I haven’t blogged much about Carlos Ghosn, though I’ve Tweeted aplenty since his arrest last November. Earlier this week, his lawyers released a video of Ghosn stating his position, and it echoes much of what I had Tweeted. He couldn’t make a personal appearance at a press conference himself, thanks to some conveniently timed (for Nissan) evidence that prompted another arrest by the Japanese authorities.
The way the original exposé was done and the way the Japanese mainstream media lapped up the one-sided story and propagated it verbatim told me immediately that something was rotten inside Nissan. A lack of investigation should always tell you that not all is what it seems.
While it’s true that Nissan is worth more than Renault now, we can’t forget what a terrible shape it was in at the time the alliance was forged. While Nissan could have declared the Japanese equivalent of Chapter 11, it’s interesting to speculate how it would have emerged: would it have saved face or would consumers have lost confidence, as they have with Mitsubishi? And in the wake of Ghosn’s arrest, stories in the western media began appearing: Nissan’s performance was faltering (‘mediocre,’ says Ghosn). It had had a recent scandal and a major recall. More likely than not, it meant that certain heads were going to roll. To save themselves, they rolled their leader instead.
We’ll see if there has been financial impropriety as things proceed, but to me there’s an element of xenophobia in the way the story has developed; and it was a surprise to learn at how ill-balanced the Japanese legal system is.
I’ve been vocal elsewhere on how poorly I think elements of both companies have been run, but Ghosn does have a valid point in his video when he says that leadership can’t be based solely on consensus, as it’s not a way to propel a company forward.
I’m keeping an open mind and, unlike some of the reporting that has gone on, maintaining that Ghosn is innocent till proved guilty. It’s dangerous to hop on to a bandwagon. It’s why I was a rare voice saying the Porsche Cayenne would succeed when the conventional wisdom among the press was that it would fail; and why I said Google Plus would fail when the tech press said it was a ‘Facebook-killer’. Ghosn deserves to be heard.
Yesterday, Mark Zuckerberg came out and made a statement on Facebook that had no apology (though he gave a personal one later on CNN) and, at a time when people demanded transparency, he continued with opaqueness.
First, he told us nothing we didn’t already know about the Cambridge Analytica scandal.
Secondly, he avoided the most pressing points.
No mention that Facebook had covered this up for two years. No explanation of why he failed to answer journalists about this for two years. No explanation on why Facebook tried to gag the story in The Observer by threatening legal action. No mention that it had failed, by law, to report a data breach that it knew about.
From the clips I saw on CNN, Zuckerberg claims he wants to restrict access to developers, and he still doesn’t know if there are other Cambridge Analyticas out there. Nothing about Facebook gathering more and more data on you and using it improperly themselves, which has actually been an ongoing issue. From the clips online provided by CNN, it wasn’t a hard-hitting interview, with the journalist going very easy on the milliardaire in what amounted to a puff piece. I really hope there was more meat than what we were shown, given how much ammo there is.
The site has countless more failings, including its bots and its bugs, but I’ve mentioned them before.
I’m unimpressed and for once, the market agreed, with shares dipping 2·7 per cent after Zuckerberg’s first comments in the wake of the scandal.
However, CNN Money thinks Cambridge Analytica is an anomaly, even when Facebook’s own boss says they are still to ‘make sure’ whether there are other firms out there in the same boat. ‘We’re going to go now and investigate every app that has access to a large amount of information.’ In other words, it hasn’t been done, and yet Facebook knew about this since 2015.
The world is seeing what I and others have talked about for years: Facebook is irresponsible, it does nothing till it’s embarrassed into it, and it collects a lot of data on you even after you’ve opted out of certain features on their site.
Not a lot has changed since 2009, when he gave this interview with the BBC. Say one thing, do another.
Above: The Mitsubishi eK Wagon, one of the cars at the centre of the company’s latest scandal.
One thing about creating and running Autocade is that you gain an appreciation for corporate history. Recently, I blogged about Fiat, and the troubles the company is in; it wasn’t that long ago that Fiat was the designers’ darling, the company known for creating incredibly stylish vehicles for all its brands and showing how you could use Italian flair to generate sales.
That was the 1990s; by the turn of the century, Fiat had lost some of its mojo, and by the time I got to Milano in the early 2000s, the taxi ranks had plenty of German and French cars. Once upon a time, they would have been nearly exclusively Italian. Today, a lot of Fiat’s range is either made by, or on platforms shared with, Ford, GM, Chrysler (which it now owns), Peugeot, Mitsubishi and Mazda. Sharing platforms isn’t a sin, but a necessity, but Fiat seems to have taken it to a new level, looking like a OEM brand whose logo is freely slapped on others’ products.
Mitsubishi is the other car company to find itself in trouble in recent weeks. The company admitted that it had lied about the fuel economy figures for its kei cars, the micro-cars that it sells predominantly in Japan.
