Two of the biggest corporate PR-brand crises of 2015 have roared into the New Year with no end in sight. Recently, the U.S. Justice Department and the Environmental Protection Agency sued VW over its illegal diesel emissions scandal. Days later, Chipotle was sued for misleading its investors about food safety procedures.
Both companies face uphill battles to rebuild consumer trust in their brands, built largely on “we do it better” reputations. But is one crisis worse than the other?
When it was pointed out to VW in 2013 by various government authorities that road tests on its “clean diesel” cars showed wildly unacceptable results — as much as 40 times the pollutants allowed — the manufacturer began a year-long campaign to discredit the results. It was only when VW was presented with incontrovertible proof that it had installed software in its diesel-engine car computers to deliberately manipulate its pollutant emission — the proverbial smoking gun — did VW engineers admit to the fraud. This was no lone wolf act; it took a German village to carry out this malfeasance.
Regaining the public’s trust (not to mention that of VW dealers) will not be easy. Changes will have to be made that must be big, bold and sincere. Forget burnishing the brand. The entire culture of VW that gave permission to dupe customers will have to be reengineered, and the process will have to transparent.
Chipotle’s Dark Side
The Chipotle situation has definitely taken a turn to the dark side. When the norovirus story first hit, Chipotle fans came to its defense because of the company's seemingly genuine efforts on behalf of real, healthy food. Chipotle was leading the good fight by promoting hormone-free, non-GMO products in the food industry. They were the good guys that were going to change the system by marrying business success with ethics.
Now, however, things look a bit sinister with the Fed investigating. The fact that the Fed is being cagey and not saying if Chipotle executives or business practices are the focus of the investigation makes it even more unsettling. The lack of information suggests to consumers there might actually be something rotten at Chipotle headquarters.
The last quarter saw a nearly 35% drop in sales. Let’s be real, if McDonald’s was accused of unhealthy food preparation practices, no one would be overly surprised and their customers would still keep going because food ethics aren’t the reason they go to McDonald’s. But Chipotle built a brand on transparency, honesty and consumer health. If it is found they broke that promise, their consumers will react strongly.
Which Brand Crisis Is Worse?
Chipotle is a franchise company, which removes the national brand to some degree away from the current crisis that is originating among its franchisees. If the buck stops at some bad apples in the franchisee pool, Chipotle can rebound. But, if this a command from the top, they are in very bad shape.
As bad as Chipotle’s brand problem is, VW’s is worse. In the case of VW, we now know this was deliberate cheating straight from the top. Even now, upper management refuses a mea culpa. In an interview with NPR last week at the Detroit Car Show, the new VW chief, Matthias Mueller, justified the cheating and cover-up by saying, “We didn't lie. We didn't understand the question first.” The EPA, for one, isn’t buying that the whole mess was merely a matter of semantics. In addition to its lawsuit against the car manufacturer, the EPA has rejected its recall proposal as “incomplete.”