A "defeat device." That's what the Environmental Protection Agency is saying Volkswagen installed in some of its diesel cars.
The company allegedly used software that could figure out when the cars' emissions were being tested and modify their performance to meet mandated standards. The EPA says the company has admitted using the devices and the agency is now looking at other carmakers; Bloomberg says VW may face a criminal probe.
Public relations professionals often advise that when a company makes a mistake, the best thing to do is admit it quickly and immediately try to make right by consumers. Business school students have long studied how well Tylenol did this during a recall in the 1980s. However, VW's case is different from past recalls, said David Cole, who is chairman of AutoHarvest and a long-time industry analyst. For one thing, he said, this isn't a safety issue and it doesn't appear to be a mistake.
That may mean Volkswagen's most significant challenge will be in reestablishing trust with consumers, who may wonder whether "something's gone on in the backroom that has really tarnished the image of the vehicles and the company," he said, adding that some car shoppers could easily pivot to another automaker.
How much this news will affect resale value or sales of new Volkswagens will depend on what it takes to fix the issue and whether it hurts the cars' performance, said Greg Schroeder, with the Center for Automotive Research.
"They've marketed themselves as clean diesel; this is certainly a challenge to that," Schroeder said.
In the past, when Ford, Hyundai and Kia were found to have overstated gas-mileage estimates, they cut checks to drivers to try to make up the difference. VW might have to try something similar, said Jack Nerad, with Kelley Blue Book. But he said VW's recovery could be complicated by the fact that its customers, especially its diesel owners, tend to be passionate about their cars.
"Those people could feel essentially duped by what has happened and kind of question their loyalty going forward," Nerad said.
He said the more loyal the customer, the more betrayed they may feel.
"If a stranger lies to you, it's a lot different than if your husband or wife lies to you," Nerad said.
"The trust of our customers and the public is and continues to be our most important asset," Volkswagen CEO Martin Winterkorn said in a statement. "We at Volkswagen will do everything that must be done in order to re-establish the trust that so many people have placed in us, and we will do everything necessary in order to reverse the damage this has caused."