Marketing lecturer Dr Mike Lee has a look at the impact in Germany of the VW scandal.

The refugee crisis was headline talk here in Germany until the VW scandal broke, then that took over immediately. This is because of the relationship between auto-engineering and the German psyche. Their ability to make superior, reliable, and trustworthy cars, is similar to New Zealand's belief in our ability to provide clean, green, nutritious and safe food.

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I am currently on leave near Braunschweig and was actually in Wolfsburg (VW HQ) on the 23rd of September.

My family and I passed a lot of advertisements spouting the benefits of clean diesel, and all I can say is that such billboards and banners that only a week ago boosted a sense pride and employee morale, must now act like salt in the wounds for the thousands of VW employees and customers who either work for the VW or own some product of the companies, whether it be an actual Volkswagen, or one of its many subsidiary brands such as Audi, Porsche, Skoda, etc.

We cringe every time we see a VW ad such as the 'Peace, Love and Happiness' billboard at Hannover airport promoting the new iconic Combi, or the Giant truck billboards in Wolfsburg espousing the 'logical superiority of clean diesel'.

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For Germans, VW is a huge part of their national identity and place brand. It would be like a Kiwi finding out that Fonterra, purposely lied about the safety or nutritional value of its milk products. Or if the All Blacks had been taking steroids. We are not talking about a simple mistake overlooked, but intentional deception on a long term basis.

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VW is the largest employer of people in the two cities I am near: Braunschweig and Wolfsburg. The company accounts for 25% of cars driven in Germany; and to provide some context of the company's reach, at a personal level: My father in law has a close friend who works for VW, when his son finished school he also worked for the company.

My daughter's swimming instructor's husband works for VW RnD. My wife's best friend from school also works for VW, as well as many of her class mates. And last year I taught a PhD course where one of my students also works for VW marketing. So this is really a company where everyone in Germany, certainly Lower Saxony, knows someone who either works for the company or certainly knows someone who owns a potentially affected automobile.

In my own research of anti-consumption I established that corporate irresponsibility was one of the main reasons for brand avoidance, and I would not be surprised to see brand avoidance of VW automobiles, as well as its subsidiary brands occurring, in the near or long term future.

Certainly, the immediate brand avoidance effects have already been seen in VW's dramatic share price drop. If there is a broader silver lining to this, it would be the opportunity for other competitors operating on the other side of the auto-fuel sector (solar, Hybrid, Electric) to gain market share and confidence, as this scandal has proven again that fossil fuels really are a thing of the past. As I say this, VW has hired Kirkland and Ellis the law firm who defended BP in Deepwater Horizon.

Workers prepare to drive VW Golf cars off the assembly line at the Volkswagen car factory. Photo / iStock
Workers prepare to drive VW Golf cars off the assembly line at the Volkswagen car factory. Photo / iStock

I haven't had a chance to interview anyone, but given the German sense of righteousness and moral obligation, the overall impression I get is a one of national embarrassment, VW employee morale at an all-time low, and the broader question if VW is really the only corporation gaming the system, or simply the unlucky one to be caught?

Added to this is the Greek financial crisis, where Germany has been held up as the 'role model' economy to date, so I guess the question on the minds of countries struggling within the Euro zone, is whether the VW scandal is the act of an isolated company within Germany, or something more indicative of German business and economic policy more generally?

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I guess the question on the minds of countries struggling within the Euro zone, is whether the VW scandal is the act of an isolated company within Germany, or something more indicative of German business and economic policy more generally?

And Germany's almost martyr like declaration of the number of refugees it was willing to accept is perhaps now also seen through less rosy tinted glasses as it establishes borders to neighbouring countries to control the influx of refugees.

So what we have seen within a matter of weeks is the role model country in Europe taken down several notches in brutal succession. Winters are pretty harsh in this part of the world, and I think this one will be particularly fraught. But if history has taught us anything, it's that you can't keep Germany down.

Dr Mike Lee is a senior marketing lecturer at the University of Auckland Business School.