It wasn’t as troublesome as Volkswagen’s defeat device which fooled the US EPA, running differently when it knew the engine was being tested. Mitsubishi kept things simple, and overinflated tyre pressures.
It would have got away with it, too, if it weren’t for Nissan, a company to which Mitsubishi supplied, under an OEM deal, kei cars. The customer started to ask questions and tested the cars for itself.
Mitsubishi had supplied 468,000 cars to Nissan, all of which are affected. It had only sold 157,000 under its own marque. Production of the cars, from the eK range, and the OEM equivalent for Nissan, the Dayz, is now suspended, while Mitsubishi’s shares plunged 15 per cent on the news last week. Sankei, the Japanese newspaper, believes that Mitsubishi used the wrong test method on the I-MIEV electric car, RVR (ASX), Outlander, and Pajero, which are exported.
You have to wonder what the corporate culture must be like for these matters to recur so regularly. But then, collectively, people tend to forget very rapidly, and companies like Volkswagen and Mitsubishi must bank on these.
VW isn’t the first to cheat the EPA—US car makers have attempted less sophisticated defeat devices in the latter half of the 20th century—though it has had a chequered past. Just over 10 years ago, there was a scandal involving VW colluding with a union leader to keep wage demands down, and a few low-level employees took the rap. Go back to the 1980s and the company found itself in a foreign exchange scandal. But these were known mainly among specialist circles, principally those following car industry news.
Mitsubishi’s scandals, meanwhile, were more severe in terms of the headlines generated. Last decade, when the media called Mitsubishi Japan’s fourth-largest car maker—these days they call it the sixth—the company was implicated in a cover-up over the safety of its vehicles. Japanese authorities raided the company in 2004, and revealed that Mitsubishi Motors Corp. hid defects that affected 800,000 vehicles, and had done so since 1977. Nearly a million vehicles were recalled. Affected vehicles were sold domestically as well as in Europe and Asia. Top execs were arrested that time, including the company president, although it was hard under Japanese law to punish Mitsubishi severely. There was no disincentive to conducting business as usual. The company was ultimately bailed out by its parent, the giant Mitsubishi Group, when it found itself facing potential bankruptcy.
People were killed as a result of Mitsubishi’s cover-ups, and at the time it was considered one of the biggest corporate scandals in Japan.
Go back a bit further and Mitsubishi Materials Corp., a related company, had used slave labour in World War II, including US troops—something the company did not apologize for till 2015, even though the Japanese government itself had issued apologies in 2009 and 2010. While it was a first among Japanese corporations, and US POWs got what they had long awaited, descendants of Chinese slave labourers still have a lawsuit pending against a connected Mitsubishi subsidiary.
The other major difference between Volkswagen and Mitsubishi is that the Japanese marque is relatively weak in terms of covering its market segments. It’s SUV- and truck-heavy, and its kei cars had sold well (till now), but it has little in the passenger car segments, which it had once fielded strongly. The Mirage (and the booted Attrage) and the Galant Fortis (exported as the Lancer to many markets) are what’s left: the latter is now nine years old, though still fairly competitive, and in desperate need of replacement. Its only other car is its Taiwan-only Colt Plus, still selling there as an entry-level model despite having been withdrawn from every other market. In the big-car segments, Mitsubishi is actually supplied by Nissan in Japan, but doesn’t make its own any more. ‘Sixth-largest’ is shorthand for third-smallest, at least among the big Japanese car companies.
Mitsubishi looks set to quit the C-segment (Galant Fortis) since neither Renault nor Nissan, which it had approached, wanted a tie-up. And the company survives on tie-ups for economies of scale, and there’s now a big question mark over whether potential partners want to work with it. Automotive News’s Hans Greimel questions whether the Mitsubishi–Fiat truck deal will go ahead (though I had thought it was an inked fait accompli).
But, most seriously, Mitsubishi hasn’t completely recovered from its earlier scandal.
It is within living memory, and the timing and nature of the latest one, tying so closely to what rocked Volkswagen, ensured that it would get global press again, even if the bulk of the affected cars were only sold domestically. And when consumers see a pattern, they begin wondering if there’s a toxic corporate culture at play here.
We’re too connected in 2016 not to know, and while Mitsubishi is likely to be bailed out again, it will face the prospect of shrinking car sales—and sooner or later one will have to question whether the company will stay in the passenger-car business. Isuzu exited in the 1990s, focusing on SUVs, pick-ups and heavy trucks, forced by an economic downturn. Since Mitsubishi’s own portfolio is looking similarly weighted, it wouldn’t surprise me if it chose to follow suit, its brand too tarnished, with too little brand equity, to continue.
If you want a humorous take on what happened at Volkswagen this week, the above video sums it all up.
