 people said they would boycott a company they believed behaved irresponsibly. </p>
<p>And this is especially true of industries that are more directly connected to the crisis. In the current situation, for example, there’s been a shortage of hand sanitizer, which fashion companies that make perfume <a href="https://tanksgoodnews.com/2020/03/17/lvmh-hand-sanitizer/">can easily produce</a>. And manufacturers are, as we’ve seen, <a href="https://www.wsj.com/articles/trump-lashes-out-at-general-motors-over-ventilators-11585327749">capable of repurposing</a> their assembly lines to build ventilators. </p>
<p>Not doing its part, in this environment, could result in a long-term hit to a company’s reputation. </p>
<h2>Eluding onerous regulations</h2>
<p>The other motivator is preempting government regulation, which becomes a greater risk during and after a crisis. </p>
<p>For instance, we saw <a href="https://corpgov.law.harvard.edu/2010/11/20/the-financial-panic-of-2008-and-financial-regulatory-reform/">more financial regulation</a> after Wall Street’s behavior sparked the Great Recession, and lawmakers from districts that suffer from hurricanes <a href="https://www.nber.org/papers/w25835">tend to support bills</a> promoting more environmental regulation. </p>
<p>So companies will often pursue voluntary self-regulation and take other proactive measures during a crisis in hopes of forestalling a more onerous government reaction. A recent <a href="https://web.stanford.edu/%7Etomz/pubs/MMT-APSR-2019.pdf">Stanford study</a> found that even a modest effort can work to effectively preempt regulation. </p>
<p>Furthermore, this allows companies to set the terms and control the agenda, <a href="https://store.hbr.org/product/profiting-from-environmental-regulatory-uncertainty-integrated-strategies-for-competitive-advantage/CMR498">allowing them to choose actions</a> that are in the interest of society, profitable, and avoid the costs and pains of complying with new regulations. </p>
<p>At the moment, companies may be stepping up to avoid a more draconian response from the government, such as when Trump invoked the <a href="https://www.washingtonpost.com/politics/2020/03/19/defense-production-act-trump-coronavirus/">Defense Production Act</a> against GM, which allows him to control and direct corporate resources towards production of critical equipment. This also gives the federal government priority in contracting, limiting a company’s ability to find the most efficient or profitable contracts.</p>
<p>So next time you read about a company doing something for the greater good, applaud the effort. But you could consider its other strategic motivations as well. </p>
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<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Ford is assembling ventilators, LVMH is making hand sanitizer, and Chanel is making masks. Here’s why these and dozens of other companies are doing it.Elham Mafi-Kreft, Clinical Associate Professor of Business Economics, Indiana UniversitySteven Kreft, Clinical Professor of Business Economics and Public Policy, Indiana UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1203102019-07-18T11:20:38Z2019-07-18T11:20:38ZHow the Volkswagen Beetle sparked America’s art car movement<figure><img src="https://images.theconversation.com/files/284562/original/file-20190717-147312-onjqgn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A 'back-to-back' Beetle rolls along the road at the 2006 Houston Art Car Parade.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/falsecognate/146630276/in/photolist-ayENAt-nHFKP-3iqb7J-o1tAZ2-7k1DwZ-oJ2mpq-6nXHrX-3iqch7-nJMWa-nJMYZ-8JWvwc-nJMTt-akD5t7-dXw5d-52joDA-6GkvhF-nJMra-242K6q-8N3jKj-9GWtbr-4KqQf1-dutUJU-2Nzn6u-7gZVF9-2NxtcF-4zdUR8-ipZEy-aghbhM-AbwSV-akD4Wy-4jDbqC-2NB3f7-nZQ4E-5iH76B-7hrrop-7HE2kG"> D.L./flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p><a href="https://www.dw.com/en/final-vw-beetle-drives-off-mexico-factory-floor/a-49544177-0">With a mariachi band playing along</a>, the last Volkswagen Beetle rolled off the assembly line of a Mexican factory on July 10.</p>
<p>Originally created in Germany <a href="http://mentalfloss.com/article/68811/how-hitlers-volkswagen-beetle-conquered-america">at the behest of Adolf Hitler</a>, the Beetle ended up being exported around the world, and every country that sold the car absorbed it into its own culture.</p>
<p>In Mexico, it was dubbed the “<a href="http://www.zonalatina.com/Zldata313.html">Vocho</a>,” and became popular among cab drivers, who painted them green and white. In France, where it was called the “<a href="https://qz.com/1664068/volkswagens-beetle-81-is-no-more/">Coccinelle</a>,” or “lady bug,” it zipped through country’s winding, medieval streets. </p>
<p>And in America, where it was affectionately called “the Bug,” it came to represent the unconventional and idiosyncratic.</p>
<p>In my undergraduate history course “The Automobile and American Life,” the first image of an automobile that students see is not a Ford Model T but rather a Beetle art car featured in filmmaker Harrod Blank’s documentary “<a href="https://www.imdb.com/title/tt0105821/">Wild Wheels</a>.”</p>
<p>I show Blank’s Beetle because, to me, cars symbolize ingenuity, individuality and freedom. And art car enthusiasts like Blank – who transformed their cars into actual vehicles of self-expression – took these values to new heights. </p>
<h2>Would Americans buy Hitler’s car?</h2>
<p>When the Beetle <a href="http://mentalfloss.com/article/68811/how-hitlers-volkswagen-beetle-conquered-america">was first introduced to the U.S. market in 1949</a>, most Americans hadn’t seen anything like it. Some were vaguely aware of <a href="http://mentalfloss.com/article/68811/how-hitlers-volkswagen-beetle-conquered-america">its connection to Adolf Hitler</a>, which wasn’t exactly a great selling point. </p>
<p>Aesthetically and mechanically, it was almost everything the vehicles of the “Detroit Three” – General Motors, Chrysler and Ford – were not. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/284587/original/file-20190717-147275-15wnd3d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/284587/original/file-20190717-147275-15wnd3d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/284587/original/file-20190717-147275-15wnd3d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=779&fit=crop&dpr=1 600w, https://images.theconversation.com/files/284587/original/file-20190717-147275-15wnd3d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=779&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/284587/original/file-20190717-147275-15wnd3d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=779&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/284587/original/file-20190717-147275-15wnd3d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=978&fit=crop&dpr=1 754w, https://images.theconversation.com/files/284587/original/file-20190717-147275-15wnd3d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=978&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/284587/original/file-20190717-147275-15wnd3d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=978&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A Volkswagen ad from 1962 emphasizes the car’s compact size.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/autohistorian/47706499711/">Alden Jewell/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Instead of being accented by sharp angles, it was round. Instead of being bulky and prone to overheating, it was economical, reliable and well-made. (<a href="https://www.arnoldclark.com/newsroom/527-why-do-volkswagen-beetles-float.com">Its parts were said</a> to be put together so tightly that you needed to crack a window to close a door, and that it could float when driven into a lake.) And while most car buyers wanted a vehicle that denoted status, speed and power, the Beetle seemed exceedingly “cute.” </p>
<p>The Beetle was polarizing. A survey in the January 1969 issue of Road & Track magazine emphasized the divide: A majority of owners were quite satisfied with the car and indicated that they would buy another. But a number of drivers complained that the cars – especially those built before 1965 – were under-powered and slow.</p>
<p>For these reasons, the model always seemed to cater to a niche market; but among its fans, it achieved cult-like status. </p>
<p>Some owners made tweaks of their own, adding horsepower and improving the handling. Others, inspired by the car’s sublime appearance, used it to make artistic statements. One of the first was a man named Harrod Blank.</p>
<h2>‘Oh My God’ turns heads</h2>
<p>The son of a filmmaker and ceramic artist, <a href="http://www.cameravan.com/contact/bio.html">Blank was born in 1963</a> and graduated from University of California, Santa Cruz, in 1986 with a degree in theater arts and film studies.</p>
<p>During the late 1980s, Blank acquired a battered VW Beetle and <a href="http://harrodblank.com/harrod-blank-biography/">decided to use it as a canvas to create a work of art</a>.</p>
<p>First he painted a rooster on the driver’s side door. Then he added a globe to the front ornament, mounted a television to the roof and tacked plastic chickens and fruit to the bumper. He slapped a sticker on the back that exclaimed “Question Authority” and eventually christened the car “Oh My God.” </p>
<p>The name referenced Blank’s <a href="http://harrodblank.com/work/wild-wheels-1992/">eventual realization</a> that his vehicle was not the only art car in America. </p>
<p>In fact, Blank’s car ended up catalyzing a movement. Its popularity brought together enthusiasts who had modified Beetles and other car models in ingenuous ways, often adorning them with discarded consumer goods. </p>
<p>Blank followed “Oh My God” with another creation based on a Beetle, “<a href="http://www.artcaragency.com/gallery/pico-de-gallo-art-car-by-harrod-blank/">Pico De Gallo</a>.” A fully interactive piece of art, the car was outfitted with two electric guitars, drums, keyboards and an accordion.</p>
<p><iframe id="tc-infographic-421" class="tc-infographic" height="400px" src="https://cdn.theconversation.com/infographics/421/4e30edd50793840d3b0037005ab8d5f64ebcdee3/site/index.html" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>Both vehicles reflected central goals of the art car movement: to engage with the public in ways that evoke joy and wonder. Blank and his fellow art car enthusiasts hoped their cars could inspire others to reject conformity and not succumb to an increasingly homogeneous world. </p>
<p><a href="http://harrodblank.com/film-and-books/">A book of photos</a> and several films, including 1992’s “Wild Wheels” and 2009’s “<a href="https://www.imdb.com/title/tt0977638/?ref_=fn_al_tt_1">Automorphosis</a>,” followed. Blank has since promoted numerous art car events, most of which have taken place in the San Francisco Bay area and Houston. </p>
<p>Other famous examples of Beetle art cars include one that features <a href="http://www.oldbug.com/ironbug.htm">a wrought iron body</a> and another that’s been outfitted <a href="https://www.youtube.com/watch?v=ZgqzIgOy1hM">with thousands of small lights</a>. </p>
<p>Of course, <a href="https://www.pinterest.com/autooutletsusa/art-cars/">there are many makes and models besides the Beetle</a> that have been transformed into art cars. But for Blank and other artists, the Volkswagen Beetle proved to be an ideal canvas.</p>
<p>The Nazis probably never imagined that their mass-produced car would one day become the ultimate expression of creativity and freedom. </p>
<p>[ <em><a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=thanksforreading">Thanks for reading! We can send you The Conversation’s stories every day in an informative email. Sign up today.</a></em> ]</p><img src="https://counter.theconversation.com/content/120310/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John A. Heitmann does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>When the Beetle was first introduced, Americans had never seen anything like it. Among art car enthusiasts, it became the ideal canvas for self-expression.John A. Heitmann, Professor Emeritus of History, University of DaytonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1056322018-11-05T18:49:24Z2018-11-05T18:49:24ZThe Volkswagen scandal: will the US justice system change managers’ behaviour?<figure><img src="https://images.theconversation.com/files/242126/original/file-20181024-71020-19mb29d.jpg?ixlib=rb-1.1.0&rect=0%2C15%2C1500%2C961&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">VW was hit with more than $15 billion in penalties in the United States.</span> <span class="attribution"><span class="source">KDN759/Shutterstock</span></span></figcaption></figure><p>The <a href="https://www.cleanenergywire.org/factsheets/dieselgate-timeline-germanys-car-emissions-fraud-scandal">“Dieselgate” scandal</a> is one for the management books. In 2014, Volkswagen was on track to become the world’s biggest car manufacturer when it figured just a little too prominently in an <a href="https://www.theicct.org/publications/real-world-exhaust-emissions-modern-diesel-cars">International Council on Clean Transportation study</a> that highlighted striking differences between the emissions of its cars in the lab and on the road. The company was subsequently accused by the US Environmental Protection Agency of <a href="https://www.epa.gov/sites/production/files/2015-10/documents/vw-nov-caa-09-18-15.pdf">installing devices to defeat emissions tests</a>, and 2016 VW agreed to pay nearly <a href="https://www.nytimes.com/2016/06/28/business/volkswagen-settlement-diesel-scandal.html">$15 billion to settle claims</a>, and the total eventually grew to $21 billion. This year the firm was hit with a <a href="https://www.nytimes.com/2018/06/13/business/volkswagen-emissions-germany-fine.html">1.2 billion euro fine</a> in Germany, and the battle continues, with US investors <a href="https://www.nytimes.com/2018/09/09/business/volkswagen-investors-dieselgate-trial-elliott-paul-singer.html">demanding compensation</a> for losses they suffered because of VW’s cheating, and a <a href="https://www.ft.com/content/a8def230-336a-11e8-b5bf-23cb17fd1498">looming suit in the UK</a>.</p>
<p>For a professor of management science, the central question is clear: how could a world-renowned company like Volkswagen knowingly violate US air-pollution standards despite the senseless risks to which it was exposing its reputation and bottom line?</p>
<p>The <a href="https://www.hbs.edu/teaching/case-method/Pages/default.aspx">case method</a> is one possible way of answering this question while avoiding two pitfalls. The first is being too close, making it difficult to avoid total immersion and drowning in details; the second is being too distant, leading to a featureless description of the events. In a special issue of the <em>Revue Française de Gestion</em>, <a href="https://www.cairn.info/revue-francaise-de-gestion-2017-8-page-83.htm">“Management facing the judiciary: The challenges of internormativity”</a> we attempted to track down the truth at the heart of “Dieselgate”, with a particular focus on the conflict between the legal standards produced by public authorities and the managerial standards produced by companies.</p>
<h2>A culture of arrogance?</h2>
<p>The mystery in front of us, it’s time to look for clues. There are three possible explanations: First, Volkswagen’s “company culture”, rooted in its history since the 1930s. In the rules and regulations game, neither US nor European regulators were taken seriously. The company accepted standards because it knew it wouldn’t be complying with them. The <a href="https://global.handelsblatt.com/mobility/us-monitor-vw-had-corrupt-culture-flawed-leadership-867040">seriousness of lies in American culture</a> had perhaps been underestimated.</p>
<p>The second possible explanation concerns the pre-eminence of VW’s managerial standards over US legal standards: VW’s research and development (R&D) teams knew that the environmental requirements on air pollution were much more stringent in the United States than in Europe. To meet these requirements for diesel cars, which represented only a small share of the US market, would have resulted in an intolerable extra cost for customers; consequently, disregarding legal standards became a technical problem that required a technical solution. A software cheat would become this solution.</p>
<p>The third possibility, which supplements the second one, steers us toward a normalisation of deviance. Not complying with standards – environmental in this case – is not considered a moral issue. Among the community of pollution-control specialists, the rule is actually to break rules rather than comply with them. Consequently, the fraudulent software was considered by VW engineers to be a suitable technical response approved of by their protective management.</p>
<p>These three possible explanations may then be used to organise a discussion around the power of large firms in the face of the legal system, and the questions obviously go far beyond the case of VW alone: Are large corporations above the law? Is their vast power really something that’s inevitable? Are governments defeated in advance, helpless against organisations capable of mobilising resources and skills that they themselves do not have? How can governments regain control and legal procedures be made more efficient? Is the citizen’s power up to the challenges when faced by lobbyists relaying the interests of their clients, which are precisely those same large corporations?</p>
<h2>The alliance of NGOs and universities: the new counter-power</h2>
<p>One of the unexpected outcomes of this research is the recognition of a new and powerful alliance between NGOs and universities. Their goal is to mobilise knowledge for the benefit of the common good. Had an American university laboratory and an NGO not teamed up to measure emissions in real-life situations as opposed to test-bench simulations, the “Dieselgate” scandal would never have been revealed. This is a foreshadowing of the formation of a community of knowledge that can become a formidable counter-power in Europe as well – provided that counter-investigations can be carried out effectively and alliances forged.</p>
