VW Australia counts cost of ‘dieselgate’

VOLKSWAGEN Group Australia (VGA) believes the current diesel emissions cheating scandal will have only a short-term impact on sales and is confident the issue will be dealt with in a transparent fashion with little long-term effect on the brand.

The German automotive giant announced last month that about 11 million VW Group vehicles from brands including Volkswagen, Skoda, Seat and Audi were fitted with a software device that only activated full emissions controls when under test conditions, allowing emissions up to 40 times higher during normal driving.

Around 100,000 vehicles are affected in Australia, including 61,189 Volkswagen passenger cars, 17,256 VW commercial vehicles, 5148 Skoda cars (part of VGA) and 16,085 Audi vehicles, with the latter imported through an independent distributor.

Speaking at his final media event before he heads back to his native Canada for an early retirement next week, outgoing VGA managing director John White admitted the issue would have an impact in dealer showrooms, but that the company was determined to stick with its bullish targets for the local market.

“We still have aggressive long-term sales targets,” he said in an interview with GoAuto and two other journalists in Queensland on Monday.

“I think our fundamental long-term strategy is sound. Are we going to be in for some turbulence over the next year? Absolutely. I think once we are able to announce the fix and get that sorted out, then this, like any other recall, should enable us to move forward.” In terms of buyer perception of the Volkswagen brand once a fix is found, Mr White compared the emissions scandal to problems relating to the DSG dual-clutch transmission in mid-2013 that affected sales and the brand.

“I can’t predict the future, but if I look at what happened with the DSG situation, we had an immediate impact. We have not seen the same impact to this. Obviously we have a stop-sale, which is going to affect a certain number of our cars right now,” he said.

“The fact that there is a certain number of cars we can’t sell is going to have an impact on our immediate short-term sales, but I think that once we are through that, we have demonstrated with the DSG situation, that we were able to first get the situation under control, stabilise it, rebuild customer confidence and then grow our business.

“I don’t see why the same wouldn’t be possible again in this market.” The stop-sale announced last week relates to Volkswagen, Skoda and Audi vehicles with the EA189 diesel engine, and includes versions of models such as the Tiguan, Caddy, CC, outgoing B7 Passat, as well as the Skoda Superb and Yeti.

When asked how VGA will win back the trust of consumers who are put off by the cheat device, Mr White said people will recognise that Volkswagen’s Australian division was not involved, and was optimistic about the brand’s recovery.

“It’s very important to note that nobody in Australia did anything, was aware of this or had any involvement. Current or past employees or management. That is absolutely clear,” he said.

“This is not an Australian issue. Once we are able to make a concerted effort to come up with a fix and demonstrate that we have done what we have had to do, then I think Australians are reasonable and pragmatic people.

“It’s really hard to say, I can’t predict how some people will or won’t react and I don’t want to talk about other manufacturers but other manufacturers have had certain issues to deal with and bounced back. I would see us bouncing back, the question is when.” Mr White said the VGA dealer network had a right to be frustrated with the effects of the scandal, adding that management would discuss it at length at the dealer conference to be held this week on the Gold Coast.

“First of all, the network is on the front lines, so whatever frustration or anger they show, we know it’s not directed towards us. What am I anticipating? I am anticipating honest, open, frank, two-way dialogue with our dealer body.

“And the relationship we have with our dealer body is that they don’t come in and, for lack of a better word, complain. They come in and make concrete suggestions and recommendations and we sit down and we listen to them.” While confirming that VGA is “absolutely committed” to diesel technology in Australia, Mr White went on to say the company would continue to advertise, despite the media attention the scandal is receiving.

“If anything, from what our experience has shown is, you need to be out there on your front foot. We have the money committed to media, and to buys, and we are going to continue to advertise.

“If anything now is the time to continue to be present.” Mr White opened a media conference for the B8 Passat launch on the Gold Coast on Monday by acknowledging the impact the scandal has had on customers and dealers.

“First of all I’d like to say I share the disappointment of Australian customers, staff, dealers and our partners that are affected by this situation in this country and I would like to unreservedly apologise to all of those affected by this issue in Australia,” he said.

“I also know our parent company is going to do everything that it can to restore the trust that we have lost. Now not only is this a difficult situation, but it is a very complex problem. We are talking multiple types of vehicles, brands, and emissions regimes around the world.

“First thing we need to do, is to clarify the situation and our parent company is working very intensively to do that.” Mr White said the company would not be commenting on the fix for the issue until it is determined by its German parent company.

“From our end the way we look at it, there is no point making reports based on speculation and conjecture,” he said. “We want to make sure we take the time to get all of the facts, and get all the facts to you with comprehensive answers, as they are made available to us.” Mr White also acknowledged that customers are “frustrated” by not knowing what will happen to their vehicle, but sought to clarify some misleading reports that have circulated about the emissions issue.

“What I want to do is assure our customers, that despite the reports that have been made, that this issue currently affects CO2 levels and fuel economy in current vehicles, that is incorrect. That is not accurate information. There is no effect to either.”