Could Volkswagen’s brand collapse provide an opening for high tech companies?*
Value of Volkswagen A.G. now is less than half what it was in late April as diesel car fiasco leads to further declines in the company’s stock price today
Watching what is happening to Volkswagen is like watching a car crash in slow motion – you see it coming up, its awful to see, but fascinating all the same. Today VW stock is down another 17 percent, after losing 17 percent on Monday.
In short, since the end of April, when the market started to go down, and taking into account the past two days of trading, the company has lost more than half it value. What is happening to VW is of Enron proportions.
If you are not aware of what has happened, here is the developments in brief: on Friday the EPA ordered a recall of half a million VW diesel cars, stating that the company was using software that would defeat emission tests while allowing the car to run at full performance, and with more emissions, in regular driving mode. Now the company admits that the same software has been used in cars in Europe, up to 11 million diesel models.
On Saturday, the CEO of the company, Dr. Martin Winterkorn, issued an apology:
We do not and will not tolerate violations of any kind of our internal rules or of the law.
Winterkorn, 68, was due to have his contract extended, but that seems highly unlikely, with a resignation expected to be announced on Friday unless another fall guy can be found (and believe me, they are seeking volunteers). In the meantime, there are reports that Winterkorn is refusing to quit, though it is unlikely that this will be his decision to make.
Meanwhile, UK Transport Secretary Patrick McLoughlin has called for a EU-wide investigation, leading many to believe that this crisis for VW has not yet peaked.
The timing of all this is interesting, only 24 hours after The Wall Street Journal reported that Apple really is serious about entering the car business (though it should be remembered that Apple was supposed to be serious about entering the TV business, too).
Former GM Vice Chairman Bob Lutz is said to be skeptical that Apple should enter the car business, which is probably all the endorsement for the move you need to hear.
Still, the car business is a low margin business compared to the iPhone. But then again, few businesses will prove as profitable as Apple has been with the iPhone.
* Remember the old saying about headlines that end in a question mark – the answer to the question is usually “No”.