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Volkswagen's Rough Week in Detroit

By John Rosevear – Jan 18, 2016 at 4:04PM

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New CEO Matthias Mueller tried to help move VW past the emissions-cheating scandal, but he wasn't exactly successful, and now VW is under even more pressure.

VW CEO Matthias Mueller spoke at an event for journalists in Detroit last week. Image source: Volkswagen.

Many automakers were in a celebratory mood at last week's North American International Auto Show in Detroit. 2015 was a record year for auto sales in the U.S., and most manufacturers were feeling good about their prospects in 2016.

Most manufacturers, that is, aside from embattled Volkswagen (VWAGY -3.69%).

VW's not-so-good week in Detroit
VW had a rough week in Detroit. Its executives were (and are) under intense pressure to address the company's emissions-cheating scandal on multiple fronts. Regulators, dealers, and VW owners are all demanding answers and solutions -- and it may not be long before prosecutors join them.

In an effort to get on top of the scandal, VW CEO Matthias Mueller made his first visit to the U.S. since the scandal broke in September. It didn't go quite as well as he had probably hoped. In a hurried interview with NPR, Mueller suggested that the whole thing had been a misunderstanding of U.S. law on VW's part, not a deliberate attempt to cheat.

That was an extraordinarily tone-deaf statement, not least because VW has already essentially admitted that some of its engineers deliberately circumvented U.S. clean-air laws. VW's PR folks quickly requested a do-over, and Mueller managed to un-do some of the damage with more contrite remarks in his second attempt. 

But it wasn't a good week for the new CEO. The next day, the U.S. Environmental Protection Agency (EPA) and California state air-quality regulators announced that they had rejected Volkswagen's proposed plan to fix the roughly 580,000 diesel-powered vehicles equipped with illegal "defeat devices" in the U.S. And his fumbled initial appearance called into question some of the optimism that followed his first press conference in December.

We can give Mueller a partial pass, but...
So what does that mean for VW?

To some extent, I think we can let Mueller off the hook for his first interview with NPR. He is apparently not a fluent speaker of English, and he appeared to have been caught off guard by NPR's questions in a crowded, noisy situation. 

Mueller had a closed-door meeting with EPA chief Gina McCarthy in Washington on Wednesday. Both VW and the EPA declined to provide any specifics of what was discussed, or even to say how long the two talked. But at least they talked.

Still, taken all together, it's weak stuff. VW has had since the EPA first announced its charges in September to muster a strong, positive response. But so far, Volkswagen still seems to be taking at least one and a half steps backwards for every two steps it seems to take forwards.

...it's past time for VW to get on top of this scandal
Two years ago, another brand-new automaker CEO found herself confronting a huge scandal. Like Mueller, General Motors'(GM -2.92%) Mary Barra wasn't implicated personally in the events that led to the scandal. And like Mueller, Barra's first steps were somewhat awkward. But it didn't take her long to get on top of events, ordering the recall of millions of vehicles, establishing a compensation fund for victims, and quickly settling complaints brought by regulators and prosecutors. 

VW has tried to follow in GM's footsteps, even going so far as to hire the same attorney, Kenneth Feinberg, who set up that compensation fund for GM. But so far, Mueller and his team appear to be chasing events, not leading them. If VW is to get on with its recovery, that has to change -- and soon.

John Rosevear owns shares of General Motors. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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