<p>The case of VW also emphasizes the importance of judicial investigation mechanisms, which in this case involved the <a href="https://www.epa.gov/">Environmental Protection Agency</a> (EPA), the FBI, and the US Congress. Their collaboration made it possible to quickly establish VW’s fraud. Such mechanisms have no equivalent in Europe, where the imbalance of power between judges and multinationals is too great to establish civil and criminal liability.</p>
<h2>Pandora’s box</h2>
<p>“Dieselgate” for VW led to huge fines, settlements and remediation – more than $30 billion up at present. Nonetheless, the losses were quickly absorbed, and the company’s sales <a href="https://www.nytimes.com/2017/11/01/business/volkswagen-sales-diesel.html">bounced back in 2017</a>. But concentrating on its resilience means forgetting the effects that Dieselgate has had and will continue to have on the automotive sector and the industrial world in general.</p>
<p>One defining consequence of the scandal is the <a href="https://e360.yale.edu/features/end-of-the-road-are-diesel-cars-on-the-way-out-in-europe">end of diesel</a>, once presented as tomorrow’s “clean technology”. Sales are dropping all over the world, and all players have endorsed the gradual phase-out through increased regulations and, in some countries and jurisdictions, traffic restrictions. All manufacturers are therefore affected by this affair, but particularly those that poured a great deal of money into this technology, in particular Mercedes, Renault and PSA. Finally, the scandal increased mistrust of European regulators, accused of collusion with manufacturers.</p>
<p>In this respect, the boards of inquiry set up in Europe and particularly in France that bring together stakeholders under the watchful eye of the media are a sign that politicians and civil society are working to regain control over issues that were previously the exclusive concern of experts. But with this particular Pandora’s Box now open, what exactly we will discover remains to be known.</p><img src="https://counter.theconversation.com/content/105632/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Les auteurs ne travaillent pas, ne conseillent pas, ne possèdent pas de parts, ne reçoivent pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'ont déclaré aucune autre affiliation que leur organisme de recherche.</span></em></p>How could a company like Volkswagen knowingly violate US air-pollution standards despite the senseless risks to which it was exposing its reputation? The case method can provide an answer.Franck Aggeri, Professeur de management, PSL Research University, Mines Paris - PSLJean-Michel Saussois, Professeur émérite HDR en sociologie, ESCP Business SchoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/944682018-04-11T23:04:10Z2018-04-11T23:04:10ZWhy the price-fixing scandal might not be all bad for Loblaws<figure><img src="https://images.theconversation.com/files/214163/original/file-20180410-536-11ebgpe.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Loblaws bread price-fixing scandal may have eroded public trust in the company, but will it truly hurt the grocery giant in the long run? Galen G. Weston, executive president and chairman of Loblaw Ltd., is seen in this 2016 photo.</span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Fred Thornhill</span></span></figcaption></figure><p>The bread price-fixing scandal has garnered Canada’s biggest grocery chain a lot of negative media attention.</p>
<p><a href="https://cdn.dal.ca/content/dam/dalhousie/pdf/management/News/News%20%26%20Events/Food%20Retail%20Sector%20Supplementary%20release%20March%202018.pdf">A recent survey</a> from Dalhousie University suggested that consumer trust in Loblaws has fallen by 10 per cent since the announcement of the bread price-fixing issue.</p>
<p>But will the scandal have a sustained negative impact on Loblaws?</p>
<p>While the company may face civil suits at some point, there is no risk of prosecution under the whistle-blower provisions of Canada’s competition regulations. And so the outstanding question is whether the decline in consumer trust results in significant losses in sales and market share to Loblaws.</p>
<p>Several factors suggest perhaps not. </p>
<h2>All retailers painted with same brush</h2>
<p>It’s clear that consumers are becoming <a href="https://www.forbes.com/sites/forbesagencycouncil/2017/04/11/dealing-with-declining-trust-among-consumers/#14f5add8f880">increasingly distrustful</a> of business generally. They feel in many cases that bad behaviour is the norm, and aren’t surprised when stories like the Loblaws price-fixing emerge.</p>
<p>This is particularly true in this case because Loblaws has claimed (and preliminary findings from the Competition Bureau suggest) that many, but not all, Canadian retailers were involved in the bread scheme. </p>
<p>The Dalhousie study suggested that on average, trust went down for all Canadian retailers following the scandal, although trust in Loblaws declined the most. And so if consumers believe everyone cheats, there’s little motivation to switch stores. Food is a staple. We can’t choose to forego groceries.</p>
<p>It’s worth noting the case of Volkswagen. The <a href="http://www.bbc.com/news/business-34324772">emissions scandal</a> that engulfed the German company in 2015 was a significant challenge. Volkswagen paid huge fines and had to retrofit millions of cars. Despite that, the company has seen unit <a href="http://www.dw.com/en/volkswagen-group-achieves-record-sales-in-2017/a-42177892">sales growth</a> of 3.8 per cent in 2016 and 4.3 per cent in 2017. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/214164/original/file-20180410-566-1ooryaq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/214164/original/file-20180410-566-1ooryaq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=382&fit=crop&dpr=1 600w, https://images.theconversation.com/files/214164/original/file-20180410-566-1ooryaq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=382&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/214164/original/file-20180410-566-1ooryaq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=382&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/214164/original/file-20180410-566-1ooryaq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=480&fit=crop&dpr=1 754w, https://images.theconversation.com/files/214164/original/file-20180410-566-1ooryaq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=480&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/214164/original/file-20180410-566-1ooryaq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=480&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Volkswagen cars are lifted inside a delivery tower of the company in Wolfsburg, Germany in March 2017. The CEO of Volkswagen said the United States remains a core market for the company despite its diesel emissions scandal.</span>
<span class="attribution"><span class="source">(AP Photo/Michael Sohn)</span></span>
</figcaption>
</figure>
<p>There were financial challenges, and Volkswagen performed in some markets better than others, but customers aren’t staying away in droves despite the negative media attention and bad corporate behaviour.</p>
<h2>Who is Loblaws anyway?</h2>
<p>Another factor that will likely buffer the Loblaws parent company is that many customers likely shop at Loblaws without knowing it. </p>
<p>Loblaws sells food under many <a href="http://www.loblaw.ca/en.html">different banners</a> including Real Canadian Superstore, Zehrs, Provigo, Fortino’s, No Frills and Shoppers Drug Mart. Many customers likely shop at a favourite store without making an explicit connection to the Loblaws name.</p>
<p>That means even those customers who are inclined to punish Loblaws might not even know they are shopping there.</p>
<h2>Free groceries</h2>
<p>Loblaws has reportedly distributed <a href="http://www.macleans.ca/news/canada/you-can-sign-up-for-the-25-loblaw-gift-card-starting-today-heres-how/">as much as $150 million</a> in gift cards (in $25 increments) as part of the campaign to win back public trust in the wake of the price-fixing revelations. These gift cards need to be spent in Loblaws stores. It will bring customers back into the store and they will likely spend more than the $25 they’re entitled to via the gift cards.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/214162/original/file-20180410-577-6rtetn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/214162/original/file-20180410-577-6rtetn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=406&fit=crop&dpr=1 600w, https://images.theconversation.com/files/214162/original/file-20180410-577-6rtetn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=406&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/214162/original/file-20180410-577-6rtetn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=406&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/214162/original/file-20180410-577-6rtetn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=511&fit=crop&dpr=1 754w, https://images.theconversation.com/files/214162/original/file-20180410-577-6rtetn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=511&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/214162/original/file-20180410-577-6rtetn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=511&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A $25 Loblaws gift card is shown in Oakville, Ont., in March 2018.</span>
<span class="attribution"><span class="source">(THE CANADIAN PRESS/Richard Buchan)</span></span>
</figcaption>
</figure>
<p>There will also be people who have never shopped at a Loblaws store who applied for gift cards. Rival grocery chain Sobeys has said it expects <a href="https://www.theglobeandmail.com/report-on-business/sobeys-parent-empire-beats-profit-expectations-in-third-quarter/article38285355/">to feel an impact</a> from the distribution of the gift cards. </p>
<p>Once again, we would expect customers who may have never set foot in a Loblaws store before to spend more than the gift card. It’s even possible that they’ll enjoy shopping at Loblaws so much that they’ll switch stores after spending the card.</p>
<h2>Short-term pain</h2>
<p>That’s not to say Loblaws won’t feel an impact from the price-fixing scandal. They distributed millions of dollars in gift cards. Some of them will not be redeemed — <a href="https://nypost.com/2014/01/26/unused-gift-cards-total-44b-since-2008-study/">that’s always true of gift cards.</a> </p>
<p>Those that are redeemed will not cost Loblaws the full $150 million as they must be spent in Loblaws stores. That means that, although Loblaws will lose the margin they would have made on the sales, the actual out-of-pocket cost of the card is less than the face value of the card. There also remains the real threat of class-action lawsuits.</p>
<p>In the long run, however, it doesn’t seem likely that Loblaws will suffer significant losses in food market share. The price-fixing announcement came very late in the year, so <a href="http://media.loblaw.ca/English/media-centre/press-releases/press-release-details/2018/Loblaw-Reports-2017-Fourth-Quarter-and-Fiscal-Year-Ended-December-30-2017-Results1/default.aspx">fourth-quarter results</a> will not provide much insight. </p>
<p>It’s worth noting that same-store food sales were up 0.5 per cent over the previous year in the fourth quarter. While third-quarter results showed a 1.5 per cent increase over the previous year, it does not appear that there was a dramatic flight from shopping at Loblaws in the immediate aftermath of the announcement. </p>
<p>Loblaws’ first-quarter 2018 results will be telling. But the market also seems to believe Loblaws will weather the price-fixing storm. Share price did not decline significantly after the announcement, and a late January drop <a href="https://www.ctvnews.ca/business/loblaw-shares-downgraded-to-hold-after-new-generic-drug-deal-reached-1.3781673">was attributed</a> to generic drug-pricing reform and the cost of minimum wage increases.</p>
<p>There are still challenges in the market. Stiff competition in the grocery sector still exists and will increase if and when online sales grow. Other factors will continue to keep Loblaws on its toes, but the price-fixing scandal might not be among them.</p><img src="https://counter.theconversation.com/content/94468/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael von Massow receives funding from the Tim Hortons Sustainable Food Management Fund, the Longo's Retail Research Laboratory and the Ontario Ministry of Agriculture and Food. </span></em></p>Loblaws’ reputation has taken a hit following the bread price-fixing scandal. But will it do prolonged damage to Canada’s biggest grocery chain?Michael von Massow, Associate Professor, Food Economics, University of GuelphLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/919492018-02-22T13:00:09Z2018-02-22T13:00:09ZSilicon Valley is winning the race to build the first driverless cars<figure><img src="https://images.theconversation.com/files/207500/original/file-20180222-152348-n7t8rw.png?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Waymo</span></span></figcaption></figure><p>Henry Ford didn’t invent the motor car. The late 1800s saw a flurry of innovation by hundreds of companies battling to deliver on the promise of fast, efficient and reasonably-priced mechanical transportation. Ford later came to dominate the industry thanks to the development of the moving assembly line.</p>
<p>Today the sector is poised for another breakthrough with the advent of cars that drive themselves. But unlike the original wave of automobile innovation, the race for supremacy in autonomous vehicles is concentrated among a few corporate giants. So who is set to dominate this time? </p>
<p><a href="https://indd.adobe.com/view/a0bd4358-a51c-4a90-b300-e727272a6bba">I’ve analysed</a> six companies we think are leading the race to build the first truly driverless car. Three of these – General Motors, Ford and Volkswagen – come from the existing car industry and need to integrate self-driving technology into their existing fleet of mass-produced vehicles. The other three – Tesla, Uber and Waymo (owned by the same company as Google) – are newcomers from the digital technology world of Silicon Valley and have to build a mass manufacturing capability.</p>
<p>While it’s impossible to know all the developments at any given time, we have tracked investments, strategic partnerships and official press releases to learn more about what’s happening behind the scenes. The car industry typically rates self-driving technology <a href="https://autoalliance.org/connected-cars/automated-driving-systems/levels-of-automation/">on a scale</a> from Level 0 (no automation) to Level 5 (full automation). We’ve assessed where each company is now and estimated how far they are from reaching the top level. Here’s how we think each player is performing.</p>
<h1>Volkswagen</h1>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/207502/original/file-20180222-152375-15m1e12.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/207502/original/file-20180222-152375-15m1e12.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=225&fit=crop&dpr=1 600w, https://images.theconversation.com/files/207502/original/file-20180222-152375-15m1e12.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=225&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/207502/original/file-20180222-152375-15m1e12.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=225&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/207502/original/file-20180222-152375-15m1e12.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=283&fit=crop&dpr=1 754w, https://images.theconversation.com/files/207502/original/file-20180222-152375-15m1e12.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=283&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/207502/original/file-20180222-152375-15m1e12.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=283&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Audi A8 traffic jam pilot.</span>
<span class="attribution"><span class="source">Audi</span></span>
</figcaption>
</figure>
<p>Volkswagen <a href="https://www.ft.com/content/b09e7396-21c5-11e6-9d4d-c11776a5124d">has invested</a> in taxi-hailing app Gett and partnered with chip-maker Nvidia to develop an artificial intelligence co-pilot for its cars. In 2018, the VW Group is set to release <a href="https://www.forbes.com/sites/michaeltaylor/2017/09/10/tthe-level-3-audi-a8-will-almost-be-the-most-important-car-in-the-world/">the Audi A8</a>, the first production vehicle that reaches Level 3 on the scale, “conditional driving automation”. This means the car’s computer will handle all driving functions but a human has to be ready to take over if necessary.</p>
<h2>Ford</h2>
<p>Ford already sells cars with a Level 2 autopilot, “partial driving automation”. This means one or more aspects of driving are controlled by a computer based on information about the environment, for example combined cruise control and lane centring. Alongside <a href="https://www.forbes.com/sites/samabuelsamid/2016/08/16/ford-and-baidu-lead-new-150-million-investment-in-lidar-maker-velodyne/#2203481b1de7">other investments</a>, the company has put US$1 billion into Argo AI, an artificial intelligence company for self-driving vehicles. Following a trial to <a href="https://www.wired.com/story/ford-self-driving-pizza-delivery-dominos/">test pizza delivery</a> using autonomous vehicles, Ford is now testing Level 4 cars on <a href="https://www.forbes.com/sites/samabuelsamid/2017/08/29/dominos-takes-high-tech-pizza-delivery-to-level-4-with-ford/">public roads</a>. These feature “high automation”, where the car can drive entirely on its own but not in certain conditions such as when the road surface is poor or the weather is bad.</p>
<h2>General Motors</h2>
