Volkswagen: Will the world still love the Bug?

On a grey day in Wolfsburg a grim-faced man hangs lights on trees in a windy shopping precinct. People stand and talk, glancing occasionally at the yellowing trees or towards the hulking Volkswagen factory in the distance.

Soon the four chimneys of the VW power plant will be transformed into 125m-high Advent candles. Christmas hasn’t been cancelled in Wolfsburg – yet. But the mood is far from festive.

Wolfsburg, 200km or so west of Berlin, is less a city with a VW factory than a VW factory with a city. And now it’s a city reeling from revelations that the car company’s engineers manipulated millions of diesel engines to look cleaner than they were.

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Birth of the Beetle: Volkswagens are assembled in Wolfsburg in 1954; the city is home to VW’s main factory and headquarters. Photograph: Reithausen/AP

It’s a huge breach of trust for Volkswagen customers worldwide and a knife in the heart of the 120,000 Wolfsburgers, about 70,000 of whom work for VW directly. The city has risen with Volkswagen; if the car giant falls, the city goes with it.

Wolfsburg's pedestrian zone is no beauty, with stores running the gamut from designer outlets to discount hairdressers and a shoe store named after Al Bundy, the harassed father of the television sitcom Married With Children.

The pedestrian zone ends at the intersection of Goethestrasse and Porschestrasse, named, respectively, after Wolfgang von Goethe, the father of German high culture, and Ferdinand Porsche, the pope of German motoring and the father of the Porsche 60 – the prototype for the Nazi “people’s car”.

From the ruins of war came seven decades of motoring history. There was an occasional crisis, but the success was as steady as the cars passing on Goethestrasse.

Waiting for the lights to change, it takes a moment to notice that every passing car is either a Volkswagen or a member of the VW family; most are no more than five years old. An out-of-town Mitsubishi slips by, ruining the effect, but is followed by many, many more VWs.

National identity

Long before brand awareness and decades before globalisation, the world believed in Volkswagen. Irish farmers loved the Beetle as much as German holidaymakers. Herbie took Hollywood, and a generation of 1970s Germans were named after the Golf.

Just two months ago a YouGov survey here found that two-thirds of Germans mentioned Volkswagen as what they most readily associated with German national identity.

But if your belief in the brand is shaken, and a pillar of national identity knocked out, what then? In Wolfsburg, both inside and outside the factory walls, this is isn’t a theoretical marketing problem. It’s an existential crisis.

"This is the most far-reaching event in Wolfsburg's history," says Andre Pichiri, a journalist at the Wolfsburger Allgemeine. Like everyone else at the daily newspaper, Pichiri has worked flat out since it emerged that some 11 million VW engines were programmed to produce lower levels of nitrogen oxides in test conditions than out on the road. The news left the city paralysed by shock, he says, but the mood has since shifted: to disappointment and, now, solidarity.

"Two million jobs depend directly or indirectly on VW in Germany, " he says. "No one will let that die."

City traders in Wolfsburg have already pulled together, taking out full-page advertisements in support of the company. In Wolfsburg town hall the last weeks have been a blur of emergency meetings.

Last year VW paid €275 million in local commercial taxes, about three-quarters of the city’s tax take. The company has also invested heavily in the local Bundesliga team, sport facilities, schools and kindergartens. After imposing an immediate budget freeze, the mayor, Klaus Mohrs, did his best this week to spread optimism.

“Wolfsburgers don’t have to worry that the lights will go out,” he says. “In previous crises I felt more depression. Now I hear people saying, ‘We’ll get out of this hole.’ It might take two, three years, perhaps a little longer, but the mood is confident.”

Professions of confidence notwithstanding, everyone here knows that Wolfsburg is hostage to Volkswagen’s fortunes.

Changing cityscape

Strolling back up Porschestrasse towards the factory, these changing and interlinked fortunes are visible in Wolfsburg’s cityscape – mostly modest postwar blocks, although things get more opulent closer to the canal and factory. Just like VW’s expensive recent acquisitions of Porsche, Bentley and Bugatti, Wolfsburg has developed expensive tastes of late.

