Corporate disasters tend to follow similar patterns: a scandal breaks and reputations nosedive; efforts are made to restore public confidence whilst in the background litigation rumbles on for a number of years.
For casing points see BP and Deepwater Horizon and UK banks in the wake of PPI and Libor. The same path seems set to be followed in the case of VW and those brands under its ownership in the wake of the so-called "diesel dupe".
The VW scandal is thus: The US Environmental Protection Agency has found that many VW cars being sold in America contained devices in diesel engines which are capable of detecting when they were being tested enabling them to change the performance to improve results.
VW has admitted cheating emissions tests in the US.
Although the issues have arisen in the US, a growing number of other countries, including the UK, are opening their own investigations. A number of VW owners (and VW owned brands: principally Audi, Skoda and Seat) have received letters as part of that investigation.
Recently, the legal press announced that 'magic circle' firm, Freshfields, has been appointed by VW as its advisers in the UK on this issue.
Meanwhile, a cursory search of the internet reveals that already a number of legal firms experienced in bringing so-called 'class actions' (now made easier by the introduction of the Consumer Rights Act) are ascertaining the interest of participants in potential claims for compensation.
There is a third party involved in this situation whose involvement has largely gone unmentioned in the mainstream press reporting.
The understandable assumption of many lay individuals is that "I buy a VW. Therefore, I buy from VW".
Invariably, that is not the case. A customer will, in nearly all instances, buy from a dealer which at most will be an authorised dealer (complete with the rights to use the manufacturers' branding). The dealer is a different and often separately owned legal entity.
The dealer is the entity from which a car is purchased and against which the majority of entitlements exist and to which obligations are owed under the Sale of Goods Act previously and now under the Consumer Rights Act.
The dealer owes the contractual duty to provide a product which is of satisfactory quality and fit for its purpose.
It is also the dealer’s salesperson that may have persuaded the customer to buy that car based on its performance and emissions (alongside the manufacturers’ brochure). It is the dealer which is on the 'front line'.
In the context of the corporate disaster pattern, we are still at stage one. Whether there is an issue in the UK which needs to be dealt with and, if so, how VW addresses that issue has yet to be seen.
One thing is for sure: the dealers do not want to find themselves caught in the middle facing potential exposure on both sides.