<p>GM also sells vehicles with Level 2 automation but, after buying Silicon Valley startup Cruise Automation in 2016, <a href="http://uk.businessinsider.com/gm-cruise-fully-autonomous-electric-car-no-steering-wheel-2018-1">now plans</a> to launch the first mass production-ready Level 5 autonomy vehicle that drives completely on its own by 2019. The Cruise AV will have no steering wheel or pedals to allow a human to take over and be part of a large fleet of <a href="https://www.ft.com/content/cc88fc96-d620-11e7-8c9a-d9c0a5c8d5c9">driverless taxis</a> the company plans to operate in big cities. But crucially the company hasn’t yet <a href="https://www.recode.net/2018/1/12/16880570/general-motors-self-driving-cars-cruise-steering-wheel-nhtsa-fmvss">secured permission</a> to test the car on public roads.</p>
<h2>Waymo (Google)</h2>
<figure> <img src="https://storage.googleapis.com/sdc-prod/v1/press/waymo_first_ride.gif"><figcaption>Level 5 testing.</figcaption></figure>
<p>Founded as a special project in 2009, Waymo separated from Google (though they’re both owned by the same parent firm, Alphabet) in 2016. Though it has never made, sold or operated a car on a commercial basis, Waymo has created test vehicles that have clocked more than <a href="https://waymo.com/ontheroad/">4m miles</a> without human drivers as of November 2017. Waymo tested its Level 5 car, “Firefly”, between 2015 and 2017 but then decided to focus on hardware that could be installed in other manufacturers’ vehicles, starting with the <a href="https://www.cnbc.com/2018/01/29/waymo-orders-thousands-of-pacifica-minivans-in-push-to-open-ride-hailing-service.html">Chrysler Pacifica</a>. </p>
<h2>Uber</h2>
<p>The taxi-hailing app maker Uber has been testing autonomous cars on the streets of Pittsburgh <a href="http://uk.businessinsider.com/uber-self-driving-car-testing-in-pittsburgh-2016-2?r=US&IR=T">since 2016</a>, always with an employee behind the wheel ready to take over in case of a malfunction. After buying the self-driving truck company Otto in 2016 for a <a href="https://www.reuters.com/article/us-uber-tech-volvo-otto-idUSKCN10T1TR">reported US$680m</a>, Uber is now expanding its AI capabilities and plans to test NVDIA’s latest chips in Otto’s vehicles. It has also partnered with Volvo to create a <a href="https://www.ft.com/content/36f071b0-cd64-11e7-b781-794ce08b24dc">self-driving fleet</a> of cars, and with Toyota to co-create a <a href="https://www.recode.net/2018/1/8/16864916/uber-partnership-toyota-ces-volvo-daimler">ride-sharing autonomous vehicle</a>.</p>
<h2>Tesla</h2>
<p>The first major car manufacturer to come from Silicon Valley, Tesla was also the first to introduce Level 2 autopilot <a href="http://www.bbc.co.uk/news/technology-34535604">back in 2015</a>. The following year, it announced that all new Teslas would have the hardware for <a href="https://www.tesla.com/blog/all-tesla-cars-being-produced-now-have-full-self-driving-hardware">full autonomy</a>, meaning once the software is finished it can be deployed on existing cars with an instant upgrade. Some experts have challenged this approach, arguing that the company has merely added surround cameras to its production cars that aren’t as capable as the <a href="https://www.theverge.com/2017/10/24/16504038/tesla-autopilot-self-driving-update-elon-musk">laser-based sensing systems</a> that most other carmakers are using.</p>
<p>But the company has collected data from hundreds of thousands of cars, driving millions of miles across all terrains. So we shouldn’t dismiss the firm’s founder, Elon Musk, when he claims a Level 4 Tesla will drive from <a href="https://www.teslarati.com/tesla-autonomous-coast-to-coast-self-driving-trip/">LA to New York</a> without any human interference within the first half of 2018.</p>
<h2>Winners</h2>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/206746/original/file-20180216-131000-1tlem5l.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/206746/original/file-20180216-131000-1tlem5l.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/206746/original/file-20180216-131000-1tlem5l.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=376&fit=crop&dpr=1 600w, https://images.theconversation.com/files/206746/original/file-20180216-131000-1tlem5l.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=376&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/206746/original/file-20180216-131000-1tlem5l.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=376&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/206746/original/file-20180216-131000-1tlem5l.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=472&fit=crop&dpr=1 754w, https://images.theconversation.com/files/206746/original/file-20180216-131000-1tlem5l.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=472&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/206746/original/file-20180216-131000-1tlem5l.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=472&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Who’s leading the race?</span>
<span class="attribution"><a class="source" href="https://indd.adobe.com/view/a0bd4358-a51c-4a90-b300-e727272a6bba">IMD</a></span>
</figcaption>
</figure>
<p>At the moment, the disruptors like Tesla, Waymo and Uber seem to have the upper hand. While the traditional automakers are focusing on bringing Level 3 and 4 partial automation to market, the new companies are leapfrogging them by moving more directly towards Level 5 full automation. Waymo may have the least experience of dealing with consumers in this sector but it has already clocked up a huge amount of time testing some of the most advanced technology on public roads.</p>
<p>The incumbent carmakers are also focused on the difficult process of integrating new technology and business models into their existing manufacturing operations by buying up small companies. The challengers, on the other hand, are easily partnering with other big players including manufacturers to get the scale and expertise they need more quickly. </p>
<p>Tesla is building its own manufacturing capability but also collecting vast amounts of critical data that will enable it to more easily upgrade its cars when ready for full automation. In particular, Waymo’s experience, technology capability and ability to secure solid partnerships puts it at the head of the pack.</p><img src="https://counter.theconversation.com/content/91949/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Wade does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Uber, Tesla and Waymo (Google) are leapfrogging traditional car makers like Ford, VW and General Motors when it comes to self-driving cars.Michael Wade, Professor of Innovation and Strategy, Cisco Chair in Digital Business Transformation, International Institute for Management Development (IMD)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/799262017-07-26T20:15:43Z2017-07-26T20:15:43ZA focus on goals rather than behaviour is creating workplace monsters<figure><img src="https://images.theconversation.com/files/179762/original/file-20170726-3011-1lg8g8s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Our research highlights that destructive leaders lack self-control especially when anxious and the difficulty of tasks is high</span> <span class="attribution"><span class="source">www.shutterstock.com</span></span></figcaption></figure><p>Rather than putting the time and effort into promoting self-control, many organisations continue to favour focusing on goals, irrespective of how they are achieved. The general obsession by some organisations with outputs, reports, and metrics, signals to employees that performance is paramount, whatever the cost.</p>
<p>This has led to some spectacular failures in organisations. For example in the ride-sharing business Uber, <a href="https://theconversation.com/uber-gets-a-backseat-driver-as-kalanick-exits-top-job-79854">poor leadership modelled and encouraged poor self-control</a> within the business. <a href="https://theconversation.com/au/topics/volkswagen-emissions-scandal-20831">Volkswagen’s 2015 emission scandal</a> offers another sobering example of what can happen when there is insufficient scrutiny on how performance targets are met.</p>
<p>Many of us are guilty of having momentary lapses in self-control. This can be anything from procrastinating on facebook instead of finishing a client report or losing our cool with a frustrating colleague. <a href="http://www.sciencedirect.com/science/article/pii/S0092656610001595?via%3Dihub">Research</a> shows that poor self-control more generally leads to dysfunctional outcomes.</p>
<p><a href="http://www.sciencedirect.com/science/article/pii/S1048984315000417?via%3Dihub">Our research</a> highlights that destructive leaders lack self-control especially when anxious and the difficulty of tasks is high. Constructive leaders, on the other hand, have much more self-control and are much less easily overwhelmed.</p>
<h2>How to turn the focus from goals to self-control</h2>
<p>Self-control, our ability to regulate our emotional and behavioural responses, is widely recognised as essential for success in <a href="https://www.ncbi.nlm.nih.gov/pubmed/19534590">modern organisations</a>. The origins of self-control are thought to be, at least partially, <a href="http://psycnet.apa.org/search/display?id=37888341-ac95-2732-f0f9-f8b9a564381a&recordId=1&tab=PA&page=1&display=25&sort=PublicationYearMSSort%20desc%2CAuthorSort%20asc&sr=1">biologically based</a> . So while self-control can be taught, training employees to control their behaviour in the workplace is not always easy.</p>
<p>The usual way businesses gauge employee performance is epitomised by <a href="http://www.hbs.edu/faculty/Pages/item.aspx?num=9161">Norton and Kaplan’s</a> Balanced Scorecard. The Balanced Score Card sets a range of balanced objectives that employees and teams need to meet and which cascade up through the organisation so that they are easily monitored.</p>
<p>The reliance on these tools like this can fail to identify, and even encourage poor self-control. It can create an environment of low accountability which paves the way for individuals with low self-control to reach senior leadership positions. <a href="https://www.ted.com/talks/carol_dweck_the_power_of_believing_that_you_can_improve">Research shows a focus on performance also reduces</a> the learning and development of staff, whereas a focus on effort and good process puts an organisation on a far better footing.</p>
<p>There are multiple ways to encourage self-control among employees and minimise the effect of self-control failures. </p>
<p>One is by developing a culture of participation among staff. In meetings, proper discussion can lead to successful innovation, if everyone is involved in decision making. That’s right, brain storming actually works! This is because the emphasis is on sharing ownership of problems and solutions by encouraging contribution from a diverse group of people who feel empowered to speak. </p>
<p>Mindfulness training is also widely employed to promote self control and emerging evidence suggests that it can improve <a href="http://psycnet.apa.org/record/2012-34922-001">well-being</a>. The best mindfulness training focuses on good process, reflection and questioning morality, as opposed to simply learning to be more relaxed while following the rules.</p>
<p>Effective organisations encourage self-control, good process, proper discussion and are more driven by growth mindsets than unrealistic performance metrics. The crux of the issue is that whilst performance is important, it shouldn’t come at the expense of process. Promoting and encouraging self-control amongst employees is one way to safeguard good process.</p><img src="https://counter.theconversation.com/content/79926/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Effective organisations encourage self-control, good process, proper discussion and are more driven by growth mindsets than unrealistic performance metrics.Chris Jackson, Professor of Business Psychology, UNSW SydneyBenjamin Walker, Postdoctoral Research Fellow in Management, UNSW SydneyElliroma Gardiner, Lecturer in Organisational Psychology, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/790642017-06-09T13:54:10Z2017-06-09T13:54:10ZHow did the VW camper turn into a £90,000 icon?<figure><img src="https://images.theconversation.com/files/172962/original/file-20170608-32312-boxcnf.jpg?ixlib=rb-1.1.0&rect=61%2C43%2C2281%2C1455&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/fijian_scion/7240459610/in/photolist-c2Pfow-VuhNto-7Kp2bm-8fJebt-7M5FsH-J8R78R-8spcog-5q87xp-dfqfMA-c2Pftd-VxQqVv-ntLwuZ-8kwNWX-ntLE69-qs5DzG-nJta6H-nQiihj-nLxzgP-nsgz4u-nQd4YJ-nDRRfz-nVoaWe-8AmZih-nNjo4W-nJHAHE-ne4oWq-nPphkc-z8f19s-fVfoZ5-nJdKwb-ntHPaY-nt2dLC-nsgzgy-nWjT99-nMWA36-nxShDW-nDWkA5-swrsBn-nhvizo-6fw3tb-nAqUgy-sEWbHJ-nVFj5i-nKyBGC-6j1QCn-nuozXP-ntLEq7-suo31D-nWqwBB-nMj12v">NMK Photography/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>Only a handful of cars have ever managed to be considered both cute and cool at the same time. Fewer still acquire the kind of status that makes them sought-after collectors’ pieces in old age. Volkswagen’s original camper van has been firmly in this category for some time, and its position appeared to be confirmed after auctioneers set a top guide price at a <a href="https://www.thesun.co.uk/motors/3738150/rare-first-generation-of-classic-60s-vw-camper-van-to-sell-for-the-same-price-as-a-brand-new-aston-martin/">record £90,000</a> for a pristine example due for sale.</p>
<p>These days, the VW camper is a ubiquitous feature of festival season or the summer surf scene, but it started life as a direct descendant of that other German classic, the Beetle. It came about only because of a suggestion and accompanying drawings made in 1947 by <a href="http://www.benpon.com/index.php/history">Dutch VW importer Ben Pon</a> which imagined a cargo carrying vehicle or transporter on the chassis of the VW Beetle.</p>
<p>The concept of a small transporter was not new to the world. Europe’s bakers, tradesmen, plumbers, and others had been relying on compact vehicles with around half a ton of load capacity for decades. What was new after the World War II though was the idea of shortening the vehicle as much as possible to make it easier to manoeuvre in European cities, and to maximise cargo space. </p>
<p>VW wasn’t the only manufacturer trying to plug this gap in the market. All delivered an improvement over the long-bonneted, space-inefficient vehicles from before the war, but equally they all still had at least a bit of a “nose” which took up a sizeable portion of the vehicle’s overall length. Even worse, the pug-nosed vehicles built <a href="http://hvanworld.co.uk/">mostly by French companies</a> managed to keep the length in check, but at the expense of driver comfort, pushing their engines in between the front seats to save space.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/173140/original/file-20170609-20857-1qs7hnv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/173140/original/file-20170609-20857-1qs7hnv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/173140/original/file-20170609-20857-1qs7hnv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/173140/original/file-20170609-20857-1qs7hnv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/173140/original/file-20170609-20857-1qs7hnv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/173140/original/file-20170609-20857-1qs7hnv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=504&fit=crop&dpr=1 754w, https://images.theconversation.com/files/173140/original/file-20170609-20857-1qs7hnv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=504&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/173140/original/file-20170609-20857-1qs7hnv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=504&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The pug-nosed Citroen H.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/sidibousaid/33664136625/in/photolist-ThMuYH-FZxkCm-5BYYQp-9BnSj5-6tFs73-3Lm4Fh-4dDyKF-4LbwK1-3xrHAY-6rXwZg-okSw5F-ne8mDT-54aM2a-czNxnf-cZAiRA-cZAkXs-mRiTW-7MV4hB-hUr1xr-8KshQj-cxuXqA-8JXB8z-ecHeH7-j2JWii-a2KLxE-ppKsfE-5oE8FL-ebeSaS-nx1Pna-ebeNpd-e87JRB-7MZ3Em-77TgY8-bsW73S-5oE8CS-egpfSF-77TpH8-oYFE69-77TiYz-CV38Cp-2usb1p-hXV78F-77XdCG-cZAjR7-oYFW3Y-aK5Rjg-ao16i6-56WvW-Sn7yrB-Kwfi3">Simon Harrod/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<h2>Affection</h2>
<p>The VW van – sometimes known as the Type 2 (the Beetle was Type 1) – changed all this by shifting its air-cooled engine to the back altogether, allowing the driver and passenger to enjoy a relatively spacious compartment without much engine noise or engine heat. Driving the Type 2 was, in fact, a surprisingly refined and comparably quiet affair because of this, but also because of the very advanced suspension system VW employed.</p>
<p>This was an independent suspension for all four wheels, adapted from the Beetle. It did away with the crude, rigid axles and leaf springs that made rival vans a punishing experience, and offered road holding and handling that was superior even to some family cars. It might seem a quaintly ramshackle drive by modern comparisons, but the advanced and unconventional technology the van used in the middle of the last century helped build the reputation and customer affection that survives to this day. </p>
<p>Body construction was adaptable, and a large number of different types emerged over time, including delivery vans and micro passenger buses with any number of windows and window configurations. There were pickups, crew cabs with four doors, and, obviously, campers – some with folding roofs or raised roofs.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/173141/original/file-20170609-20829-1tpexoy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/173141/original/file-20170609-20829-1tpexoy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/173141/original/file-20170609-20829-1tpexoy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=429&fit=crop&dpr=1 600w, https://images.theconversation.com/files/173141/original/file-20170609-20829-1tpexoy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=429&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/173141/original/file-20170609-20829-1tpexoy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=429&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/173141/original/file-20170609-20829-1tpexoy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=539&fit=crop&dpr=1 754w, https://images.theconversation.com/files/173141/original/file-20170609-20829-1tpexoy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=539&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/173141/original/file-20170609-20829-1tpexoy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=539&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">In a field of its own.</span>
