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VW loses $10bn of its brand value

News, 29 September 2015

LONDON: The crisis engulfing Volkswagen following revelations that the German automaker used software to cheat emission tests has knocked $10bn off its brand value, according to the latest estimates.

Brand Finance, the global brand valuation and strategy consultancy, said the company's brand value prior to the scandal stood at $31bn, meaning it has lost a third of its brand value since the scandal erupted.

Volkswagen was previously rated as the third most valuable auto brand in the world after Toyota and BMW and was on an upwards trajectory, having gained $4bn in brand value since 2014.

All of that is now in decline, Brand Finance warned, while adding that further revelations could mean Volkswagen faces a crisis on an unprecedented scale.

"The developments of the last few days will undoubtedly send this trend into reverse, resulting in $10bn in lost brand value," said David Haigh, CEO of Brand Finance.

"The apparent ease with which the company's activities were uncovered makes it all the more astonishing that VW was willing to endanger its most valued asset."

Since the release of the Brand Finance report, further pressure piled on the company with news that German prosecutors have launched a fraud investigation against former chief executive, Martin Winterkorn, the BBC reported.

Furthermore, reports in the German media over the weekend suggested that some of Volkswagen's own staff and one of its suppliers had warned years ago about the illegal use of "defeat devices".

With the company's reputation on the line, Brand Finance's David Haigh pointed to the problems faced by Toyota after its reputation was damaged following a series of recalls over mechanical issues from 2009 to 2011.

He said Toyota's brand value fell from a peak of $27.3bn in 2010 to $24.5bn in 2012 and it did not exceed its previous peak until 2014, when its brand value was $34.9bn.

Haigh warned that the outlook for Volkswagen could be a lot worse because "the cost of recalls and fines could be far more significant than those Toyota faced, whilst the apparently deliberate nature of VW's actions compounds the impact on its credibility".

Even "the very future of the VW brand is in doubt", Haigh warned, adding that any hope of recovery will come down to it investigating the source of the alleged nefarious activity and then to communicate its findings clearly to avoid contagion.

Data sourced from Brand Finance, BBC; additional content by Warc staff