Volkswagen Recall:  Will the company survive?

When the news broke that Volkswagen had installed cheat devices to attain reduced emissions on their diesel engines, the initial reports were modest with fewer than a million cars affected.  Originally, it was believed that only vehicles in the U.S. were affected.  However, as the investigation progressed more and more vehicles and brands were impacted.

Shortly after the situation was revealed, CEO Martin Winterkorn of Volkswagen stepped down and claimed he had no knowledge of this situation.  The new CEO, Matthias Mueller, was appointed, and the use of the defeat devices has been found in over eight million cars worldwide (mostly in the U.S. and Europe).

As the situation unfolds, the resale price of these vehicles has dropped dramatically.  The stock price of Volkswagen has also dropped by a third.  Given all the uncertainty about what will happen no one wants to risk buying one of these vehicles.   Though Volkswagen resisted stating that they would issue a recall, due to overwhelming pressure from many governments and organizations, including the Germany government who demanded a recall, Volkswagen has finally announced a recall.  Volkswagen is continuing to work with authorities to engineer a solution that would meet the requirements of regulating agencies.  This announcement means that a fix is possible, but any change will certainly affect the performance of these vehicles. How much of an impact, and when the solution will be implemented are also not known.

This vehicle recall will be the largest ever in the world and how and when the repairs will take place has yet to be announced.  Volkswagen has gone from the largest car producer in the world to a company whose existence and fate are unknown.  Volkswagen is the largest employer in Germany and wields both economic power and political power in Germany.  This change will certainly influence the global marketplace, as consumers will seek alternative vehicles.

How Volkswagen will engineer and implement this massive recall will be a milestone for the organization if it survives.  Because if Volkswagen can manage this and continue to exist as a brand will represent one of the most instructive recalls on the planet.  The question that industry sources wonder is if Volkswagen can manage to go from the top to the bottom and then end up back on top.  This comeback would rival the turnaround at Chrysler.

The new CEO Matthias Mueller at Volkswagen will need to build a team of the best to pull off this miracle.  A likely course of action is also to sell off some of Volkswagen’s assets. The estimated cost of the recall will easily be in the billions.  The question is that can Volkswagen afford this and manage to drive through the stormy road ahead.

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