<span class="attribution"><a class="source" href="https://www.instagram.com/vdubjoss/">Joss Wickson/Instagram</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>This cheap, durable, economical, comfortable vehicle spread all over the world, <a href="https://www.thesamba.com/vw/archives/info/productionfigures.php">gaining a following</a> everywhere it went. Its popularity reached the point where VW decided to produce it in more countries, including Australia, Argentina, and Brazil. Production <a href="https://www.theguardian.com/world/gallery/2013/dec/18/last-volkswagen-camper-vans-made-brazil-in-pictures">continued in Latin America</a> well over four decades after production of the Type 2 had ceased in Germany in 1967.</p>
<h2>Counterculture</h2>
<p>No competitor has ever managed to duplicate the factors that made the VW van such a success, or find the secret sauce behind its charisma and desirability.</p>
<p>One key reason for this may well be coincidence. You see, the VW Type 2, in all its guises, became closely associated with the hippie movement through the 1960s and 1970s, and with the progressive intellectual concepts of the time. An image was built that lasts till today. Mention the word “hippie van”, and no one thinks of a Toyota. The image that comes to mind is a flower-adorned VW camper with big eyes, being driven down a coastal highway in California by counterculture types in flared trousers, playing guitars and nursing impossible hairdos on beaches south of San Francisco.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/172987/original/file-20170608-6975-dhocq4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/172987/original/file-20170608-6975-dhocq4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/172987/original/file-20170608-6975-dhocq4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/172987/original/file-20170608-6975-dhocq4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/172987/original/file-20170608-6975-dhocq4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/172987/original/file-20170608-6975-dhocq4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/172987/original/file-20170608-6975-dhocq4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/172987/original/file-20170608-6975-dhocq4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Peace, love and brand loyalty.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/lulworth-united-kingdom-august-02-german-154668983?src=_ngsWEhHBZ9H_vGuGZ2jUw-1-6">RG-vc/Shutterstock</a></span>
</figcaption>
</figure>
<p>VW really lucked out by having a monopoly at the right time as the sole purveyor of friendly-looking, economical campers that were easily recognisable as non-American just when that counterculture movement struck in the US. Friendly people with flowers in their hair began to drive them, live in them, attend open air festivals in them, and generally made them into the vehicle we all associate with the hippie movement to this day.</p>
<p>That combination of simple, wholesome German design and a dope-fuelled, tree-hugging spirit fulfilled some fundamental needs. Many can afford and run a small, reliable, well-engineered vehicle, especially when you can also live in it. Fuel consumption was low by comparison with US trucks at the time, and the possibilities for personalisation and adaptation allowed a break from conformity.</p>
<p>Driving a Type 2 meant being a rebel, and so it came about that the Type 2 spirit remains very much alive and valued among festival goers, middle-class enthusiasts and collectors alike. Whether endorsing a mainstream hippie image actually honours the real hippie founding spirit is a debate for another time, but it doesn’t matter; the vehicle symbolises the philosophy in one handy package, and that’s that.</p>
<p>VW has never quite managed to rekindle the concept; the Type 2 has been a hard act to follow for its maker as well as its rivals. The <a href="https://www.volkswagen-vans.co.uk/range/transporter-t6?utm_source=google&utm_medium=cpc&utm_campaign=vwcv_transporter_model_exact&utm_term=_vw_t6_&mkwid=ssm9ca3Ja%7Cpcrid%7C163889321931%7Cpkw%7Cvw%20t6%7Cpmt%7Ce%7Cpdv%7Cc%7C&gclid=CJHQ35fgsNQCFc0K0wodUQsDeg&mkwid=ssm9ca3Ja_163889321931_vw%20t6_e_c&mtid=vdvv2y1xd0&slid=&product_id=">current version</a> is a refined, quality vehicle but frankly rather dull. Perhaps, though, the next VW to capture the imagination of enthusiasts with £90,000 to spare could come from the new frontier of automotive tech, just as the Type 2 did in its time. No one can fail to see the powerful echoes of the original VW camper in the company’s plans for the ID Buzz – a familiar looking, timely, electric, <a href="https://www.dezeen.com/2017/01/11/volkswagen-self-driving-electric-vw-microbus-id-buzz-design-transport/">self-driving van</a> launched earlier this year.</p><img src="https://counter.theconversation.com/content/79064/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris Ebbert does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Auctioneers have put a record price tag on the ultimate symbol of 60s counterculture and vintage nostalgia.Chris Ebbert, Senior Lecturer in Product Design, Nottingham Trent UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/738282017-03-14T00:20:18Z2017-03-14T00:20:18ZWhy powerful people fail to stop bad behavior by their underlings<figure><img src="https://images.theconversation.com/files/160609/original/image-20170313-9620-9nczny.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Who you gonna listen to?</span> <span class="attribution"><span class="source">Ethical dilemma via www.shutterstock.com</span></span></figcaption></figure><p>Imagine you were recently promoted at work. You now command a higher salary, lead more people and control more of the organization’s resources. As such, you have more influence over strategy, more authority to hire and fire and more responsibility for your team’s outcomes. </p>
<p>As you undertake your new role, however, you are also faced with evidence of an unethical business practice that plagues your organization. This practice is harmful, potentially embarrassing at best and possibly illegal at worst. In your new, more powerful position, would you be more or less likely to stop it than in your previous role?</p>
<p>This situation is hardly unheard of and might even be common. Leaders often set goals but delegate responsibility for how they are achieved, providing leeway for unethical practices to creep in. Leaders also inherit business practices from their predecessors and gain visibility only as they achieve higher rank in the hierarchy. Unethical practices <a href="http://www.sciencedirect.com/science/article/pii/S0191308503250012">can become routine and taken for granted</a> when embedded in the organization’s structures and processes. </p>
<p>Consider the <a href="https://www.wsj.com/articles/how-wells-fargos-high-pressure-sales-culture-spiraled-out-of-control-1474053044">salespeople at Wells Fargo</a> who were reaching their goals by opening fake accounts, the <a href="https://www.wsj.com/articles/volkswagen-probe-in-germany-extended-to-chairman-1478429066">engineers at Volkswagen</a> who installed software to cheat on emissions tests or the <a href="https://dealbook.nytimes.com/2013/11/04/sac-capital-agrees-to-plead-guilty-to-insider-trading/">traders at the hedge fund SAC</a> who were using inside information to make investment decisions. In each of these situations, unethical practices emerged on the front line, and higher-ups failed to stop those practices.</p>
<p>In <a href="https://authors.elsevier.com/a/1URkI2gS5NWMA5">recent research</a>, we asked: Why do powerful people so often fail to stop unethical practices such as these, even after learning of them? </p>
<h2>People in power</h2>
<p>After all, plenty of <a href="http://amj.aom.org/content/56/4/1002.short%22%22">psychological theories</a> say that individuals in a position of power <a href="http://psycnet.apa.org/psycinfo/1988-12437-001">are situated</a> to respond well to such practices. </p>
<p>After a promotion, people are particularly motivated to ensure the long-term success of the business, and unethical practices might put that success at risk. People in power also command the necessary authority and influence to intervene. They are often seen as more personally responsible when ethical lapses are exposed by whistle-blowers or the press. So you might expect a promotion to increase the likelihood that you would stop such practices in your group or organization.</p>
<p>However, <a href="https://authors.elsevier.com/a/1URkI2gS5NWMA5">our research recently published</a> in <a href="https://www.journals.elsevier.com/organizational-behavior-and-human-decision-processes/">Organizational Behavior and Human Decision Processes</a> suggests the reverse is true: Holding higher rank makes it less likely someone will object to an unethical act. We call this behavior “principled dissent.”</p>
<h2>Taking a stand</h2>
<p>Principled dissent is an effort to protest or change a morally objectionable practice. It challenges the status quo. </p>
<p>For instance, when <a href="https://www.susanjfowler.com/blog/2017/2/19/reflecting-on-one-very-strange-year-at-uber">Susan Fowler at Uber</a> protested the refusal to provide jackets to women engineers, she was expressing principled dissent.</p>
<p>This is often the first step toward correcting ethical failures in organizations. It is typically less costly for the organization than alternative forms of correction, such as political pressure from external parties or free market discipline. </p>
<p>For example, as reluctant as some Uber executives might have been to respond respectfully to Fowler’s claims, they probably are finding the public outcry generated by her blog post and the <a href="https://www.nytimes.com/2017/02/19/business/uber-sexual-harassment-investigation.html">related New York Times article</a> more painful. Worse yet could be free market discipline, whereby unethical practices lead to the company’s demise over the long term.</p>
<p>Sometimes principled dissent is enough to stop an unethical practice completely – such as when the person expressing it holds higher rank. In light of this fact, the relation between hierarchical rank and principled dissent is important to understand.</p>
<h2>How rank affects principled dissent</h2>
<p>To learn more, we conducted a study in which we randomly assigned participants to hold a high- or low-ranking position in a group, or assigned them to a control condition where they had no information about their rank in a group. We then gave participants an ethical dilemma to discuss, asking them to decide whether to lie to another group in a way that would benefit their own team financially but harm the other one.</p>
<p>A key element of our study was that before participants were asked what to do they learned that four of the other five members in their group were apparently willing to lie for monetary gain. We wanted to know whether participants would then openly disagree with this supposed consensus (which we concocted). That is, would they recommend telling the truth even if it goes against what their peers preferred?</p>
<p>We found that almost 40 percent of participants in the low-rank and control conditions disagreed with the group’s dishonest decision. In other words, a sizable number of those people went against the grain and engaged in principled dissent. </p>
<p>However, a paltry 14 percent of participants in the high-rank condition did the same. Very few people who were given high rank were willing to disagree with their group’s unethical choice.</p>
<p>We wondered: Did holding high rank corrupt people somehow? That is, did high-ranking participants simply prefer lying to honesty? </p>
<p>The answer was no. Holding high rank led people to accept the group’s preference more readily, regardless of whether that preference was ethical or not. We included another condition in that study in which participants were told that the rest of their group wanted to be honest, even if it incurred some monetary cost to their group. In these conditions, high-ranking participants were still less likely to go against the grain than participants in low-ranking or control conditions.</p>
<p>We also explored the impact of organizational rank on principled dissent in a study of over 11,000 randomly selected government employees. In that study, holding higher rank was again associated with less principled dissent – specifically reporting illegal or wasteful practices – even after we statistically accounted for a variety of factors such as tenure in the organization, education, knowledge of rules about retaliation for reporting unethical practices and other demographic variables. </p>
<p>This study thus suggested that the patterns we observed in the laboratory extend to the real world, when unethical practices are real and have more severe consequences.</p>
<h2>Group identification</h2>
<p>Although the failure to stop an unethical practice is often attributed to character problems such as greed, sexism or the relentless pursuit of self-interest, our explanation is subtler.</p>
<p>According to <a href="https://authors.elsevier.com/a/1URkI2gS5NWMA5">our studies</a>, ethical failures like these can also stem from a psychological factor endemic to very successful teams: identification with the group or organization. Identification is a feeling of oneness with the group. When you identify highly with a group or organization, you define yourself in terms of your membership in it. When asked, “Who are you?” your answer will reflect a category (e.g., you might refer to yourself as a man, a Texan, a Yankees fan, an environmentalist, a Christian). You focus on the traits that you and other group members share, rather than on personal traits that distinguish you.</p>
<p>We found that holding higher rank increases identification. People in high-ranking positions feel more connected to their group or organization and value their membership in it to a greater degree than do lower-ranking people. This trend has benefits for the group, as strong identifiers cooperate more readily and contribute more to the group’s goals. </p>
<p>But stronger identification has an ethical cost: It makes it more difficult to perceive ethical problems within the group. </p>
<p>For example, people who identify strongly with a group are more likely to consider unethical acts committed by its members to be more ethical than someone with a weaker connection to it. So one reason high-ranking people might fail to stop unethical practices is that their stronger identification blinds them: They don’t see the act as unethical in the first place. They fail to step in and intervene because they do not see any need to do so.</p>
<p>In another study, we made it easy or difficult for participants to identify highly with their other group members. We randomly assigned them to positions of high or low rank, and then tasked their group with making a decision based on a popular business ethics case study. Participants were led to believe that their group wanted to price-gouge hospitals in the aftermath of a hurricane. High-ranking participants engaged in principled dissent less frequently than low-ranking participants only when they identified strongly with the group.</p>
<h2>Silver lining</h2>
<p>There is some good news. </p>
<p><a href="http://www.jstor.org/stable/40575061?seq=1#page_scan_tab_contents">Earlier research</a> found that people who strongly identify with their group are more likely to engage in principled dissent than weak identifiers – as long as they recognize a problem as unethical. That is, while these strong identifiers may have trouble recognizing that certain activities are unethical, when they do realize it, they’re more likely to intervene and try to put a stop to the bad behavior. </p>
<p>This shows just how important it is to instill a strong moral compass in future business leaders, and for companies to find ways for them to maintain it as they climb the corporate ladder. </p>
<p>The other option is to make it easier for managers to leverage the ethical perspectives of lower-ranking employees who, according to our research, have a clearer eye for spotting wrongdoing. In other words, a more democratic approach to management could offer an ethical advantage that could be more profitable in the long run.</p><img src="https://counter.theconversation.com/content/73828/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Higher-ups at Wells Fargo, Volkswagen and Uber all failed to stop unethical practices that had significant repercussions. New research offers some clues on why.Jessica A. Kennedy, Assistant Professor of Management, Vanderbilt UniversityCameron Anderson, Professor of Leadership and Communication, University of California, BerkeleyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/712642017-01-16T07:12:52Z2017-01-16T07:12:52ZWhat we can all learn from the VW emissions saga<p>A year and a half after the US Environmental Protection Agency (EPA) <a href="https://www.epa.gov/vw/learn-about-volkswagen-violations">alleged</a> Volkswagen had installed software to circumvent emissions standards, the company has <a href="https://www.justice.gov/opa/pr/volkswagen-ag-agrees-plead-guilty-and-pay-43-billion-criminal-and-civil-penalties-six">plead guilty</a> to three criminal felony counts. Volkswagen (VW) will pay US$4.3 billion in criminal and civil penalties, and six executives and employees have been indicted. </p>
<p>But the VW scandal is not indicative of systemic problems in the German Corporate Governance system. Rather it highlights huge issues with corporate influence peddling and regulatory capture in Brussels, Washington and Canberra.</p>
<h2>The German context</h2>
<p>German corporations have faced a number of scandals recently – on top of VW there have been <a href="http://www.nytimes.com/2008/12/21/business/worldbusiness/21siemens.html">international bribery allegations at Siemens</a> and <a href="https://www.theguardian.com/business/2016/sep/16/deutsche-bank-14bn-dollar-fine-doj-q-and-a">Deutsche Bank’s mis-selling of mortgage securities</a> in America. </p>
