After Scandal, Volkswagen Plans Image Makeover

Scarred by a public relations thrashing over its "Dieselgate" scandal, Volkswagen is planning an image offensive, and its "Das Auto" global advertising slogan is an early casualty.

Launched in 2007 under ousted boss Martin Winterkorn, the slogan has had the advantage of simplicity, merely meaning "The Car". However, the German carmaker's leaders, anxious to proclaim a reformed corporate culture, have criticized it as out of step with a company trying to show new-found humility.

A Volkswagen spokesman would not pronounce "Das Auto" dead quite yet, but said it would no longer accompany the famous VW badge in the coming advertising campaign.

Its replacement is hardly radical.

"Wherever our logo appears in future, it will be backed by the new brand slogan 'Volkswagen'," the spokesman said. "The slogan will be rolled out in stages across the world."

VW has been largely on the defensive since U.S. authorities revealed in September it had admitted rigging exhaust emission tests on some diesel-powered models. For weeks, it volunteered little information about the extent of the cheating, instead reacting guardedly to a flood of revelations and allegations.

The new campaign, discussed last week at a closed-door meeting of 2,000 group managers, is VW's latest attempt to regain the initiative in rebuilding its reputation following a sharp drop in sales in some markets, including the United States and Britain.

While the group produces everything from Bugatti supercars and Ducati motorbikes to heavy-duty Scania trucks, the meeting in the eastern German city of Dresden focused on the main VW brand.

According to a manager who was there, Volkswagen brand chief Herbert Diess described the Winterkorn-era slogan - which could suggest that VW alone can define the modern motor car - as absolutist.

Such an image of regal arrogance ill fits the reality of VW today: a company facing huge costs from recalling and modifying cars to meet emissions regulations, plus likely regulatory fines and a welter of lawsuits.

Volkswagen needed to show humility, the manager said, and the slogan 'Das Auto' was pretentious. The old slogan also failed to convey VW's technological ambitions in areas such as electrically-powered vehicles, the manager said, requesting anonymity.

VW said the Dresden meeting discussed the task of leading the company through the crisis and its future strategy.

Diess is a relative newcomer to VW, arriving from Bavarian rival BMW only in July. Since Winterkorn's forced resignation on Sept. 23, the group has reshuffled its management through internal promotions and external hires.

New chief executive Matthias Mueller formerly ran the group's Porsche sportscar unit, while the compliance chief was hired from rival Daimler.

VW tried to engender a new atmosphere at the annual pre-Christmas conference in Dresden last Thursday. For instance, male staff were encouraged to remove their ties - an unheard of suggestion in the buttoned-up Winterkorn era - and managers even folded shirts in a team-building exercise.

All this, along with VW's first news conference on the scandal earlier this month, suggests it is finally becoming a little less defensive and trying to shape events from a public relations perspective rather than merely reacting to them.

BAD START

Group communications chief Hans-Gerd Bode acknowledges frustrations have built up while VW tries to establish who did what and when to deceive the U.S. authorities, but he denies deliberate dishonesty in VW's communications.

"I can assure you that we certainly did not, at any point, knowingly lie to you," he told a group of reporters. "We have always tried to give you the information which corresponded to the latest level of our own knowledge at the time."

VW's PR response in the first three months of the crisis drew criticism from regulators, customers and politicians. There have been several missteps.

On Sept. 22, the company dismissed as "nonsense" a German media report that Winterkorn would be replaced by Mueller. The following day, Winterkorn resigned and Mueller was installed as his successor on Sept. 25.

In November, its luxury Audi division denied that its three-liter models had been fitted with illegal software, only to admit three weeks later that in fact they had.

Three weeks into what has become known as 'Dieselgate' VW communications staff began insisting media questions be submitted by email for consideration by teams that included lawyers as well as compliance staff. Often answers came back hours later or even the following day.

More recently the flow of information has improved, with Mueller and Chairman Hans Dieter Poetsch updating reporters for two hours on Dec. 10 on the state of VW's internal investigations.

But it had taken VW almost three months to hold its first free-flowing news conference. Prior to that, Mueller had largely stuck to reading out carefully worded statements, departing without fielding questions.

PLAYING AN ADVANTAGE

One advantage of the long delay was that VW won time to come up with a forward-looking plan that it could present at the news conference, rather than having to dwell on its past misconduct.

"The earlier you communicate, the more backward-looking you have to be," said Katja Nagel, chief executive of Munich-based crisis communications consultancy Cetacea.

"To be able to look forward and talk about prevention of such cases in the future - this is a strong position to be in. To do so, you need time to substantiate your plans before publicly talking about them."

Sometimes haste can be counterproductive, such as when Winterkorn was forced out within a week of the U.S. Environmental Protection Agency (EPA) revealing VW's admission. This left Mueller to pick up the pieces immediately, rather than having Winterkorn stay for a while to handle the fallout.

"They jumped on it a bit quickly by pushing Winterkorn out of the door, so the scope for him to take the flak was limited," said Robert Haigh, communications director at Brand Finance, a London-based brand valuation consultancy.

In PR terms, VW was on the backfoot from the outset, allowing the EPA to reveal its cheating, putting others in charge of the message.

Only occasionally did it show initiative. On Nov. 3 - six weeks after the first revelations - VW volunteered it had discovered carbon dioxide emissions and fuel usage of up to 800,000 cars sold in Europe had been overstated.

It was later able to say that only a much smaller number of cars was affected and the cost could be relatively minor, in contrast to the figure of at least 2 billion euros ($2.20 billion) it had first estimated.

VW said the initial estimate of 800,000 cars was a worst case scenario and it was able to reduce the number of affected vehicles following measurement checks.

This was a success under the rules of public relations; by initially estimating the costs of a setback at a high level, a company can subsequently present a lower number as good news.

But PR industry experts gave VW low marks for announcing that only a small group of employees had been responsible for the cheating without naming them - suggesting it did not yet know who they were.

VW has called in German PR firm Hering Schuppener, as well as Finsbury in Britain and Edelman and Kekst in the United States. But Bode made clear VW was still making the final decisions on crisis communications.

"What we also need is a view from outside. They are excellent sparring partners for us," he said.

(Additional reporting by Georgina Prodhan; Writing by David Stamp; editing by Janet McBride)