The Hits Keep Coming for Volkswagen and Chipotle

Last September, I wrote about the negative impact crises have had on Volkswagen and Chipotle Mexican Grill (“When it Comes to Reputation Management, Actions Speak Louder Than Words”), two well-known and once highly respected companies.

Both companies are back in the news.

On Wednesday, federal prosecutors announced criminal charges against six Volkswagen executives for their roles in the company’s emissions-manipulation scandal. The company also formally pleaded guilty to a variety of charges.

In late 2015, the auto manufacturer was caught purposely manipulating software in order to avoid strict emissions control requirements on 11 million cars in the U.S. and Europe.

According to U.S. Attorney General Loretta Lynch, “Volkswagen knew of these problems. When regulators expressed concern, Volkswagen obfuscated. And they ultimately lied.”

VW will reportedly pay $4.3 billion in criminal and civil penalties resulting from the investigation, bringing the total cost of the crisis, including settlements of suits by car owners, to $20 billion in the U.S. alone.

Volkswagen expressed regrets for the behavior that gave rise to the diesel crisis. “Since all of this came to light, we have worked tirelessly to make things right for our affected customers,” said Matthias Müller, chief executive of Volkswagen. “The agreements that we have reached with the U.S. government reflect our determination to address misconduct that went against all of the values Volkswagen holds so dear. They are an important step forward for our company and all our employees.”

Over at Chipotle, the company is now facing a $2.2 billion lawsuit after a California woman claimed she did not give permission for the fast-food chain to use a photo of her hanging in one of its Orlando locations.

In recent years, Chipotle has dealt with criminal charges resulting from several recalls related to foodborne illnesses that sickened hundreds, closed stores and sent the company’s stock tumbling; a National Labor Relations Board ruling regarding the company’s social-media policy; a $500,000 jury award for violating anti-discrimination laws; and legal action for allegedly stealing the name of a new menu item.

While the amount of the suit, which is said to equal the company’s earnings over the past nine years, is outlandish, we’re talking about something as simple as a signed release form here – PR 101.

In an upcoming blog I will discuss what companies can to do earn a positive corporate reputation and some of the benefits of doing so.