Next to the train station stands the oblong, futuristic Phæno, a science museum by the star architect Zaha Hadid.

One camp in the city sees such buildings as just reward for decades of hard work. But critics say the Phæno is only one example of how Wolfsburg, like VW, lost the plot.

“It’s just the kind of thing we can’t afford now,” says an elderly local woman standing in the Phæno’s €90 million shadow.

Across the canal many more expensive buildings await visitors to VW’s Autostadt – Car City – an immaculate, 15 year-old mash-up of theme park and trade fair with steel-and-glass temples to VW brands. For those not interested in “Das Auto” there are shops, restaurants and a bakery called Das Brot. Two million people visit Austostadt each year, including 166,000 Germans who come here to pick up their new VWs personally. One in four German VWs begins its life here, at VW’s on-site adoption agency.

“Not at all,” says Tobias Riepe, a company spokesman, when I ask if Autostadt has noticed a drop in visitors or a rise in order cancellations since the scandal broke.

The customers may still be coming, but VW is learning the hard truth of the old German saying: success has many fathers; failure is an orphan.

In the good times German politicians couldn't get close enough to VW, especially those in the state of Lower Saxony, with its 20 per cent share and seats on the board of Volkswagen AG.

On October 14th Lower Saxony’s state premier, Stephan Weil, who sits on the car firm’s supervisory board, castigated the company for not coming clean sooner about its dirty diesel engines: “A long and hard path lies ahead. There’s no way to sugarcoat that.”

As Weil spoke in nearby Hanover, however, visitors to Autostadt were as unimpressed by his hand-washing as they were by the scandal’s consequences.

“It’s a tsunami, particularly financially, but I think this will blow over,” says Alexander, visiting from Berlin.

His friend Peter agrees: “The media completely blew this out of proportion. It’s not like anyone died.”

German winemakers make the same argument. But, three decades after a few vineyards added antifreeze to their product, the German wine brand is still tainted.

Will the same happen to VW? Its former chief executive Martin Winterkorn has gone, key managers are on leave and under investigation, and the queue of salivating US class-action lawyers is growing. But insiders aboard the Wolfsburg mother ship describe the mood as a mixture of paranoia, depression and defiance – as well as a growing grim resolve.

As the dust begins to settle several calculations are being made. First: VW owners are still attached to their cars and have tired quickly of dramatic media coverage.

Second: if the company can organise the recall and fix of vehicles without annoying its customers, it might pull off a corporate turnaround. That’s a big if.

Volkswagen AG’s new board has given an idea of what’s to come in Wolfsburg and 118 sites around the world: a €1 billion cost-cutting programme; a shake-up of company structures and culture; and a radical – some say risky – shift from lip service on electric cars to real investment.

The auto works

As VW executives and Wolfsburg count the growing cost of the diesel disaster, Autostadt visitors still arrive each day to roam their field of motoring dreams.

We board a custom-built bus and are whisked inside the 2km-long factory. Here we watch robots, alongside workers in dungarees, transform empty metal shells into made-to-order VW Golfs.

All looks productive and normal until we glide past an oversized union notice pasted on the factory wall that begins: “VW is having a difficult time due to irresponsible manipulation . . . ”

As we glide out of the plant and another bleak week ends in Wolfsburg, visitors on the bus swap jokes about the latest news: the actor Leonardo DiCaprio is planning to make a movie out of VW’s shame.

As they drift off to collect their new cars it’s hard not to feel sorry for people here doing their jobs, or for the town of Wolfsburg: all waiting, powerlessly, to learn their fate.

“People inside the factory have really been affected by this, but the shock at the start is more like defiance now,” says Mehmet (not his real name), a VW worker.

Still wearing his green work dungarees, Mehmet is sitting on the train from Wolfsburg back to Berlin.

“We did our jobs. We didn’t trick anyone,” he says, his eyes welling up slightly. “And we still build good cars. I only hope our customers know that.”