<p>But these are not examples of a systemic failure in German corporate governance at home, instead they highlight its weaknesses where those rules do not apply and managers feel less constrained. The scandals at Siemens, Deutsche Bank and now VW reveal the difference in scrutiny German managers face at home and abroad. </p>
<p>German corporate governance is built around the principals of co-decision making and social partnership. In <a href="http://en.dgb.de/fields-of-work/german-codetermination">this system</a> (called codetermination) managers are monitored from above by Supervisory Boards and from below by Works Councils.</p>
<p>Supervisory boards feature representatives elected by unions and employees, who sit alongside representatives of ownership. These boards oversee and appoint a second separate board made up of executive directors. </p>
<p>In all but the smallest workplaces, employees can elect a Works Council. Works Councils can’t initiate strikes but they have considerable influence over operational issues. In very large companies such as VW there can be a network of Works Councils to represent plants, divisions and the group overall. </p>
<p>Codetermination <a href="http://www.emeraldinsight.com/doi/abs/10.1108/01425450510612004">forces</a> German managers to focus on productivity and cooperation <a href="http://www.theage.com.au/victoria/mass-resignations-threat-after-power-plant-industrial-deal-scrapped-20170113-gtr500.html">rather than</a> short-termism, cost-cutting and industrial confrontation.</p>
<p>The business and governance model found in <a href="https://www.researchgate.net/publication/268085988_Trade_Union_Interests_In_Corporate_Governance_In_Anglo-American_Firms">Anglophone countries</a> - the UK, US and Australia, emphasises shareholder value and excludes unions if it can. Other hallmarks include aggressively outsourcing, offshoring and casualisation of labour, and preference for individual contracting arrangements. Even in the cut throat service sector the German approach <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1468-232X.2008.00521.x/abstract">results</a> in less precarious employment conditions and greater employee voice.</p>
<p>Germans view codetermination as <a href="http://onlinelibrary.wiley.com/doi/10.1111/1467-8543.00230/abstract">an important democratic institution</a> because it <a href="https://academic.oup.com/ser/article-abstract/12/3/517/1663134/Polarizers-or-landscape-groomers-An-empirical?redirectedFrom=fulltext">constrains corporate political donations</a>. This is what John Keane <a href="https://theconversation.com/the-origins-of-monitory-democracy-9752">calls monitory democracy</a>.</p>
<h2>Undermining the German system</h2>
<p>A number of factors combined to weaken Volkswagen’s corporate governance. A feud amongst the Porsche family, who own the majority of VW shares, resulted in controversial board appointments, <a href="https://theconversation.com/vorsprung-durch-realpolitik-what-vw-power-games-say-about-german-ceo-culture-40396">reducing oversight over CEO Martin Winterkorn</a>. But VW’s global production footprint also means that unions and employees could not monitor management in the US. VW attempted to introduce a Works Council style arrangement in the US <a href="https://www.bloomberg.com/news/articles/2015-02-19/volkswagen-s-sort-of-union-in-tennessee">but failed</a>. </p>
<p>Further, VW’s use of a standalone enterprise rather than the standard industry-wide collective bargain agreement has <a href="https://insiders.fortune.com/what-vws-bonuses-say-about-how-bogus-businesses-measure-success-71ba1acfe2ed#.gni8m1mvv">encouraged a creeping and corrosive Anglo-style bonus and incentivisation culture</a>. </p>
<p>In Germany industry-wide collective bargaining between the industry association and union <a href="http://www.emeraldinsight.com/doi/abs/10.1108/01425450510612004">reduces the temptation</a> for this kind of wage and executive remuneration policy.</p>
<p>Finally European Union (EU) competition law forced the German government to strip away additional layers of governance oversight at VW, allowing the German State of Lower-Saxony to exercise an effective veto over all board decisions. <a href="http://www.autonews.com/article/20130529/COPY01/305299972/germany-has-complied-with-ruling-on-vw-law-eu-court-adviser-says">This veto</a> warned off corporate raiders and stymied the Porsche family extending its influence at VW.</p>
<h2>What we can learn</h2>
<p>These scandals show that simply adopting Anglophone ideas of governance and labour market reform will not necessarily create better corporate governance in Germany. Rather, they <a href="http://link.springer.com/article/10.1007/s10551-010-0730-8">could spread bad practice</a> increasing inequality and <a href="https://academic.oup.com/ser/article-abstract/14/1/97/2362835/The-insider-outsider-divide-and-economic-voting?redirectedFrom=fulltext">threatening German democracy</a>.</p>
<p>Instead the German system should be bolstered. Regulators should curtail the erosion of industry-level collective bargaining, introduce statutory bonus and salary caps for executives and directors, and severely limit executive and employee share plans. Regulators might also have to scrutinise cross-border mergers that <a href="http://www.sciencedirect.com/science/article/pii/S1090951601000748">undermine the strengths of codetermination</a>.</p>
<p>There are also some striking similarities between the VW scandal and earlier ones in the car industry (<a href="http://www.bbc.com/news/business-37218510">Mitsubishi</a>, <a href="http://www.abc.net.au/news/2014-03-20/toyota-pays-1-3-billion-for-defect-cover-up-statements/5332894">Toyota</a> and <a href="https://www.bloomberg.com/news/features/2016-06-02/sixty-million-car-bombs-inside-takata-s-air-bag-crisis">Tanaka</a>). All these cases involve concerted attempts to either capture the regulator outright, or to mislead regulators who lack the resources or the political support to uphold legislated standards. </p>
<p>Brussels, London, Washington and Canberra are crawling with paid lobbyists on the payroll of corporations. In the VW case, the company (along with other carmakers) <a href="https://www.nytimes.com/2015/09/29/world/europe/volkswagen-scandal-highlights-european-stalling-on-new-emissions-tests.html?_r=0">lobbied EU regulators</a> in Brussels to adopt less stringent standards than the US. </p>
<p>In the US it <a href="https://theconversation.com/how-volkswagen-got-caught-cheating-emissions-tests-by-a-clean-air-ngo-47951">took an NGO and state regulator</a> to expose the defeat device rather than active policing by an under-resourced and politically hogtied EPA. </p>
<p>This alerts us to the capture of <a href="https://theconversation.com/how-vw-test-fixing-is-just-the-start-of-the-car-industrys-problems-48192">EU</a>, <a href="https://www.gpo.gov/fdsys/pkg/GPO-OILCOMMISSION/pdf/GPO-OILCOMMISSION.pdf">US</a> and Australian regulatory agencies, many of whom are now required to “actively engage” with “industry stakeholders”. </p>
<p>In Australia <a href="http://www.smh.com.au/business/revolving-regulators-how-one-door-opens-another-in-australias-financial-system-20150527-ghb6n4.html">this includes</a> staff secondment, appointment of industry insiders to head regulatory agencies and collaboration in the design of regulations and taxation regimes. This lobbying and influence peddling is <a href="https://theconversation.com/we-keep-choosing-cars-over-clean-air-thats-the-real-scandal-48108">likely to accelerate</a> as companies in carbon-intensive industries attempt to delay inevitable policy responses to climate change. </p>
<p>Across the western democracies laws need to be established to restrict or ban corporate political donations, and political lobbying. Reform of regulators is also necessarily, including introducing independent testing and questioning and revisiting the <a href="http://www.treasury.act.gov.au/documents/regulatory_impact_statement_guide.pdf">guidelines</a> that extend representation to “the potentially affected”. This would add an additional layer of safeguards to ensure corporations cannot unduly influence or undermine rules designed to protect the wider public interest.</p>
<p>In this regard the global car industry needs greater scrutiny, not less, as news of scandals <a href="https://www.bloomberg.com/news/articles/2017-01-12/fiat-chrysler-plunges-on-report-epa-to-allege-emissions-cheating">keeps rolling in</a>.</p><img src="https://counter.theconversation.com/content/71264/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew Linden received funding from RMITs EU Centre <a href="http://www.rmit.edu.au/about/our-education/global-outlook/european-union-eu-centre">http://www.rmit.edu.au/about/our-education/global-outlook/european-union-eu-centre</a> to conduct his doctoral research. The Centre is funded by the European Union.</span></em></p>The Volkswagen emissions scandal highlights the benefits of the German corporate governance system, as well as the worst of lobbying around the world.Andrew Linden, Sessional/ PhD Candidate RMIT University, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/699212016-12-08T09:31:18Z2016-12-08T09:31:18ZThese four cities are cracking down on diesel vehicles to improve air quality – here’s how<figure><img src="https://images.theconversation.com/files/148889/original/image-20161206-25749-kag1fy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/jafsegal/8497651302/sizes/l">jafsegal/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Four of the world’s biggest cities are to <a href="http://www.bbc.co.uk/news/science-environment-38170794">ban diesel cars</a> from their city centres by 2025, in order to improve air quality. The mayors of Paris, Madrid, Athens and Mexico City announced the plans at the <a href="http://www.c40.org/events/c40-mayors-summit-2016">C40 Mayors’ Summit</a> on climate change. This bold move could lead other cities to take action, and help to accelerate a shift away from diesel.</p>
<p>Diesel engines are seen as major contributors to air pollution in cities, as they exude nitrogen dioxide and tiny particulates. These pollutants have a known impact on human health: they <a href="https://theconversation.com/the-not-so-invisible-damage-from-vw-diesel-cheat-100-million-in-health-costs-48296">can cause</a> heart attacks, breathing difficulties and even <a href="https://theconversation.com/how-londons-next-mayor-could-fix-air-pollution-and-save-lives-58597">premature death</a>. </p>
<p>Anne Hidalgo, the mayor of Paris, <a href="http://www.pbs.org/newshour/rundown/cities-quit-diesel-environment/">stated that</a>: “we no longer tolerate air pollution and the health problems and deaths it causes, particularly for our most vulnerable citizens”. Mexico City’s mayor, Miguel Ángel Mancera, said that the city would also increase <a href="http://www.cbc.ca/news/business/ban-diesel-paris-athens-madrid-mexico-city-1.3878883">investments in public transport</a>, so as to improve air quality and reduce greenhouse gas emissions. Meanwhile Giorgos Kaminis, the mayor of Athens, <a href="https://www.theguardian.com/environment/2016/dec/02/four-of-worlds-biggest-cities-to-ban-diesel-cars-from-their-centres">said that</a> he aimed to remove all cars from the city centre and work with governments and manufacturers to promote electric vehicles and cleaner transport options.</p>
<h2>Ditch the diesels</h2>
<p>Government attitudes had started to turn against diesels anyway. A year ago, the (now ex-) French prime minister, Manuel Valls, admitted that the promotion of diesel cars – on the basis that they are more fuel efficient and emit less CO₂ than petrol engines – had been a <a href="https://www.motoringresearch.com/car-news/france-to-begin-move-out-of-diesel">“mistake”</a>. His comments reflected a wider shift in thinking in Europe, which has been accelerated by Volkswagen’s “dieselgate” scandal. Indeed, <a href="http://arstechnica.com/cars/2016/06/paris-bans-pre-1997-cars-from-its-streets-during-the-week/">Paris</a> already had plans in place to ban older diesels from 2020. </p>
<p>These measures are likely to increase pressure on other nations – including the UK – to phase out diesel vehicles, or at least introduce clean air zones. London’s <a href="https://tfl.gov.uk/modes/driving/ultra-low-emission-zone">ultra-low emissions zone</a>, for example, aims to stop the dirtiest diesels driving through the centre of the city. The question now is whether this will be tightened up further and whether other UK cities such as Birmingham and Manchester will act to reduce air pollution too.</p>
<p>In the wake of the VW scandal we should see tougher testing of emissions and fuel efficiency by regulators which better reflects real-world driving conditions. If this requires diesel-powered cars to be fitted with systems that clean up their emissions, they may become <a href="http://www.autocar.co.uk/car-news/industry/future-diesel-cars-could-cost-more-hybrids-toyota-powertrain-boss">more expensive</a>. This would, in turn, affect their popularity. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/148890/original/image-20161206-25742-1q2qe1t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/148890/original/image-20161206-25742-1q2qe1t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/148890/original/image-20161206-25742-1q2qe1t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/148890/original/image-20161206-25742-1q2qe1t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/148890/original/image-20161206-25742-1q2qe1t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/148890/original/image-20161206-25742-1q2qe1t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/148890/original/image-20161206-25742-1q2qe1t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Bad reputation.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/hamzadaoui/3145992682/sizes/l">Hamza Daoui/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>It’s as well that European nations are taking firm action to curb the use of diesel vehicles. For years now, diesels have been pushed by European manufacturers and governments as a supposedly clean alternative to petrol cars, producing lower tail-pipe CO₂ emissions and offering better fuel efficiency. Diesel car sales account for just short of <a href="http://www.forbes.com/sites/bertelschmitt/2016/10/13/in-europe-diesel-falls-slowly-out-of-favor/#1989dbf588a5">50% of the European car market</a>, in stark contrast to other major markets where diesel sales are tiny.</p>
<p>For example, in the UK, company cars (which account for about half of annual car sales) have a “benefit-in-kind” tax for drivers, related to the car’s CO₂ rating, which makes diesels more attractive from a tax point of view. As a result, diesel sales in the UK have grown dramatically in recent years. European governments have effectively subsidised diesels and, in doing so, have slowed a much-needed transition to cleaner vehicles. </p>
<h2>Playing catch-up</h2>
<p>Fortunately, a range of hybrids and electric vehicles (EVs) have been developed to meet this need. Japanese and American car makers have gone down two different technological routes. Japanese car makers – and Toyota in particular – went down the petrol hybrid route, while US firms such as General Motors and Tesla have gone into pure electrics and plug-in hybrids. </p>
<p>With the exception of Renault-Nissan and BMW, European producers are now particularly exposed to a diesel downturn – it seems they may have placed the wrong technological bets. Petrol hybrids and electric cars could well emerge as winners from the VW debacle – something which Tesla founder <a href="http://www.autoexpress.co.uk/tesla/92959/elon-musk-what-i-d-do-if-i-was-running-vw">Elon Musk has been keen to stress</a> </p>
<p><a href="http://fortune.com/2016/11/30/toyota-president-electric-cars/">Toyota</a> is trying to play catch up on EV development while Jaguar Land Rover also recently announced a belated electric push with its <a href="http://www.birminghampost.co.uk/business/business-opinion/jaguar-gets-ready-charge-quite-12175462">I-PACE launch</a>. Meanwhile, VW is trying to clean up its act in the hope that <a href="https://www.theguardian.com/environment/2016/nov/22/vw-shifts-focus-to-electric-cars-with-us-expansion-plan">25% of VW sales</a> will be EVs by 2025.</p>
<p>But so far, apart from Tesla’s in roads into the premium market, sales of EVs have been something of a disappointment. EV take up has only really happened on a big scale <a href="https://electrek.co/2016/11/09/norway-keeps-electric-vehicle-tax-exemption-until-2020-positions-itself-to-stay-ev-leader/">in Norway</a>, thanks to substantial government support. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/148892/original/image-20161206-15334-1thtezr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/148892/original/image-20161206-15334-1thtezr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/148892/original/image-20161206-15334-1thtezr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/148892/original/image-20161206-15334-1thtezr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/148892/original/image-20161206-15334-1thtezr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/148892/original/image-20161206-15334-1thtezr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/148892/original/image-20161206-15334-1thtezr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Gap in the market.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/simotronics/14396479818/sizes/l">Simopala/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p>This is partly down to huge over-hyping early on: despite several years of high expectations for EVs, it’s only now that the first genuinely viable models have appeared on the market in the form of the BMW i3, Nissan Leaf 2 and Tesla Model S.</p>
<p>Other factors slowing the take-up of electric vehicles could include a lack of confidence in electric vehicle technology and performance, uncertainty over the lifespan of expensive batteries, a lack of awareness of the incentives that make electric vehicles cheap to run and a relative lack of choice, which results in the perception that electric vehicles are not particularly stylish.</p>
