The Fortune 100 brand has always held an enviable reputation as a reliable and quality car manufacturer, leading the way for 'clean diesel' and sparking a revival in demand for diesel cars in the 1990s.
With news that the company has actually been deceiving the public about this 'clean-diesel' technology, belief and trust in the brand has been shattered.
This is no short-term crisis. Volkswagen is a much-loved global brand across many generations.
The company has broken environmental laws and, in today’s environmentally-conscious consumer world, that’s a big deal – made even bigger by the fact that this was no accident.
All eyes are on the German company to see how it manages the crisis and wins back the related authorities, shareholders and consumers – the people.
A company of this size will surely have procedures in place to minimise reputational risk – at some point, a decision was made at board level to deliberately mislead the authorities.
Did they measure the reputation risk incorrectly?
The magnitude of the loss in consumer and investor trust is yet to be fully realised, but Volkswagen needs to demonstrate complete transparency and honesty from now on.
Volkswagen has a loyal, long-standing customer base, many who feel an emotional, nostalgic connection to the brand; the ‘people’s car’ manufacturer needs to speak to the people.
Volkswagen dealerships are key to apologising and reassuring customers that their vehicles are safe, first and foremost.
The company needs to ensure that consistent, honest and clear answers are communicated to the entire Volkswagen network, so that media and customer questions are dealt with in the same way with the same messaging; any ambiguity of information given out will only further add to a lack of trust in the company.
To the media, the issue needs a senior spokesperson in each country and key executives need to be making personal appearances on national news channels and offering commentary in publications, apologising and stating what steps it is going to take to restore consumer trust.
Customers and investors like to see cultural changes in companies following situations like this, with failings being admitted and key people being made accountable.
Fundamental structural and operational changes will no doubt be announced shortly.
To date, Volkswagen CEO Martin Winterkorn has offered a personal apology and the company has stated it will set aside €6.5bn (£4.7bn) to "win back the trust of its customers".
It’s likely there’ll be a second wave of negative PR with authorities and the press holding a magnifying glass to the company.
Volkswagen needs to be whiter than white from now on. The public doesn’t really want to see the end of a much-loved brand, but customer trust and honesty go hand in hand.
Caroline Skipsey is managing partner of Igniyte