Volkswagen's brand has been untouchable in Australia. Now it is facing a recall. The media storm will probably blow over in a few days but customer trust will take longer to rebuild. The firm has missed an opportunity to put things right quickly and limit the damage, according to those that should know.
Communications expert Patrick Southam, principal and co-founder at GSG Counsel, has managed the reputations of some of Australia's biggest brands. He said VW had "fallen asleep at the wheel, frankly" in not acting sooner.
"They have handled it terribly. It looks as if they have been dragged kicking and screaming to a recall. That is not a good look. One of the first rules of crisis management is transparency. VW has missed that opportunity. VW has such a good brand. It's surprising it would allow [the situation] to develop to this extent."
"It has lost a lot of skin," he continued. "What it means for the brand [in the longer term] we will have to see."
But now VW has "done the right thing" with a recall, the company must follow it with a mea culpa, according to Southam.
Communication is key, according to Gabriel McDowell, managing director at PR firm Res Publica. The lack of it has irked VW customers, judging by comments flooding onto its Facebook page. And nature abhors a vacuum.
“The key communication challenge for a company in a major product recall situation is to ensure that they communicate clearly to all stakeholders and don’t allow an information vacuum or uncertainty to arise," McDowell said.
"That means establishing direct communication with customers and providing timely updates to news outlets and social media so it is clear what customers should do and what steps the company is taking to rectify the situation. As a general rule, it is much better to over-communicate than under-communicate in the early days of a major recall.”
Peter Webster, former divisional general manager of marketing at Toyota, agreed. Act decisively, quickly and keep customers informed and a recall can be turned into a positive experience, he suggested.
Recalls were a fact of life in the automotive industry, Webster said. But there were ways to do them, and ways not to do them. "I don't know what's gone on behind the scenes at VW but the big issue is why they let it go on this long," he said. "Arguably it's a PR disaster."
Normally an automotive brand "moves as quickly as possible at the merest hint of a safety issue," Webster added. "Recalls come and go on a regular basis and the warranty is recognition that there is a potential for something to go wrong. Ninety-nine times out of a hundred the general population doesn't know what is happening [because it is managed before it becomes an issue]."
Webster said Toyota used its recall (of 12,000 Prius models in 2012) to build a stronger customer relationship. "Toyota moved at a hundred miles an hour to shore up problems. There were meetings every morning, they were phoning customers direct, despite there being not one recorded incident in Australia [with the Prius]."
He said Toyota "took the opportunity to go on the front foot. They left no stone unturned and it turned into a test case of how to turn a recall into a positive impact. Customers then saw what lengths the brand would go in order to assure them on safety and quality."
Webster said "to be fair" the decision may not be in the hands of the local distributor, and logistically it may take time to organise a recall operation on that scale. But it "becomes the responsibility of the local distributor to put forward [to Germany] a very compelling case as to the importance of a recall".
He said that the cost of inspecting 26,000 cars, plus admin costs and costs for parts (which may have to be shipped) and labour, should cars require fixing, could "add up millions of dollars". But that was "a mere drop in the ocean ... compared with how much you have to spend to get a positive brand image".
So what should VW do, now it has made the decision to recall, in terms of rebuilding its brand? Spend big on advertising? "I'm not sure they will have a big PR campaign," said Webster. "The best thing they can do is to quietly get on with fixing the problem."
Volkswagen Australia was not available for comment.
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