<p>Yet we can be hopeful that these attitudes will change. We’ll see a lot of new mass market EVs in 2017, with significantly greater range. Models such as the Tesla Model 3, the Chevrolet Bolt, as well as designs from Renault and Nissan, will be game-changers.</p>
<p>Let’s be clear. Diesels should be restricted in cities to improve air quality. Policy needs to favour public transport, as well as alternative car technologies such as hybrids and EVs. Viable models are already here; it’s time for governments to start encouraging and supporting citizens to use them.</p><img src="https://counter.theconversation.com/content/69921/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Bailey receives funding from the European Union under its Horizon 2020 Marie Sklodowska-Curie Research and Innovation Staff Exchange project MAKERS (grant agreement number 691192), the ESRC under its City Evolutions project, and the Regional Studies Association under its ‘New Manufacturing Regions’ research network.</span></em></p>It’s about time Europe ditched the diesels – so what are the alternatives?David Bailey, Professor of Industry, Aston UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/689582016-11-22T07:43:39Z2016-11-22T07:43:39ZWhy it’s so hard for Europeans to get compensation after Dieselgate<figure><img src="https://images.theconversation.com/files/146802/original/image-20161121-4528-1rbv33w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Volkswagen's headquarters in Wolfsburg, Germany.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/127064847@N02/23238278553/in/photolist-BpufB4-cBbRq3-cBbJKf-cBbzNo-cBbMJY-cBbHY5-cBbMXo-cBbFKh-cBbAVd-cBbQqQ-cBbGw9-cBbNv3-cBbLQC-cBbCoL-cBbQNC-cBbBw5-cBbwRb-cBbHAj-cBbP6S-cBbA2L-cBbvzm-cBbzcb-cBbBEf-cBbQ2E-cBbLoj-cBbNJA-cBbvYq-cBbJmC-cBbR1j-cBby75-cBbM2m-cBbAnC-cBbFUL-cBbDU1-cBbAAN-cBbHqs-cBbDJf-cBbGi5-cBbD3j-cBbKLS-7CXhML-cBbB7o-cBbE5U-cBbSuG-cBbMbC-cBbDdf-cBbQAW-cBckSy-cBbPPj-cBbEyb">Elena Savelyeva</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span></figcaption></figure><p>More than a year after the <a href="http://fortune.com/2016/11/07/vw-dieselgate-more-bad-news/">Dieselgate scandal</a>, which uncovered cheating by Volkswagen and other car companies in emissions tests, there has been little progress for European consumers. </p>
<p>Most people are unsure of how – or if – they will be compensated. London Mayor Sadiq Khan has written to Volkswagen and asked that <a href="https://www.theguardian.com/business/2016/nov/20/sadiq-khan-demands-vw-compensate-capitals-residents-and-tfl">£2.5 million be reimbursed</a> to Transport for London as compensation for gas emissions affecting the city’s residents. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"800300393142034432"}"></div></p>
<p>The company, which announced <a href="http://fortune.com/2016/11/18/volkswagen-vw-job-cuts/">30,000 job cuts</a> on November 18, has not yet replied.</p>
<p>Why is the compensation process so different in the US, where Volkswagen will reportedly spend up to <a href="http://www.reuters.com/article/us-volkswagen-emissions-idUSKBN13A1VEhttp://example.com/">US$16.5 billion</a> to buy back affected cars? </p>
<p>There are two main reasons: the influence of the diesel lobby in the EU and with national authorities, and the lack of an EU-wide collective redress system.</p>
<h2>A powerful diesel lobby</h2>
<p>National carmakers have <a href="https://euobserver.com/dieselgate/133235">consistently lobbied national authorities and the EU</a> to gain trust and deal with the fact that most cars <a href="https://www.transportenvironment.org/publications/dieselgate-who-what-how">surpass legal emissions limits</a> under real driving conditions. The car industry spent <a href="https://lobbyfacts.eu/articles/01-09-2016/car-industry-lobby-spending-keeps-growing">more than €18 million</a> on EU lobbying in 2014, making it a powerful force to be reckoned with. </p>
<p>Lobbyists for Volkswagen, Daimler and BMW - as well as VDA and ACEA, the German and European automobile associations - have prevented up-to-date car testing methods and limits from being put in place <a href="http://www.sven-giegold.de/wp-content/uploads/2016/01/Greens_EP_Automotive_Jan-2016_report.pdf">since the first EU regulations in 2007</a>. </p>
<p>The European Commission has promised new onroad tests <a href="https://www.transportenvironment.org/sites/te/files/publications/2015%2007%20RDE%20position%20paper%20FINAL.pdf">since 2012</a>, but these were blocked by the industry. Even after the scandal, in <a href="https://www.theguardian.com/environment/2015/oct/28/eu-emissions-limits-nox-car-manufacturers">October 2015</a>, car-makers weakened EU emissions limits and <a href="https://www.theguardian.com/business/2016/apr/21/all-top-selling-cars-break-emissions-limits-in-real-world-tests">delayed</a> the introduction of the new test methods, now scheduled to start in 2017.</p>
<p>The European Commission was <a href="https://www.ft.com/content/d0d7ba40-6394-11e5-9846-de406ccb37f2">aware</a> of the possibility of defeat devices being used years before the scandal broke. But because only national authorities can test cars in the EU’s <a href="http://www.politico.eu/article/confusion-slows-europes-response-to-vw-scandal/">fragmented system of regulation</a>, the matter was not investigated. </p>
<h2>Protecting national interests</h2>
<p>In Germany, the Transport Ministry was <a href="http://www.spiegel.de/international/business/vw-scandal-exposes-deep-complicity-of-government-a-1061615.html">aware that cheating existed</a> up to five years before the Volkswagen scandal. But although an investigation revealed that <a href="https://www.bmvi.de/SharedDocs/EN/Anlagen/VerkehrUndMobilitaet/Strasse/report-by-the-volkswagen-commission-of-inquiry.pdf?__blob=publicationFile">most carmakers were using defeat devices</a>, it decided in <a href="http://www.bloomberg.com/news/articles/2016-07-06/vw-escapes-cheating-fines-in-germany-as-payout-pressure-mounts">June 2016</a> not to fine any of its manufacturers - as long as they organised voluntary recalls of their vehicles. </p>
<p>However, the German authorities did contact Fiat-Chrysler for questioning about its use of defeat devices. The Italian government argued that its own tests had not found evidence of Fiat cheating and reminded Germany that Italian carmakers were Italy’s responsibility. Meanwhile, in August 2016 the Italian Competition Authority became the first in Europe to fine Volkswagen <a href="http://www.agcm.it/en/newsroom/press-releases/2294-ps10211-the-italian-competition-authority-fines-the-volkswagen-group-for-tampering-with-their-vehicles'-emissions-control-systems.html">€5 million</a> for misleading advertising. </p>
<p>In September 2016, Germany <a href="http://www.reuters.com/article/us-germany-fiat-chrysler-emissions-docum-idUSKCN1174O3">took the matter to the EU</a>, which turned the responsibility for investigation back to Italian authorities. The dispute is still unresolved, but shows how hard transparency can be when national authorities - and the information they provide - are influenced by their national carmakers.</p>
<h2>A patchwork system of collective redress</h2>
<p>But national lobbying alone cannot explain why results for consumers have been so different in the EU and the US. This boils down to the fragmented state of consumer redress (also known as class action) in the EU.</p>
<p>The European Commission <a href="http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32013H0396">recommended</a> in 2013 that all countries set up collective redress systems for all areas of consumer policy, but only 16 of its 28 member states currently have such laws. Due to the differences in these laws, it is <a href="http://www.politico.eu/article/european-volkswagen-owners-face-a-bumpy-legal-ride-pan-eu-class-action-lawsuit/">very difficult to bring pan-European class actions</a> to court. </p>
<p>Previous attempts to set up a <a href="http://www.iclg.co.uk/practice-areas/class-and-group-actions/class-and-group-actions-2017/eu-developments-in-relation-to-collective-redress">European collective redress system</a> have failed due to countries’ different legal traditions and the fear of a flood of US-style litigation. Consumers are already at a disadvantage in taking on a deep-pocketed multinational, and limiting class actions to country boundaries makes it even harder for consumers to act.</p>
<p>In the US, known for its tradition of litigation, class action was one of the main responses to the scandal. The district court of San Francisco gave final approval to the first settlement in <a href="https://www.vwcourtsettlement.com/en/">October 2016</a>. US consumers can either sell back their car, or have the car repaired and receive compensation of between US$5,000 and US$10,000 each. On top of this, consumers had already received a <a href="https://www.theguardian.com/business/2015/nov/09/volkswagen-gift-cards-vw-emissions-scandal">US$1,000 “goodwill” gift</a> from VW.</p>
<p>On the other hand, the Italian consumer organisation Altroconsumo <a href="http://www.altroconsumo.it/auto-e-moto/automobili/news/altroconusmo-contro-volkswagen">brought class actions</a> against Volkswagen and Fiat in September 2014, long before the scandal broke. These were <a href="http://europe.autonews.com/article/20160617/ANE/160619890/italian-appeals-court-accepts-class-action-against-vw-report-says">accepted after appeal</a> in 2015 and 2016, and are ongoing. But these actions demand only €500 payback per vehicle, and Volkswagen has made it clear that it has no intention of providing any extra “goodwill” gift to European consumers.</p>
<p><a href="http://www.europarl.europa.eu/RegData/etudes/BRIE/2016/583793/EPRS_BRI(2016)583793_EN.pd">Similar lawsuits</a> are ongoing in several other European countries and are being coordinated by the <a href="http://www.beuc.eu/volkswagen-emission-affairs">European Consumer’s Organisation (BEUC)</a>. But the lack of EU-wide rules mean that even if some consumers do receive remuneration, consumers in countries without collective redress systems will miss out. </p>
<p>These holes in the system leave consumers with less power to place pressure on manufacturers to go beyond the bare minimum - pressure which is vital when national authorities are reluctant to enforce sanctions themselves.</p>
<h2>Looking ahead</h2>
<p>So what prospects are there for consumer compensation in the EU? Progress is still slow, despite pressure from the European Commission and NGOs. </p>
<p>In a belated but welcome first step, Volkswagen recently committed to <a href="https://euobserver.com/dieselgate/135230">creating an action plan</a> to better inform EU consumers and speed up the repair process. The website will only provide information that US consumers have been given since the beginning though, and, so far, there are no plans to compensate EU consumers.</p>
<p>Perhaps the most positive thing to come out of the scandal is that it has created momentum for transparency and raised awareness of the need to introduce EU-wide collective redress.</p>
<p>In an opaque system dominated by industry lobbying, fragmented regulation and responsibility, that can only be a good thing.</p><img src="https://counter.theconversation.com/content/68958/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Francesca Colli does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A powerful diesel lobby and fragmented class action laws put EU consumers at a disadvantage.Francesca Colli, Phd Student, KU LeuvenLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/647952016-09-02T03:40:13Z2016-09-02T03:40:13ZACCC unlikely to secure compensation for Volkswagen customers<p>The Australian Competition and Consumer Commission’s (ACCC) is unlikely to secure compensation for customers from German car maker Volkswagen and its Australian subsidiary for breaching emission standards. This is because Australia standards, even though they are based on European emission standards, aren’t as stringent as in Europe or the United States.</p>
<p><a href="http://www.accc.gov.au/media-release/accc-takes-action-against-volkswagen-over-diesel-emission-claims">The ACCC alleges</a>:</p>
<blockquote>
<p>“consumers rightly expect that their vehicle’s emissions would operate as advertised and this was not the case with more than 57,000 vehicles sold in Australia by Volkswagen over a five year period.” </p>
</blockquote>
<p>The cars in question include various models made between 2008 and 2015 including the Amarok, Golf, Polo and Passat.</p>
<p>The ACCC alleges Volkswagen engaged in misleading or deceptive conduct, made false or misleading representations and engaged in conduct liable to mislead the public in relation to diesel vehicle emission. More specifically, that Volkswagen represented the vehicles as complying with Australian and European standards and all regulatory requirements, when this was in fact not the case. </p>
<p>The European emission standards for passenger cars (including SUVs) applied to the vehicles mentioned in the ACCC’s claim, ranged from Euro 5 for new models in 2009 and all new vehicles 2011, to Euro 6 <a href="http://www.theicct.org/sites/.../ICCT_comparison%20Euro%20v%20US.pdf">for new vehicles sold from September 2015</a>. This means that Euro 5 applied for the above vehicles. </p>
<p>However in Australia, the European regulations Euro 4 applied to vehicles launched before November 1, 2013, and Euro 5 vehicle emission standards will only apply to all new cars <a href="https://www.legislation.gov.au/Details/F2011L02016">(including SUV’s and LCV) on November 1, 2016</a>. In effect, Euro 4 regulatory standards applied and Euro 5 applied to new models.</p>
<p>In the United States this is different again. The US Tier 2 and Tier 3 regulatory standards on nitrogen oxide emissions are stricter than Europe’s regulatory standards for Euro 5 and Euro 6. So much so that Volkswagen diesel engine manufacturers concede it will be far harder to meet the stricter US standards. </p>
<p>This has led to <a href="http://www.autonews.com/article/20160111/RETAIL/160119974/vw-to-expand-diesel-compensation-program-in-u.s.-to-larger-vehicles">a US$10 billion buyback program</a> for turbocharged direct injection car owners. They can now sell their cars back to Volkswagen. The initial action was initiated by the US Department of Justice, which first sued Volkswagen on behalf of the Environmental Protection Agency. </p>
<p>This is not the case in Europe and in Australia. Volkswagen is recalling the affected vehicles and offering no compensation.</p>
<p>Pressure is mounting on countries in the Europe for not taking action. In the United Kingdom, Volkswagen appeared before the Transport Select Committee in 2015 to answer <a href="http://www.parliament.uk/documents/commons-committees/transport/16-Letter-from-Louise-Ellman-to-Paul-Willis-MD-Volkswagen-UK.pdf">questions on its emissions testing for its cars</a>. </p>
<p>The UK arm of Volkswagen said it wasn’t required to pay compensation because it removed the defeat device from its vehicles. This is the software in engines that could detect when they were being tested, changing the performance accordingly to improve results. </p>
<p>It said the removal won’t have an impact on performance and the cars will pass the less stringent European Union emission tests after the approval of new technical measures by the relevant authorities. </p>
<p>When questioned whether vehicle owners would be compensated in the UK, Volkswagen said it was not necessary to do so. It argued compensation requires a fault which has given rise to some form of loss, and they did not believe this was the case. Any discrepancy between the advertised carbon dioxide emissions and fuel economy and actual performance was expected to be very slight in the UK. If this is the case, then the same argument could apply in Australia which adopts more lenient regulatory standards than in Europe.</p>
<p>The ACCC’s case assumes consumers expect vehicle emissions would operate as advertised. In the review of Euro 5/6 Light vehicle emission standards, the Australian <a href="https://infrastructure.gov.au/roads/environment/files/Final_RIS_Euro_5_and_6_Light_Vehicle_Emissions_Review.pdf">Department of Infrastructure and Transport said</a>for consumers buying a new car, emissions don’t rate highly on their concerns. </p>
<p>This latest case brought against Volkswagen is likely do to little to alleviate the concerns from customers about whether the scandal will affect the value of their car.</p><img src="https://counter.theconversation.com/content/64795/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anna Mortimore does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The court action ACCC has brought against Volkswagen might not succeed because Australia’s emissions standards are not as strict as those in the US and Europe.Anna Mortimore, Lecturer, Griffith Business School, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/647962016-09-02T01:45:02Z2016-09-02T01:45:02ZACCC takes VW to court – but will it help consumers?<figure><img src="https://images.theconversation.com/files/136374/original/image-20160902-1061-wxhq50.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The ACCC is taking VW to court. </span> <span class="attribution"><span class="source">VW image from www.shutterstock.com</span></span></figcaption></figure><p>Yesterday the Australian Competition and Consumer Commission (ACCC) announced that it has <a href="https://www.accc.gov.au/media-release/accc-takes-action-against-volkswagen-over-diesel-emission-claims">instituted proceedings against Volkswagen (VW)</a>. The ACCC is pursuing VW for allegedly misleading consumers (in contravention of Australian Consumer Law) around emissions from its diesel cars. </p>
<p>In 2015, VW admitted it had installed software in certain diesel-engine cars that ensured the cars met <a href="http://www.euronews.com/2015/09/22/volkswagen-admits-it-totally-screwed-up-as-emissions-rigging-scandal-spreads">US standards</a> for nitrogen oxide emissions in testing, but turned off in real road driving conditions. This meant that the diesel engines were dirtier than consumers realised. The affected cars were sold globally, including in Australia. </p>
