BERLIN (AP) — The “Made in Germany” label has stood for precision and reliability for decades, but since Volkswagen admitted to cheating on U.S. car emissions tests, many are questioning whether the automaker’s problems could taint the rest of the country.
It’s the second serious blow to a major German company’s reputation in six months, following the tragic crash of a Germanwings jet that killed 150 people. Parent company Lufthansa has faced questions over why it failed to identify the psychological problems suffered by the pilot, who intentionally flew the plane into a French mountain.
Will such crises tarnish the reputations for quality of other brands, such as BMW, Daimler or Bosch? Experts say that VW’s problems could hurt the economy in the short term because of the company’s sheer size, but that long-term damage to Germany is unlikely.
That doesn’t mean others won’t try to capitalize. Companies will try to grab market share. And across Europe, people in nations that have been lectured to by Germany for years about the virtues of financial honesty could be feeling smug.
“Not only does this make Germany look bad, I think that Germany has been very good at moralizing to the rest of Europe about the financial crisis and other things,” said Michael Hewson, chief market analyst for CMC Markets in London.
“Germans have a word for it — ‘schadenfreude’ — and Germany’s getting a big dose of it now,” he said, referring to the German word for taking pleasure at the misfortune of others.
Indeed, Internet memes of VWs covered in clouds of smog were already making the rounds, and media commentators were quick to pounce.
“In Europe, there is a strong dose of schadenfreude ... after the Germans, and primarily Chancellor Angela Merkel, have for years been giving lectures to others,” wrote Thilo Schaefer for Spain’s La Marea news magazine.
Still, in Lufthansa’s case, the airline has not appeared to suffer any serious damage following the March crash.
Volkswagen’s case could prove more costly for the company, though by how much is still unclear. CEO Martin Winterkorn resigned Wednesday and the company on Friday named the head of its Porsche division, Matthias Mueller, as his replacement.
The EPA accused VW of installing the “defeat device” in 482,000 cars sold in the U.S. VW later acknowledged that similar software exists in 11 million diesel cars worldwide and set aside $7.3 billion to cover the costs of the scandal.
It still faces possible criminal investigations and maybe as much as $18 billion in U.S. fines. The final cost could also depend on class-action lawsuits being filed by consumers who feel duped.
This is by no means the first time in recent years that a major German company’s reputation for probity has taken a huge knock.
Hartmut Dziemballa, who conducts image research for Germany’s GfK institute with a focus on the automotive and airline sectors, said past scandals have not had lingering effects and that he didn’t expect the Volkswagen scandal would significantly affect other German manufacturers — even car companies.
“The quality and the German engineering is still there, and people know that,” he said.
Still, if a scandal with any brand has the potential to smear the whole “Made in Germany” label, it’s Volkswagen, which is deeply interconnected with the country’s people and politics. Germany is the world’s third-largest exporter, vehicles are its largest export, and Volkswagen is its largest automaker, employing over a half-million people globally.
“While the German economy defied Greece, the euro crisis and the Chinese slowdown, it could now be facing the biggest downside risk in a long while,” Carsten Brzeski, an analyst with ING in Frankfurt, wrote in a research note.