Volkswagen Long Term Public Relations Plan Agenda Case

Volkswagen Long Term Public Relations Plan

Agenda Case Overview History Previous Situation The Situation Current Situation The Public Relations Plan Budget Evaluation Questions

Case Overview Volkswagen has asked you to assess the long-term impact on their brand of their recent emission testing scandal. Based on your findings, they would like you to develop a long-term PR strategy. Your budget is $400, 000.

History

“My desire for harmony is limited. ” -Former Chairman of Volkswagen Group, Ferdinand Piech

Previous Situation Volkswagen before the scandal

International Market Share 2014 #1 #2 #3 #4 #5 #6 Europe 39% China 37% North America 9% Central and South America 7% Middle East and Africa 4% Other Asia/Pacific 4%

Stockholder Information The Porsche-Piech family controls more than half of Volkswagen’s shares

Stock trends prior to scandal Chinese Stock Market falls Internal fallout between Piech and Winterkorn

Annual Revenue (USD, Billions) 250 Financial Situation 200 150 100 50 0 2012 2013 2014 “VW’s brand value stood at just over US$31 billion making it the world’s 3 rd most valuable auto brand. ” -David Haigh, CEO of Brand Finance 2015 prior to scandal

Culture “We need to prod the pigs in production” Under Winterkorn -Former Sales Chief, Christian Klingler Overall Management Authoritarian Climate of fear Confident, cutthroat and insular Rewards and punishments regime Male German engineers Ambitious goals for public growth Group-think •

Reputation Solid Engineering & Value

The Crisis Here are the facts 2005: VW decided to use software to illegally modify engine performance. Sept. 2015: The EPA issues a public notice of violation of the Clean Air Act VW admits to 11 million vehicles affected. Winterkorn resigns. VW appoints Matthias Mueller to CEO. Nov. 2015: E. P. A. finds same test-cheating software on additional models. Jan. 2016: The United States Justice Department files a civil suit Mar. 2016: The U. S. FTC files a lawsuit against VW for false advertising. Nov. 2016: VW says it will stop selling diesel vehicles in the United States. Jan. 2017: U. S. judge approved a $1. 2 billion settlement. Feb. 2017: U. S. regulatory compliance group leader pleads not guilty

“Automobile traffic is responsible for only 12 percent of total CO 2 emissions. One should be able to point this out without being accused of changing the subject. ” -Martin Winterkorn

Reaction #1 Defensive Response Excuse #2 Vocal Commiseration Non-apology #3 Resignation #4 Internal Promotion “We didn’t lie” -Volkswagen CEO Matthias Müller

• Provisions for the scandal rose to $23. 9 Financial Impact • Net loss of $6. 2 billion (Feb. 24) billion in 2015 • 2% decline in vehicle sales in 2015 • Sales continued to rise in China • Cutting variable pay and bonuses for its top executives • Cutting 30, 000 jobs to recover costs (Nov. 2016)

Initial Brand Impact Reputation Gallup Survey Information October 2015 75% of U. S. consumers were familiar with the scandal 41% said the news makes them less likely to purchase a Volkswagen 29% say the news has no impact on their purchasing decision. 28% report they would never have considered buying a VW before. 16% used words such as "dishonest, " "liar" and "cheater" to describe Volkswagen’s brand

Current Situation Volkswagen Now Strategy 2018 TOGETHER – Strategy 2025 Transform core business Build mobility solutions business Secure funding Strengthening innovation power

Culture “Das Auto” slogan replaced with “Then. Now. Always. ” Stated vs Unstated VW's compliance chief, Christine Hohmann-Dennhardt, leaves in Jan. 2017 after only a year. Mission Statement (2015): “The Group’s goal is to offer attractive, safe and environmentally sound vehicles which can compete in an increasingly tough market and set world standards in their respective class. "

Revenue #1 in global automotive volume sales Feb. 1, 2017 10. 3 million vehicles were delivered in 2016 .

Survey Results

I Trust Volkswagen 62% Neither Agree 21% or Nor Disagree Agree

ALL AUTOMOTIVE CORPORATIONS CAN EXPERIENCE SCANDALS SUCH AS THOSE NOTED BELOW. WHICH, IF ANY, HAS VOLKSWAGEN EXPERIENCED IN THE LAST 3 YEARS? Mechanical Failure 27% Bribery Emissions Sexual Harrassment 58% 6% Embezzelment

Limitations #1 Question #2 Sample

Briefly describe what you know about the Volkswagen Scandal Some Knowledge of Scandal 10% 45% 43% Nothing/Unsure In Class Other 40% scandal awareness decrease over 17 months

Long term brand impact from scandal 78% decrease in lack of trust in brand Stock Projection 300 250 200 150 100 50 0 2012 2013 2014 2015 2016 2017 Current 2018 Our Plan 2019 2020

Key Audiences In the Know Logos Ethos Automobile Consumers Existing & Potential Logos Pathos Executive Board Logos

