German Engineering and the VW Scandal

What happened to „Made in Germany?“

U.S. Treasury Secretary Criticizes German Export Model
Made in Germany?. Adam Berry - Getty Images News@gettyimages.de

In the business world of today, there are only few myths that last longer than the one of „German Engineering”. The alleged superiority of German design and industrial craftsmanship seems to survive even the omnipresent VW-Scandal, the so-called “Dieselgate”. Interestingly enough, outside of the car industry, the famous trademark “Made in Germany” has evidently barely been scratched by the events that took a heavy toll on the big German corporation.

Certain industrial branches of mechanical engineering seem impervious to hits such as the Volkswagen scandal.

 

German Engineering – Is it a well-earned Reputation?

While the brand “Made in Germany” was, among others, first introduced in 1887, it was largely built due to German protectionism at the end of the 19th century. When it was originally issued in Great Britain, its purpose was to warn customers, as German manufacturers and traders were known as notorious fabricators and sellers of trashy goods and stolen designs. But they managed to turn it around and create a positive reputation, which is still worth something today. In fact, the German reputation provided the country’s companies with a competitive edge in the international comparison. Even if the brand “Made in Germany” is not worth the same everywhere. But it’s actually hard to say how much it is really worth. In the current judicial situation, “Made in Germany” can mean a whole lot of different things.

In numerous cases products that are labeled as made in Germany are veritably manufactured somewhere else. Sometimes the products are only assembled in Germany, sometimes only design and quality control happen in the country they are “made” in. The companies are relatively free in choosing when or if they label their merchandise.

The European Parliament is currently aiming to change that, but if and when that happens remains to be seen.

 

The VW Scandal – A systematic Deception of Customers?

In the latest development of the so-called “Dieselgate”, the Mexican government imposed a million-dollar fine on Volkswagen for selling cars without valid environmental certificates. Meanwhile, the South-Korean VW headquarter has been raided by the country’s authorities and the company has been heavily fined. But the biggest headlines are made in the USA. Effectively, millions of cars will be called back due to the fraudulent software.

 

What actually happened? In 2014, an American institute discovered higher carbon emissions in some VW models than the company had originally stated. In the following months, sales numbers in the US dwindle. VW tries to solve the problem through negotiations, but eventually has to admit to the EPA to having manipulated the cars – a software had been installed in the vehicles, which masks the real level of emissions. Officially, though, the company doesn’t comment on the allegations. In September 2015, the whole situation really turns into a scandal, as almost half a million cars are supposedly affected in the USA alone.

The American Ministry of Justice is launching an investigation and the VW stock starts its unprecedented decline, followed by the resignation of CEO Martin Winterkorn. It soon turns out that more than two million vehicles have been manipulated, among them also models from Audi and Skoda. VW assumes that its emergency fund of 6,5 billion Euros will most likely not suffice to cover the cost of the scandal as more and more lawsuits are issued against the company.

 

October 2015 brings a number of changes in the VW advisory board. The corporation’s headquarters are subject to a raid issued by the state office of criminal investigation. While German politicians worry about Volkswagen’s employees, the scandal expands to Europe and Asia. VW is calling back 8.5 million cars from several European countries.

While the manipulation was limited to nitrogen figures up to now, Volkswagen admits to having manipulated the statistics for CO2-emissions as well. Further VW-managers are forced to resign and it turns out that it is irritatingly simple and cheap to reverse the manipulation in the vehicles. In January 2016, American authorities are fully suing VW and its daughter companies. The sales figures keep dwindling. In Germany, the first civil lawsuit against VW has recently begun and latest news suggests that the former Volkswagen-CEO, Martin Winterkorn, might have known of the manipulation as early as 2014. Only the future will tell, how big a dent the VW scandal will have made in the reputation of German engineering.