During my 2010 mayoral campaign, I noted that if New Zealand did not diversify its economy to have more of a focus on technology, there could be a problem. Relying on primary products (I didn’t say dairy specifically) wasn’t something a western economy should be doing and, of course, one signal that things would change in Wellington would be my idea for free, inner-city wifi. I wasn’t trying to be a smart-arse; I was just pointing out an obvious fact, one that has taken many years for others to be concerned about, with Fonterra payouts dipping. News travels slowly.
Right now, this Reuter article (sorry, folks, having grown up in New Zealand where ‘NZPA–Reuter’ was in the newspapers every day, the plural form doesn’t come naturally to me) suggests that the Volkswagen débâcle could harm other German car makers. How great that harm is depends on how tied those brands are to the German nation brand. The danger is, according to the article, that with the German car industry employing 775,000 people, and car and car parts being the country’s most successful export, a dent in their reputation could have drastic effects for an economy. According to Michael Hüther of the IW economic institute, the car industry is at the core. Having other industries that are strong is important to any economy, and Germany has ensured that, despite one taking a knock, it has others that will keep it ticking over. Nearly 70 per cent of the German economy is in services. There will be worries in foreign exchange, but I doubt we’re going to see other German car makers tanking because of this.
But Volkswagen, some argue, is very wedded to the German psyche. Its founding, which no one really talks about because you’d have to mention the war, ties it to the state, and its postwar resurrection was borne out of the British Army wanting to get the people of the former KdF-Stadt some gainful employment. It was the great German success, the company whose Käfer became a world-beater, overtaking the Ford Model T in terms of units made.
The VW symbol is very German, borne from their graphic design ideas of the 1930s. The German name, the quirkiness of the Käfer, its relative reliability, and its unchanging appearance probably tied VW and Germany closer together in terms of branding. For years, you would associate Volkswagen with ‘Made in Germany’, just as you would with Mercedes-Benz and BMW, even if a sizeable proportion of their production is not German at all today. (Mercedes and BMW SUVs are often made in the US; Volkswagen makes its Touareg in Slovakia. Volkswagen is one of the biggest foreign players in China, and in Brazil it’s practically considered a domestic brand.)
Think of the postwar period: Germans weren’t always smart about how to market their cars. BMW had a bunch of over-engineered cars that were completely unsuited to the market-place, such as the heavy, baroque 501; it wound up making the Isetta under licence toward the end of the decade because it was in such deep trouble. Volkswagen eschewed fashion in favour of a practical little car that, too, placed engineering ahead of marketing fads. From this, the idea of German precision engineering was enhanced from its prewar years, because engineering was, by and large, top priority. Mercedes-Benz, being far more successful at selling its luxury cars to the rich than BMW, cemented it and added cachet and snobbery.
It was only the foreign-owned makers in Germany that went for fashion, such as Ford and Opel, selling convention to the masses wrapped in pretty clothes: the Ford Taunus TC had styling excesses demanded by Ford president Bunkie Knudsen at the time of its development, but it broke no new ground underneath.
Nevertheless, any time Ford sources from Germany, whether it’s for the US market or here in New Zealand, the notion of “German precision” seeps through in the marketing; when the sourcing changed, as has happened with the Focus here, it’s very quietly dropped. The German car manufacturers carved themselves a nice, comfortable niche, thanks to an earlier era which, to some extent, no longer exists.
Mercedes-Benz decided it was not about ‘Made in Germany’ some years ago, favouring ‘Made by Mercedes’, and turned itself into a marketing-led organization; quality suffered. Volkswagen, in its quest to become the biggest car maker in the world, and the master of everything from Škoda to Bugatti, did what GM did years before, by allowing each brand to maintain its character but sharing the stuff that customers didn’t see. It, too, became more marketing-led, and it’s not had a stellar performance in owner surveys for a while.
You could say that there has been a gradual separation between the brands and what we hold about the German national image in our minds. The “Germanness”, which once accounted for the companies charging a premium, has been decreasing; Volkswagens, in many parts of the world, are affordable again, even in the US where the NMS Passat is built locally in Tennessee. South African- and Mexican-sourced Volkswagens in New Zealand are cheaper in constant dollars compared to their predecessors of a generation before. The German image is not gone altogether—the name, graphics and the æsthetic of the product see to that—but it does mean the effects of the scandal might not spread to other brands as much as some commentators think. The original study that showed Volkswagen was cheating on its emissions’ tests in the US, which is nearly two years old by now (it makes you wonder why it only surfaced in the media this week), also showed that BMW performed better than what it claimed. It’s not impossible for the other manufacturers to separate themselves from Volkswagen, because their individual brands have become strong. Thanks to the weaker relationship between Volkswagen and the German brand, this scandal will likely confine itself to the single car group. It’s not great news for the world’s biggest car maker, but its compatriots should see this as an opportunity more than a threat.