<p>It has been reported that in the United States, <a href="http://www.smh.com.au/business/world-business/vw-to-offer-to-buy-back-500000-us-cars-20160420-gobddy.html">VW has agreed to buy back cars</a> affected by the emissions scandal. </p>
<p>In Australia, affected <a href="https://www.choice.com.au/transport/cars/general/articles/vw-pollution-cheating-scandal">consumers have been offered corrective software</a>, although just what that software will achieve and how well it will do that is disputed. </p>
<p><a href="http://www.abc.net.au/news/2016-09-01/volkswagen-emissions-scandal-taken-to-court-by-accc/7804352">The ABC reports</a> VW as saying that “the ACCC’s action did not provide any practical benefit to consumers”. VW says this is because “the best outcome for customers whose vehicle is affected is to have the voluntary recall service updates installed.”</p>
<h2>What’s in it for VW owners?</h2>
<p>The ACCC proceedings may appear to offer little direct benefit for disgruntled VW owners who have purchased cars without the features that were represented to them. However, contrary to VW’s suggestion, those consumers might want more by way of redress than the installation of new software to correct the original problem. </p>
<p>The attractions of low-emission diesel engines that were kinder to the environment may well have been central to affected consumers’ decision to purchase the VW car models in question. Without those benefits consumers might have purchased a different car. </p>
<p>Such consumers may be disgruntled by finding their VW is not what they had expected and they may also be facing a reduced resale value of their affected car. They may therefore want compensation for loss of value, lost opportunities and even disappointment and distress.</p>
<p>The <a href="https://www.accc.gov.au/media-release/accc-takes-action-against-volkswagen-over-diesel-emission-claims">ACCC is seeking</a> “declarations, pecuniary penalties, corrective advertising, findings of fact and costs” against VW.</p>
<p>Penalties awarded for breaches of the Australian Consumer Law may be considerable, amounting to A$1.1 million for each contravention. However, any penalties that the court determines VW will have to pay for its alleged misleading conduct will be imposed as a punishment for contraventions of the law, not to compensate affected consumers. </p>
<p>It is interesting that the ACCC does not appear to be relying on its powers itself to seek compensation for disgruntled consumers, or to seek a refund and damages on behalf of consumers for possible failures by VW to comply with the <a href="https://theconversation.com/explainer-can-i-get-a-refund-for-my-emissions-cheating-volkswagen-48815">consumer guarantee regime</a> in the Australian Consumer Law.</p>
<p>This may be for the practical reason that it would be difficult for the ACCC in this kind of action to show the required levels of causation and loss on the part of individual consumers that would be required in seeking redress on their behalf. </p>
<p>Nonetheless, the ACCC action is not entirely without benefit to consumers, albeit in a more indirect manner. The action sends a strong reminder to businesses operating in Australia about the need for “fair play” in the Australian market. </p>
<p>Moreover, any findings of fact or declarations may be made by a court in response to the ACCC action may be useful in establishing the alleged baseline wrong in <a href="http://www.abc.net.au/news/2016-09-01/volkswagen-emissions-scandal-taken-to-court-by-accc/7804352">private litigation by VW-owning consumers</a>, including under the class action filed in the Federal Court by law firm Maurice Blackburn <a href="http://www.abc.net.au/news/2016-06-08/volkswagen-accused-of-ignoring-australian-car-owners/7494290">seeking financial redress</a> for a group of affected consumers.</p><img src="https://counter.theconversation.com/content/64796/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jeannie Marie Paterson receives funding from the Australian Research Council. </span></em></p>The ACCC has launched proceedings against VW for allegedly misleading consumers. But consumers won’t be directly compensated from the case.Jeannie Marie Paterson, Associate Professor, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/623862016-07-15T01:29:22Z2016-07-15T01:29:22ZHow Volkswagen is using tried-and-tested tactics to avoid paying compensation<p>Volkswagen Group has so far paid a high price for admitting it knowingly sold diesel model cars designed to manipulate emissions tests. It has felt the wrath of shareholders, suffered <a href="http://www.volkswagenag.com/content/vwcorp/info_center/en/publications/2016/04/Y_2015_e.bin.html/binarystorageitem/file/Y_2015_e.pdf">its largest ever annual loss</a> and been forced into an US$15 billion restitution settlement in the United States. </p>
<p>By insisting that restitution will only be offered to consumers in the US and Canada, Volkswagen has adopted a crisis management strategy used by a raft of multinational companies that could see Australian consumers miss out.</p>
<p>This strategy is simple: highlight the unique characteristics of the most demanding markets, and exploit the weaknesses of institutions elsewhere in a bid to diminish or avoid restitution.</p>
<h2>Fallout</h2>
<p>Volkswagen Group has admitted it installed <a href="http://www.abc.net.au/news/2015-09-19/vw-charged-over-car-pollution-loophole/6789294">“defeat devices”</a> in 11 million diesel cars so that emissions under laboratory conditions appeared up to 40 times lower than under everyday operating conditions. </p>
<p>The reaction from consumers has been less severe than predicted, with the company’s worldwide unit sales dropping by only 2% in 2015. Unit sales in the US and Europe, the locations most affected by the scandal, even <a href="http://www.volkswagenag.com/content/vwcorp/info_center/en/publications/2016/04/Y_2015_e.bin.html/binarystorageitem/file/Y_2015_e.pdf">grew by 4.4% and 2.6%, respectively.</a></p>
<p>So far, the US - where the scandal originally broke - is the only market where significant advances have been made towards resolving the crisis, owing to its strong consumer protection ethos and aggressive enforcement. </p>
<p>A fortnight ago Volkswagen agreed <a href="http://www.autonews.com/article/20160111/RETAIL/160119974/vw-to-expand-diesel-compensation-program-in-u.s.-to-larger-vehicles">to US$10 billion compensation for US consumers</a>, the <a href="http://www.abc.net.au/news/2016-06-28/volkswagen-to-settle-emissions-scandal-case/7549940">largest-ever settlement in US auto industry</a>, coupled with the offer of a vehicle buyback or a technical solution (still to be approved by authorities). </p>
<p>The company also agreed to pay US$2.7 billion to offset excess diesel emissions and another $2 billion for investments in environmentally-friendly vehicle technology. In total, the company has agreed to pay nearly US$15 billion. The company set aside €16.2 billion to deal with the crisis, nearly all of which is accounted for by the (partial and provisional) US settlement.</p>
<h2>Resisting compensation elsewhere</h2>
<p>But Volkswagen has resisted increasingly vociferous demands for restitution in other parts of the world, insisting that financial compensation will be reserved for customers in the US and Canada. </p>
<p>The company maintains that these customers deserve compensation because they bought a vehicle specifically advertised as a “clean diesel”. <a href="http://europe.autonews.com/article/20151121/ANE/151129984/vw-refuses-compensation-for-european-owners-of-rigged-diesels?cciid=email-autonews-blast.">It has further argued</a> that US customers were investing in a niche technology compared with Europe where more than half of new cars sold are diesels. </p>
<p>In Europe, Volkswagen’s significant political clout - the company is one the EU’s largest employers and part-owned by a German Lander government – might offer some protection. </p>
<h2>What’s happening in Australia</h2>
<p>In Australia, Volkswagen Australia finally came clean <a href="https://theconversation.com/volkswagen-fallout-shows-how-not-to-manage-a-crisis-48590">with local customers in October 2015</a>, admitting that more than 90,000 of its vehicles, including Volkswagen, Skoda and Audi models, had been fitted with the device.</p>
<p>Australian consumers seemed to shrug off the scandal and Volkswagen’s Australian sales <a href="http://www.afr.com/news/volkswagen-emissions-scandal-has-no-impact-on-sales-20160106-gm0apm#ixzz4EGTdmGzX">increased by nearly 10% in 2015</a>. The lack of impact may be attributable to the fact that diesel models account for less than 10% of local sales. </p>
<p>For the past nine months the Australian Competition and Consumer Commission (ACCC) has been investigating whether Volkswagen engaged in false or misleading representations in their marketing of the affected vehicles. If customers relied on these representations when buying their cars, they would be entitled to a range of options <a href="https://theconversation.com/explainer-can-i-get-a-refund-for-my-emissions-cheating-volkswagen-48815">under the Australian Consumer Law</a>. </p>
<p>Meanwhile, class action laws suits have commenced. Last week lawyers appearing in the Federal Court for Volkswagen Australia <a href="http://www.drive.com.au/motor-news/volkswagen-australia-denies-using-defeat-devices-20160707-gq0r4k.html#ixzz4E0TbxJYT">denied the use of defeat devices</a> in local models and argued that the fines and compensation agreed to in the US were <a href="http://www.drive.com.au/motor-news/volkswagen-australia-denies-using-defeat-devices-20160707-gq0r4k.html#ixzz4E0TbxJYT">irrelevant for the Australian context</a>. </p>
<p>Volkswagen Australia has also argued the best outcome for its customers is a technical solution, chiefly in the form of a software update. </p>
<p>The company has recalled <a href="http://volkswagendieselinfo.com.au/">just one of the affected models</a> in Australia although recent testing in Europe has raised <a href="http://www.autocar.co.uk/car-news/industry/vw-emissions-scandal-consumer-group-claims-dieselgate-fix-ineffective">doubts about the effectiveness</a> of the proposed technical fix.</p>
<h2>Tried-and-tested tactics</h2>
<p>Volkswagen’s approach reflects a crisis management strategy employed effectively by other multinationals in the past. </p>
<p>In 2009 Maclaren recalled one million strollers in the US due to finger amputation risks for kids and offered a technical solution. Elsewhere the company <a href="http://www.dailymail.co.uk/news/article-1226583/Pram-maker-Maclaren-recalls-1m-models-after-children-sever-fingers.html">continued to sell the same models</a> and refused to offer a fix. It simply asked the parents to mind their children while closing the stroller. </p>
<p>It was only after sustained pressure from parents, regulators and media that the company reluctantly offered the same fix to those who approached it, but the company never issued a recall notice <a href="https://www.theguardian.com/money/2011/may/25/second-maclaren-pushchair-recall">outside the US</a>. </p>
<h2>Global integration, local responsiveness</h2>
<p>Multinationals frequently pride themselves on providing high quality products and superior customer service to consumers compared to domestic companies. </p>
<p>To achieve this, multinationals attempt to realise the benefits of global integration while also maximising local responsiveness. </p>
<p>Global integration broadly refers to the centralised management of value chain activities (such as product design, procurement and logistics), while local responsiveness refers to adapting products and value chain activities to suit local consumer tastes and local stakeholder expectations, resulting in benefits such as premium prices, government subsidies and motivated employees. </p>
<p>But this approach has also exposed them to the risks of product failures. </p>
<p><a href="http://www.palgraveconnect.com/pc/doifinder/view/10.1057/9780230116344">Our research</a> has shown that global product recalls are on the rise because of the disconnect between the design function at multinational headquarters and manufacturing operations spread around the world. </p>
<p>Coinciding with the rise in recalls is the rise in unethical practices in crisis situations, such as suppressing product failures and not reporting them to regulators so as to avoid or delay recalls. </p>
<p>While we have some understanding of company delays in issuing recalls in different markets around the world, we know very little about the phenomenon of differential restitution around the world. </p>
<p>But the notion of multinationals refining their mix of local responsiveness and global integration offers some clues. While the world is an increasingly interconnected place, most stakeholders of multinationals are firmly anchored at the level of the nation state, although some are moving towards a regional setting (for instance, the EU) or have begun to coordinate closely (for example, the US and Canada). </p>
<p>As a result, laws, regulations and associated institutions apply mostly at the national level. </p>
<h2>Exploiting institutional differences</h2>
<p>Multinationals have always exploited institutional differences across countries through mechanisms such as differential pricing and tax arrangements. Increasingly they are also exploiting institutional differences by offering differential remedies in case of corporate wrongdoing. The fragmentation of stakeholders in different countries may even be reinforced by the companies. </p>
<p>For instance, in a <a href="http://volkswagendieselinfo.com.au/Content/Document/VGAstatement29-06-16.pdf">recent press statement</a> Volkswagen Australia’s managing director, Michael Bartsch, was at pains to point out: </p>
<p>The relevant facts and complex legal issues that have played a role in coming to these agreements in the United States are materially different from those in … Australia. </p>
<p>In the same vein, the group’s corporate website makes it exceedingly difficult to access the crisis communications provided to individual markets. Queries are either looped back to the local (Australian) emission website or require a valid VIN number in the overseas market. Such tactics help to keep individual countries and their stakeholders apart, and prevent countries with less bargaining power from obtaining comparable restitution.</p>
<p>To even the odds in negotiations with multinationals, stakeholders around the world must follow companies’ lead and become more globally connected. Only through global coordination in developing and enforcing standards will stakeholders boost their bargaining power in negotiating with transgressing companies.</p><img src="https://counter.theconversation.com/content/62386/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tom Osegowitsch owns shares in Volkswagen Group. </span></em></p><p class="fine-print"><em><span>Hari Bapuji receives funding from Social Sciences and Humanities Research Council of Canada. </span></em></p>Fresh from a record US$15 billion settlement, Volkswagen is resisting paying compensation in other countries.Tom Osegowitsch, Senior Lecturer, International Business and Strategic Management, The University of MelbourneHari Bapuji, Associate professor, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/618112016-07-04T01:32:05Z2016-07-04T01:32:05ZVolkswagen’s record settlement payout: treating the symptom not the disease<p>German car maker Volkswagen is paying out up to <a href="http://www.reuters.com/article/us-volkswagen-emissions-settlement-idUSKCN0ZD2S5">$15.3 billion</a> to address the effects of the emission crisis in the United States. This by far the <a href="https://www.washingtonpost.com/news/the-switch/wp/2016/06/27/volkswagen-agrees-to-pay-consumers-biggest-auto-settlement-in-history/">biggest settlement</a> in the history of the auto industry.</p>
<p>However what happened at Volkswagen, is a symptom that of <a href="http://oss.sagepub.com/content/early/2016/04/06/0170840616641984.abstract">an economic system characterised by</a> hyper-competition, enormous stakes and inflated corporate power. This system is ultimately what needs to change if they want to address the root causes of scandals like this. </p>
<p>Since the emissions scandal broke in September 2015 Volkswagen has suffered a fall from grace of mammoth proportions. The whole sorry affair has hit Volkswagen where business hurts most. Share price, sales revenues, pre-tax profit; they are <a href="http://www.cityam.com/242224/volkswagens-share-price-drops-after-it-reports-profits-and-sales-to-have-tumbled-in-first-quarter-of-2016">all down</a>. </p>
<p>The carmarker’s new aggressive business strategy and their willingness to <a href="http://www.dailymail.co.uk/wires/reuters/article-3664877/Why-VW-smart-fold-emissions-cheating-case-Frankel.html">quickly agree to the terms of the recent settlement</a>indicates that they are focused on the future. </p>
<p>But road ahead will be rough. Even after this landmark settlement is agreed in the US, <a href="http://uk.reuters.com/article/us-volkswagen-shareholders-idUKKCN0Z60V6">legal claims in Europe and elsewhere</a> are still outstanding. The US Justice Department and investigators in Germany are working together to establish whether <a href="http://home.bt.com/news/world-news/vw-agrees-11bn-emissions-scandal-deal-in-us-11364070499502">criminal charges</a> should be laid.</p>
<p>The costs of the emissions scandal are still not fully known, <a href="http://www.nytimes.com/2016/06/29/business/in-vw-showrooms-there-is-little-to-show-from-the-settlement.html?smid=tw-nytimesbusiness&smtyp=cur&_r=0">car dealers are disgruntled</a>, and there are calls from <a href="http://www.ft.com/cms/s/0/12789d2e-388e-11e6-9a05-82a9b15a8ee7.html#axzz4D8AgEc00">angry shareholders</a> to have a more independent supervisory board are not being heeded.</p>