The Plan Positioning Statement: Become the leader of automotive quality U. S. & EUR Re-establish trust in the brand(s) Strengthen the faith in company’s modus operandi Change media’s perception Audience #1: “In the Know”

Audience #2: Automobile Consumers Existing and Potential Improve customer service between VW employees and its customers Increase positive relationship between VW and environmental efforts Strengthen association with historical brands and past success

Timeline-Measurable Objectives Awareness – Acceptance – Action 40% increase in environmental relationships Positive increase in awareness and acceptance 30% in 2 years Increase interaction on social media by 15% March 2018 Complete business operations revisions Decrease employee turnover rates by 10% March 2019 30% increase in positive attitudes about how the company is being run 30% increase in positive news stories 2025 Repair all affected vehicles by 2025

Audience #3: Executive Board Buy in to new public relations and culture approach Current CEO Matthias Mueller

Building and Maintaining Organizational Integrity

Integrity Triangle INPUTS REPUTATIONAL GAP x Organizational Integrity OUTPUTS + STAKEHOLDER TRUST UP ENTERPRISE VALUE UP ENABLERS STAKEHOLDER EXPECTATIONS _ STAKEHOLDER TRUST DOWN ENTERPRISE VALUE DOWN

Risk management grid Unobservable Controllable Uncontrollable Observable

Item Cost Employee Training $800 per individual; $200, 000 for 250 employees Multimedia $100, 000 Contingencies $100, 000 Primarily set aside for “In the Know” audience Budget Environmental initiatives covered in training and contingency costs

Evaluation Plan Media monitoring and impressions Mid and post-campaign awareness survey Post-campaign attitude survey Social media survey and cold/warm metrics analysis Organizational change evaluation Re-evaluate & audit every 2 years

So What?

Questions?

References Edelstein, S. (27 Feb 2017). VW exec pleads not guilty on diesel cheating charges. Green Car Reports. Retrieved 27 Feb 2017 from http: //www. greencarreports. com/news/1109067_vw-exec-pleads-not-guilty-on-diesel-cheating-charges Ewing, J. (25 Feb 2017). VW executive charged in emissions case says he was a bit player. The New York Times. Retrieved 25 Feb 2017 from https: //www. nytimes. com/2017/02/25/business/volkswagen-diesel-scandal-emissions-oliver-schmidt. html? _r=0 Johnston, C. (24 Feb 2017). VW cracks down on executive pay after diesel scandal. BBC News. Retrieved 24 Feb 2017 from http: //www. bbc. com/news/business-39082280 Rao, P. (26 January 2017). "VW executive, hired to help overhaul carmaker's culture, is to leave. " Retrieved February 6, 2017, from https: //www. nytimes. com/2017/01/26/business/volkswagen-germany-compliance-hohmann-dennhardt-diesel. html? _r=0 Risk management and internal control system. Volkswagen. Retrieved 1 Feb 2017 from http: //annualreport 2015. volkswagenag. com/groupreport/report-on-risks-and-opportunities/risk-management-and-control-system. html TOGETHER- Strategy 2025. (n. d. ). Retrieved February 6, 2017, from https: //www. volkswagenag. com/en/group/strategy. html "Timeline: Volkswagen's long road to a U. S. Dieselgate settlement. " Reuters. com, 11 Jan. 2017, www. google. com/ url? q=http%3 A%2 F%2 Fwww. reuters. com%2 Farticle%2 Fus-volkswagen-emissions-timeline-i d. USKBN 14 V 100. Accessed 28 Feb. 2017. management-

References Continued… Volkswagen. com. Nov. 2017, Retrieved 27 Feb. 2017 from www. google. com/url? q=https%3 A%2 F%2 Fmedia. vw. com%2 Fdoc%2 F 2173%2 Fvolkswagen_group_delivers_103_mil lion_vehicles_in_2016 -100117_press_release-3586560675874 dd 51355 dd. pdf. Volkswagen is the New Global Sales Leader: What it Means. Forbes, 1 Feb. 2017, Retrieved 27 Feb. 2017 from www. google. com/ url? q=https%3 A%2 F%2 Fwww. forbes. com%2 Fsites%2 Fgreatspeculations%2 F 2017%2 F 02%2 F 01%2 Fvolkswagen-is-the-new-global-sales-leader-what-it-means%2 F%23441 b 414 d 6 d 08. We call it think blue. Volkswagen. Retrieved 6 February 2017 from http: //en. volkswagen. com/en/company/think-blue. html Winton, Neil. Tesla Model S Wafts Along Like A Rolls-Royce, But Germans Will Catch Up Eventually. Forbes, 21 Dec. 2016, Retrieved 27 Feb. 2017 from www. google. com/ url? q=https%3 A%2 F%2 Fwww. forbes. com%2 Fsites%2 Fneilwinton%2 F 2016%2 F 12%2 F 21%2 Fteslamodel-s-wafts-along-like-a-rolls-royce-but-germans-will-catch-up-eventually%2 F%23 4 faa 5630155 d.