Volkswagen's Lack of Corporate Transparency Still a Problem: U.S. Monitor

There have been high hopes for the recovery of Volkswagen’s reputation. The German car maker, once reputed to be a leader in clean energy strategies, saw its standing in the global automotive sector suffer three years ago when the company admitted it had falsified the emissions results for thousands of cars.

But second-chance options are often easier to negotiate if you hold the key to cutting-edge technology.

With the declaration two years ago that it planned to become the world's top electric car manufacturer and its assurance to government regulators that it planned greater transparency and changes to its corporate culture, it seemed possible that Germany’s largest car manufacturer would be able to put the legacy of its “dieselgate” scandal behind it.

A new report, however, by Larry D. Thompson, a former U.S. deputy attorney general who had been appointed to monitor Volkswagen’s corporate rehabilitation suggests that Volkswagen needs to do much more to capture that success.

So just what makes a successful reclamation of a company's reputation in the eyes of court-appointed monitors?

Thompson alluded that it’s the practical things – that ensure that there is less likelihood of a repeat scandal, like an active whistle-blower program that allows employees to bring problems to the fore without fear of retaliation.

And it’s finding a way to deconstruct Volkswagen’s rigidly centralized corporate culture to ensure more transparency. According to Thompson, that lack of transparency extended to a “reluctance to share certain information” requested by court-appointed monitors.

According to Matthias Mueller, the company’s former CEO, that corporate thinking is a reflection of the fact that some, nurtured by Volkswagen's old-school “centralistic leadership” are resistant to changes. “I don’t know if you can imagine how difficult it is to change the mindset,” Mueller said.

Meanwhile, Volkswagen AG’s current CEO, Herbert Diess, who assumed leadership in April, has his sights set on revamping the company’s automotive line as an indicator of the company’s dramatic change. The compelling ID Vizzion, an electric car that was unveiled at the Geneva Motor Show as a sleek, self-driving model that embodied all the glitz and glamour the show is known to extol, is Volkswagen’s newest image-changer and due to go on sale in 2020.

Diess has admitted, though, that changing the company’s corporate culture is paramount to Volkswagen’s success and that the company is trying to address those issues.

“I was already quite sure this company had to change because of what was happening in the industry,” Diess admitted to Fortune writer Vivian Walt last July. “But the diesel crisis has accelerated our change process quite considerably.”

Still, Thompson’s latest report is an echo of an earlier question: does Volkswagen appreciate that the company's image is for many, the first consideration when it comes to embracing innovation?

As Volkswagen board member Hiltrud D. Werner, who was appointed to oversee integrity and legal issues for the company, succinctly said, “[Dieselgate] is the worst industrial scandal in Germany since World War II. This will stay with the history of the company forever.”

In the past few months the company has dabbled in a number of interests that seem on the surface like unexpected goals for Volkswagen. But they beg the question of whether new product goals can inspire a new corporate culture. Tesla’s initial announcement by CEO Elon Musk that it would be “going private” garnered interest from the German carmaker, which may have seen the potential investment as a way of redesigning its image.

Boosting visibility through investment is not exactly a new idea. Companies do it all the time by investing or supporting campaigns that they publicly identify with. But will consumers that go shopping for an energy-efficient car will pick up that nuance if they believe that Volkswagen hasn’t been transparent in its corporate operations?

As Walt points out, tomorrow’s shifting market may be less about spacious, elegant electric cars consumers can buy in the “millions” and more about the practicality of transportation they can depend on – a viewpoint that is giving increasing power to the car, bike and bus-sharing industry.

Still, one thing that becomes abundantly clear to anyone who has visited Volkswagen’s Chattanooga, Tennessee factory is the company’s innate ability to sense the priorities of its consumers and to act on them. The factory’s green technology and state-of-the-art facilities aren’t just meant to keep up with today’s focus on environment. They reflect the administration’s intuitive understanding of how important it is to align its values – not just its products—to the expectations of its consumers.

Consumers today don’t just buy cars because they are innovative and compelling. They buy them because they trust the message that is sold with them. For Volkswagen’s legacy as a green manufacturer, unfortunately, that message is carried strongest by the steps it takes to redesign how it sees itself and operates, internally.

Image credit: Volkswagen