Gutting Through the VW Crisis

Since the Volkswagen crisis broke a few weeks ago, I've discussed the case with reporters, graduate students and business audiences. I have been taken aback by the central misperceptions among these groups that:

- VW has somehow botched the handling of the crisis involving software rigged to misrepresent its emissions; and
- the company is in imminent peril.

(For the record, I have no involvement in this case, but have worked on ones of a similar nature.)

What follows are the five points I have been making to address the fallacies involving the VW crisis.

1. On botching: All contemporary crises are initially deemed to have been botched because there are active investors - I call them "crisis capitalists" who only gain by the target company's misfortune. These include pundits, bloggers, activists, reporters, plaintiffs lawyers, short sellers, regulators, angry consumers and Members of Congress. As I wrote in an earlier article, VW is now in what I refer to in my book Glass Jaw as the "Fiasco Vortex," the early stage of a Digital Age crisis where one's enemies are in absolute control of the dialogue. The trope of the botched crisis is exacerbated by the now deeply-entrenched Hollywood portrayals of "spin doctors" as magicians. Any crisis that if not deftly and immediately defused by an ingenious trick or over-engineered apology is wrongly declared a misfire.

Now comes word that none other than Leonardo Di Caprio is planning to do a film on the VW crisis. Regrettably, as we shall see, Hollywood now defies reality and screenwriters are not known for nuance; they are known for creating what I have long called Villains, Victims and Vindicators - and the corporation is always the Villain. (Have you ever heard the media praise a CEO's forthright testimony and heartfelt apology before Congress? Don't hold your breath.)

2. On time: Most big companies that find themselves in crisis do recover, but it takes longer that the twittersphere demands. Our culture is accustomed to entertainment arcs that resolve quickly. Immediately solved murders and triumphant court cases come to mind. Managing crises is not unlike solving "cold cases": Messy, improvisational, workaday readjustments, fraught with setbacks, luck - good and bad. A few years after its "sudden acceleration" mess (for which the company was quietly vindicated), Toyota's profits surged 70%.

3. On process: I have half-heartedly suggested that we stop using the term crisis management in favor of the less unappetizing "crisis digestion." This is because we don't so much "manage" crises as we do guide a rotten piece of meat through a digestive tract filled with acute twists, turns and unforgiving absorptions that the outside world does not see. In fact, most crises are resolved not by public relations but by operational changes and other predictable organic endurances. Accordingly, VW can expect to strategically digest firings, blue-ribbon investigations, Congressional hearings, recalls, litigation, repairs, re-organizations, rebates, improved products and branding initiatives. They will no doubt commit both wise decisions and missteps along the way. (A stomach bug is never pretty).

4. On self-interest: The most important audiences to VW right now are their consumers. Car crises are unique because vehicle purchases are so big that car owners are essentially shareholders in the company. While crisis capitalists like film makers, reporters, and short sellers may profit from a corporate crisis, VW owners deeply want the company to survive, which is why some combination of bedside manner, tangible fixes and generous gestures (rebates and other incentives) will be utilized.

5. On winning: As sports crises are best resolved by the athlete or team in trouble winning, business crises are best resolved by creating great products. Audi (owned by VW) was decimated in the 1980s by dubious charges of "sudden acceleration." The brand came roaring back in the latter 1990s with superior vehicles that consumers loved - and continue to love. Since the crisis broke, VW has pledged to advance its work on electric and hybrid vehicles. A perfectly respectable start. If the company can gut through the current crisis and produce a new generation of products that address both the environmental and performance desires of consumers, the crisis of 2015 will be relegated to the graveyard of bad Wikipedia entries. I am more optimistic than most that this will happen within a few years, but not in a few tweets.

Stuart Dezenhall contributed to this report.