2. Volkswagen Long Term Public Relations Plan

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

4. 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.

5. History

6. “My desire for harmony is limited.”
-Ferdinand Piech

7. Previous Situation Volkswagen before the scandal

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

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

11. Internal Fallout between Piech and Winterkorn
Stock trends
prior to scandal
Internal Fallout between Piech and Winterkorn
Chinese Stock Market
Falls

12. Financial Situation “VW’s brand value stood at just over US$31 billion
making it the world’s 3rd most valuable auto brand.”
-David Haigh, CEO of Brand Finance
2015 prior to scandal

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

14. Reputation Solid Engineering & Value
In 2013, VW was listed as #2 Greenest Company---German engineering, value

15. The Situation 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

17. “Automobile traffic is responsible for only 12 percent of total CO2 emissions. One should be able to point this out without being accused of changing the subject.”
-Martin Winterkorn

18. #4 Internal Promotion #1 Defensive Response #2 Vocal Commiseration
Reaction
#1 Defensive Response
Excuse
#2 Vocal Commiseration
Non-apology
#3 Resignation
#4 Internal Promotion
“We didn’t lie”
-Matthias Müller

19. Financial Impact 2% decline in vehicle sales in 2015
Provisions for the scandal rose to $23.9 billion (Feb. 24)
Net loss of $6.2 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)
Financial Impact

20. 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

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

22. Culture “Das Auto” slogan replaced with “Then. Now. Always.”
Stated vs Unstated
VW's compliance chief, Christine Hohmann-Dennhardt, leaves in Jan 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."

23. #1 in global automotive volume sales
Revenue
#1 in global automotive volume sales
Feb. 1, 2017
10.3 million vehicles were delivered in 2016.

24. Survey Results

25. 62% Neither Agree or Nor Disagree
I Trust Volkswagen
62% Neither Agree or Nor Disagree
21%
Agree

27. Limitations #1
Question #2
Sample

28. Briefly describe what you know about the Volkswagen Scandal
40% scandal awareness decrease over 17 months

29. Long term brand impact from scandal
78% decrease in lack of trust in brand
Long term brand impact from scandal

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

31. Audience #1: “In the Know”
Positioning Statement: Become the leader of automotive quality
The Plan 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”

32. 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
There are lions here too

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

34. Audience #3: Executive Board
Buy in to new public relations and culture approach
Unify the board
Current CEO Matthias Mueller

35. Building and Maintaining Organizational Integrity

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

37. Risk management grid Unobservable Controllable Uncontrollable

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

39. 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

40. So What?

41. Questions?

42. References
Edelstein, S. (27 Feb 2017). VW exec pleads not guilty on diesel cheating charges. Green Car Reports. Retrieved 27 Feb 2017 from 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 Johnston, C. (24 Feb 2017). VW cracks down on executive pay after diesel scandal. BBC News. Retrieved 24 Feb 2017 from Rao, P. (26 January 2017). "VW executive, hired to help overhaul carmaker's culture, is to leave." Retrieved February 6, 2017, from Risk management and internal control system. Volkswagen. Retrieved 1 Feb 2017 from management-report/report-on-risks-and-opportunities/risk-management-and-control-system.html TOGETHER- Strategy (n.d.). Retrieved February 6, 2017, from "Timeline: Volkswagen's long road to a U.S. Dieselgate settlement." Reuters.com, 11 Jan. 2017, url?q=http%3A%2F%2Fwww.reuters.com%2Farticle%2Fus-volkswagen-emissions-timeline-i dUSKBN14V100. Accessed 28 Feb

43. References Continued…
Volkswagen.com. Nov. 2017, Retrieved 27 Feb from lion_vehicles_in_ _press_release dd51355dd.pdf. Volkswagen is the New Global Sales Leader: What it Means. Forbes, 1 Feb. 2017, Retrieved 27 Feb.2017 from url?q=https%3A%2F%2Fwww.forbes.com%2Fsites%2Fgreatspeculations%2F2017%2F02%2F01%2 Fvolkswagen-is-the-new-global-sales-leader-what-it-means%2F%23441b414d6d08. We call it think blue. Volkswagen. Retrieved 6 February 2017 from Winton, Neil. Tesla Model S Wafts Along Like A Rolls-Royce, But Germans Will Catch Up Eventually. Forbes, 21 Dec. 2016, Retrieved 27 Feb from url?q=https%3A%2F%2Fwww.forbes.com%2Fsites%2Fneilwinton%2F2016%2F12%2F21%2Ftesla- model-s-wafts-along-like-a-rolls-royce-but-germans-will-catch-up-eventually%2F%23 4faa d.

44. Ignoring the Executive Board
Rejected Solutions #1 #2
Ignoring the Executive Board
Firing top executives

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

46. Inputs Culture & Ethics Compliance Quality Sustainability Safety
Security
Environment

47. Enablers Governance Regulators Leadership Risk Strategy Incentives
Media
Opinion leaders

48. Outputs
Behaviors
Actions
Financial Results
“ESG” Results

49. Top 2 Potential Risks Legal Action Against Executives
Executives Leave Company