<p>The announcement of the settlement in the US has also raised criticisms about how Volkswagen is compensating its other customers. <a href="http://uk.reuters.com/article/uk-volkswagen-emissions-idUKKCN0ZF24V">European Industry Commissioner Elzbieta Bienkowska</a> has just called again on the company to pay damages in Europe comparable to those in the US. The company has rejected those calls, with European law lacking the same mechanisms for class action law suits that are available in the US. </p>
<h2>Strategy and culture</h2>
<p>Despite the public indignation that the emissions scandal produced, it was in fact entirely consistent with the company’s strategy. In 2009 Volkwagen announced that within nine years it would become <a href="http://annualreport2009.volkswagenag.com/managementreport/reportonexpecteddevelopments/strategy/strategy2018.html">“the most successful and fascinating automaker in the world”</a>. </p>
<p>Focusing on customer satisfaction and technological innovation, including what it used to call ‘clean diesel’, Volkswagen aimed to be selling more than 10 million vehicles per annum and returning an 8% return on sales before tax.</p>
<p>The strategy was working, and half way through last year <a href="http://www.cnbc.com/2015/07/28/vw-overtakes-toyota-as-worlds-biggest-carmaker.html">Volkswagen overtook Toyota</a> to become the largest car manufacturer in the world. They were seen as an exemplar of how world leading business performance could be matched with a dedication to ethics and environmentalism.</p>
<p>The emissions scandal revealed a different part of that strategy, and one that reflected a central value of contemporary global business: all that matters is competition and winning. At Volkswagen this was coupled with an autocratic management style. Arguing with a ‘superior’ was seen as impermissible and work environment was well known for s<a href="http://www.newsweek.com/2015/12/25/why-volkswagen-cheated-404891.html">hunning debate and criticism</a>.</p>
<p>Take massively ambitious commercial goals, stir in a ‘whatever-it-takes’ attitude, and sprinkle liberally with an unwillingness to be questioned. This is a recipe for disaster, and disaster is what it caused. </p>
<h2>Volkswagen’s future</h2>
<p>In what has been dubbed ‘Strategy 2025’ Volkswagen have switched focus from growth in sales volume to profitability and efficiency. In terms of products, the plan is to put <a href="http://www.autoexpress.co.uk/volkswagen/93120/vws-strategy-2025-plan-over-30-electric-cars-planned-for-next-10-years">30 new models of electric car</a> on the market in the next nine years. </p>
<p>CEO Matthias Müller says <a href="http://www.volkswagenag.com/content/vwcorp/info_center/en/news/2016/06/2025.html">the strategy</a> will involve the <a href="http://www.wsj.com/articles/vw-ceos-strategy-overhaul-focuses-on-electric-vehicles-1466073807">“biggest transformation in the company’s history”</a>. Included is an aggressive cost cutting program that is looking for €8 billion in savings per year. But this is a serious challenge give the <a href="http://www.reuters.com/article/us-volkswagen-shareholders-idUSKCN0Z60V6">power of Volkswagen’s labour unions</a>. Resistance to eliminating jobs has so far proved successful. </p>
<p>Dealing with the emissions scandal is central to the new strategy. Müller says that his <a href="http://www.volkswagenag.com/content/vwcorp/info_center/en/news/2015/10/naechste_Schritte.html">top priority</a> is to support customers affected by the diesel crisis, through compensation and technical solutions.</p>
<p>But you don’t have to read between the lines to see that Volkswagen just wants to put the whole thing behind them as quickly and cheaply as possible. Despite the US deal, for example, Volkswagen are still persistent in <a href="http://www.abc.net.au/news/2016-06-28/volkswagen-to-settle-emissions-scandal-case/7549940">defending claims</a> for compensation being made in the Australian courts.</p>
<p>Given how aggressively they are pursuing this strategy there’s a good likelihood that the comeback will be successful and while this might work, the conditions that brought it about are where the real problems lie.</p>
<p>Volkswagen is paying the price, but trying to cure one patient doesn’t stop the spread of the virus. What happened at the company is a prime example of how big business is treated by some as a game of risk-and-reward where people are encouraged to do what needs to be done to be ‘winners’, even if that means flouting the law and abandoning personal ethics.</p>
<p>Until that game changes we can expect the corporate scandals to continue.</p><img src="https://counter.theconversation.com/content/61811/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Carl Rhodes does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Volkswagen’s strategy shows that problems like the emissions scandal are likely to continue.Carl Rhodes, Professor of Organization Studies, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/595552016-06-21T15:54:42Z2016-06-21T15:54:42ZAre we so used to corporate deception that we just don’t care?<figure><img src="https://images.theconversation.com/files/127562/original/image-20160621-13005-369vsy.jpg?ixlib=rb-1.1.0&rect=429%2C224%2C2252%2C1573&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Bold claims from adland have left us inured to deception.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/97640217@N04/17129152106/in/photolist-4TyR9L-8uYFUB-ceDRkf-dbE8Rb-7KubCq-aADnNB-eMhpNz-eMhn8B-rvm1BT-s6Do9J-7AUcpD-6XkiAS-6Xkimq-oobjvk-r2JW8Y-7AXZEm-ek9SHg-asiiR3-a4p2Lg-3bMqCV-4XUFSe-7AUc32-6GjUEP-8zNmfe-7AUsXx-yDnnt1-7AUcii-PdogZ-dyLBdP-7AUbVB-ARVHVn-dUh4UA">York Mix/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span></figcaption></figure><p>Back in the old days, plain old products became “brands” when shoppers trusted them to deliver superior performance. Along the way brand advertising arose as a way of boosting consumption and building trust. In 1946 Procter and Gamble claimed that “Tide gets clothes cleaner than any other wash day product you can buy”. Such was P&G’s confidence that it offered shoppers a full money back guarantee. This was the classic “reason why” advertising and signified a golden age when advertisers enjoyed high levels of consumer trust.</p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/127521/original/image-20160621-13008-nn2e2l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/127521/original/image-20160621-13008-nn2e2l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/127521/original/image-20160621-13008-nn2e2l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=839&fit=crop&dpr=1 600w, https://images.theconversation.com/files/127521/original/image-20160621-13008-nn2e2l.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=839&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/127521/original/image-20160621-13008-nn2e2l.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=839&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/127521/original/image-20160621-13008-nn2e2l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1054&fit=crop&dpr=1 754w, https://images.theconversation.com/files/127521/original/image-20160621-13008-nn2e2l.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1054&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/127521/original/image-20160621-13008-nn2e2l.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1054&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Promises, promises.</span>
<span class="attribution"><a class="source" href="http://file.vintageadbrowser.com/5s05lwqy2p3wyh.jpg">http://www.vintageadbrowser.com/</a>, <span class="license">Author provided</span></span>
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<p>Fast-forward 70 years and TV, one of the most trusted advertising formats, is <a href="http://www.nielsen.com/uk/en/press-room/2015/consumer-trust-in-traditional-advertising-declines-in-uk-while-a-recommendation-from-friends-remains-most-credible.html">only trusted by 56% of people</a>. So how did we get here? </p>
<p>There’s a clue in the stats from the UK’s Advertising Standards Authority (ASA), which protects consumers from harmful, misleading or offensive advertising. Last year it received more than 37,000 complaints. As a result over <a href="https://www.asa.org.uk/News-resources/Media-Centre/2015/ASA-Annual-Report-2014.aspx#.VyxHI_mDGko">3,000 advertisements were changed or withdrawn</a>. </p>
<p>One of the reasons for that is that advertisers are always looking for an edge, and that includes “reason why” advertising designed to communicate how the product is different. It doesn’t matter how – just that it is different. It may be how the brand performs on an attribute valued by customers. Or in the case of Mars Treets from the 1960s a claim that it “melts in your mouth not in your hand”. </p>
<h2>Confused.com</h2>
<p>Broadband internet providers find it hard to be different and the focus of their advertising has typically been on price. This is known to be the most important attribute shaping consumer buying decisions. Following an investigation, however, the ASA and Ofcom <a href="http://www.bbc.co.uk/programmes/b078x6g0">discovered that</a> “people expected to be misled by broadband ads” and that around 80% of customers are unable to calculate <a href="http://www.bbc.co.uk/news/technology-36195454">the total costs of their contract</a>. </p>
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<a href="https://images.theconversation.com/files/127531/original/image-20160621-12995-ew3mkc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/127531/original/image-20160621-12995-ew3mkc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/127531/original/image-20160621-12995-ew3mkc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=319&fit=crop&dpr=1 600w, https://images.theconversation.com/files/127531/original/image-20160621-12995-ew3mkc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=319&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/127531/original/image-20160621-12995-ew3mkc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=319&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/127531/original/image-20160621-12995-ew3mkc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=401&fit=crop&dpr=1 754w, https://images.theconversation.com/files/127531/original/image-20160621-12995-ew3mkc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=401&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/127531/original/image-20160621-12995-ew3mkc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=401&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Oh what a tangled web …</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/stuant63/2240432052/in/photolist-4pYNoQ-8zQJn-bnsaE8-hTGUU-ehGe21-9HGykn-4KPB3t-ehk6kN-8zRCg-5jo7zE-8ELsW9-r7fBR4-9AhUDS-9j1Ma5-3gXSyw-7wLgje-5jck6c-6vTgiF-832zvc-4Ksn5e-cqWkvq-9cqdH-c8AXC1-yUD9g-3wYEYs-57QDcs-cAgp2u-5a3FdK-66W7JM-7LLwmQ-5Sw1iK-cxkJs7-8f5YM6-5Fx4Q6-9KVeFv-6rUfDb-9cAp9h-4RqERd-oUVJ18-6iuv1z-a3DqaD-bQofQ-2vHmbT-tiGSb-4TydjP-4gpRyc-4NkvT8-8zQc5-9LDWNQ-bVY3Go">stuart anthony/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
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<p>As a result of the ASA’s investigation, broadband ads should now be designed to allow easier price comparisons rather than to “confuse or mislead”. But, in many advertisements the focus is not on price but on other performance cues used by consumers as a “reason why”. And of course, performance claims should be both practical and verifiable such as “Tide washes clothes cleaner” or “Fairy lasts longer”.</p>
<p>In 2009, the advertisement for Olay’s “Definity Eye Illuminator” eye cream featuring Twiggy claimed to “reduce the look of wrinkles and dark circles for brighter, young-looking eyes”. People complained that the model’s eye regions were airbrushed and not achieved by use of the product alone. The ASA <a href="http://www.theguardian.com/media/2009/dec/16/twiggys-olay-ad-banned-airbrushing">agreed that the ad misled customers</a> and it was subsequently banned.</p>
<p>In other cases, you might get a chance to prove your claim. This was the case when Reebok said its Easytone trainers helped you to “better legs and a better bum with every step”. For many consumers this is a very compelling reason why. Sadly though, the performance advantage couldn’t be verified through scientific evidence, the ad was banned, <a href="https://www.ftc.gov/news-events/press-releases/2011/09/reebok-pay-25-million-customer-refunds-settle-ftc-charges">and the company fined</a>.</p>
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<iframe width="440" height="260" src="https://www.youtube.com/embed/MMc2hBxzLvg?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
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<h2>Fairy nuff</h2>
<p>The weight of all these cases means we might not have the same confidence while shopping for Tide washing powder in the early 1950s. But you do get the odd bright spot in the gloom. The makers of Persil objected to a claim from P&G that its Fairy Liquid dishwashing detergent lasted “twice as long as the next best selling brand”. But after rigorous testing the <a href="http://www.dailymail.co.uk/news/article-2424224/Fairy-liquid-really-does-twice-long-rival-brands-advertising-watchdog-rules.html">ASA found that</a> the product did indeed last “at least” twice as long as Persil. </p>
<p>Sometimes brands get public and media scrutiny without any explicit claims or complaints but for what customers “infer” from advertisements or product packaging. Tesco was <a href="http://www.bbc.co.uk/news/business-35889282">recently been under fire</a> for its new range of “fictional farm” brands – a bucolic bit of packaging which sells food <a href="http://www.theguardian.com/lifeandstyle/wordofmouth/2016/mar/22/tescos-fictional-farms-a-marketing-strategy-past-its-sell-by-date">under a range of homely titles</a>. It doesn’t seem unreasonable for shoppers to expect that a chicken branded as “Willow Farm” at least began its life on something called Willow Farm, or that their punnet of strawberries was really picked at a farm called “Rosedene”. Mind you, the approach has also been used by Aldi for years. So do we really mind?</p>
<p>And fake farms, after all, are small beer. The recent scandals at Volkswagen and Mitsubishi witnessed advertising that was based on something that then turned out to be untrue. This has far more serious consequences. Those “reasons why” of importance to car buyers – power outputs, emissions and fuel consumption figures – often feature prominently in advertisements. The <a href="http://www.reuters.com/article/us-mitsubishimotors-scandal-mileage-idUSKCN0Z707R">Mitsubishi scandal in Japan</a> involved manipulated fuel economy tests. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/127552/original/image-20160621-13039-q579zw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/127552/original/image-20160621-13039-q579zw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/127552/original/image-20160621-13039-q579zw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=281&fit=crop&dpr=1 600w, https://images.theconversation.com/files/127552/original/image-20160621-13039-q579zw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=281&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/127552/original/image-20160621-13039-q579zw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=281&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/127552/original/image-20160621-13039-q579zw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=353&fit=crop&dpr=1 754w, https://images.theconversation.com/files/127552/original/image-20160621-13039-q579zw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=353&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/127552/original/image-20160621-13039-q579zw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=353&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Tarnished.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/mynameispaul/2319745226/in/photolist-4wZirm-LQYRp-6bxao7-5qqMwX-6CajdQ-cwxS1-5fdNDB-4XbUaX-3aUEs-EvQy1-ywa2m-caWTp9-9eged9-6YsCqz-mL2uj-dQ46B-8rwYp4-cKhX2o-8rC75r-9LXbBX-aCufrD-9PccMq-9RVRJD-6kg4F8-bAtyNr-5jtKFo-62hExB-4yD4yq-5pUtSd-2ZyWiM-N273b-3t3FB4-5eWjDS-6mezjw-4NPVKH-5eWpAW-dLBDU7-8HcMoK-aCwVx9-24NML5-doCyQm-4qBvLC-us6z-AWxDt-3t3G8T-oU5iQ-28gSCx-3aUDM-24JmtV-3t3FRX">Paul/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
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<p>With so many incidents of consumers being misled, it’s not surprising that the majority of people <a href="http://www.nielsen.com/uk/en/press-room/2015/consumer-trust-in-traditional-advertising-declines-in-uk-while-a-recommendation-from-friends-remains-most-credible.html">trust personal recommendations</a> much more than ads. And so it might seem odd that brands seem to be able to recover relatively quickly. After Volkswagen’s emissions scandal – the <a href="http://www.telegraph.co.uk/finance/newsbysector/industry/11884738/VW-emissions-scandal-whats-it-all-about.html">biggest corporate scandal of recent years</a> – the brand dropped to the bottom of the BrandIndex list (a measure of brand quality, value and reputation). </p>
<p>Just three months later it’s <a href="https://www.marketingweek.com/2016/02/05/volkswagen-brand-on-road-to-recovery-as-it-launches-first-campaign-since-emissions-scandal/">up from 35th place to 18th</a>. Rehabilitation of the share performance is also back on track – up 26% since its February low and according to analysts VW is an “investable company” again. </p>
<p>There are clearly short-term consequences of misleading ads in the form of bans and fines and more serious consequences for instances of proven deception. But in the long run how much does it really matter? Our trust in advertising might now be so low that we are happy to let misrepresentation and even downright fraud wash over us as we keep heading for the tills.</p><img src="https://counter.theconversation.com/content/59555/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Timothy Froggett does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Advertising complaints hit 37,000 in the UK last year, but companies keep chancing their arm.Timothy Froggett, Senior Lecturer and Course Leader for Marketing, Anglia Ruskin UniversityLicensed as Creative Commons – attribution, no derivatives.