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| | October 5, 2015 | |
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| | It's still early days, but the Volkswagen story is shaping up as a case study in how not to handle a crisis.
Volkswagen recognizes it has a very big problem on its hands. Germany's Welt am Sonntag quotes Hans Dieter Potsch, the incoming chairman, calling it an "existence-threatening crisis for the company."
But the fact that Potsch, VW's chief financial officer since 2003, was given the chairman's job, and that another company insider, Mathias Muller, has been named CEO, suggests the board is circling its Volkswagens. The FT contrasts that defensive crouch with how Siemens handled its bribery scandal in 2006, bringing in an outside chairman and CEO, and ultimately taking legal action against former executives.
Emerging evidence makes it clear that the installation of software to defeat emissions controls was not the result of some rogue operation - it was driven by decisions made by the company's top engineers and approved at the highest levels. It is a bright neon sign pointing to a sick corporate culture. That won't be easy to change, and it won't be solved by papering the world with apologetic newspaper ads.
Potsch and Muller may want to learn from GM's Mary Barra, also an insider, who when faced with the ignition switch scandal was surrounded by fellow executives who also said: This is bad, but we can get over it. Barra's response: I don't want to get over it.
"I don't want to set it aside and explain it," she told Fortune's Geoff Colvin last year, "because I think it has uncovered some things in our company that it's critical we challenge ourselves to change and to fix."
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| | Top News | |
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| | • Trade deal within reach The United States and 11 countries around the Pacific are reportedly resolving final differences on talks to complete a major trade agreement that would lower barriers to goods and services but also set the stage for big debates within national legislatures. The trade deal negotiations, in the works since 2008, are still trying to work out disputes on property protection afforded to biologic drugs, dairy products, and rules for automobile assembly. An agreement would be seen as a big victory for President Barack Obama. WSJ (subscription required • Investors brace for stock declines Investors are bracing for another drop in the S&P 500 stock index, Reuters reports, despite its positive showing last week. "Do I think we go into a bear market? No. Can we inch toward it? Absolutely," said a New York-based economist. Corporate earnings are projected to drop by 4.1% for the third quarter, a figure skewed by a predicted 65% drop in the energy sector's results. Meanwhile, a dismal U.S. employment report on Friday diminished inflation expectations. Reuters • Activist investor jumps into GE An activist hedge fund run by Nelson Peltz has accumulated a $2.5 billion stake in General Electric since the middle of May - a roughly 1% stake - making it one of the company's top 10 shareholders. It amounts to the biggest investment ever for Trian Fund Management LP, which historically has pushed firms to dramatically reshape themselves. While Trian hasn't requested a GE board seat, the investment puts additional pressure on GE CEO Jeffrey Immelt. GE's shares are down more than 35% since the day Immelt took over in September 2001, WSJ notes, while the S&P 500 is up more than 79% in the same period. WSJ (subscription required) • VW chief warns of "crisis" Volkswagen's designated chairman warned that the diesel-emissions scandal would pose "an existence-threatening crisis for the company,"as the German carmaker pleaded for public trust with national newspaper ads. "We just want to say one thing: We will do everything to win back your trust," VW said in the ad Sunday. The auto company also faces a Wednesday deadline to draft a plan to fix 2.8 million vehicles in Germany. Bloomberg • American Apparel files for bankruptcy Apparel retailer American Apparel has filed for Chapter 11 bankruptcy protection, a move that isn't exactly a surprise as the company had warned over the summer it had "substantial doubt" it would stay in business. American Apparel CEO Paula Schneider, who took the helm in January, has sought to grow the brand to a $1 billion business but has consistently warned the retailer had very little cash to play with to undergo a dramatic pivot for the unprofitable business. The company has been closing stores and laying off staff to try to cut costs. CNN Money | |
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| | Around the Water Cooler | |
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| | • Bernanke: Bankers deserved jail Ben Bernanke, the former chairman of the Federal Reserve, says he believes more bankers and corporate executives who helped cause the financial crisis should be in jail. In comments made ahead of the release of his upcoming memoir, Bernanke says the Justice Department focused on fines and sanctions, without as much effort on punishing individuals. The memoir, The Courage to Act: A Memoir of a Crisis and its Aftermath, is due for publication on Tuesday. Fortune • Disney to change park pricing The Walt Disney Company is mulling a change to how the media giant charges pricing at its U.S. parks, a change that would encourage visitors to go to the parks during the off-season. The reported plan is that tickets to Disney parks would cost more during weekends and around major holidays, and less during the weekdays and days when the tourist season is at a lull. Fortune | |
| | 5 things to know this week | |
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| | VW's deadline, Fed minutes, and a new Speaker — 5 things to know this week. This week's story can be found here. | |
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