Don’t panic, VW: Interbrand thinks you’re ok – (sort of)

The latest ‘brand league table’ is so far out of touch with reality it’s laughable, writes Dominic Mills.

Imagine, let’s say, that you are a beleaguered VW brand or marketing executive: you hunker down in your Wolfsburg bunker hoping the shit storm will pass you by. The in-fighting is ruthless, the pressure soul-destroying.

Then – woo hoo – comes good news. The Interbrand Top 100 global brands survey (published two weeks ago) appears and, extraordinarily, the damage done to the VW is, Interbrand calculates, remarkably slight: the decline is just 9pc to $12.45bn, but VW is still in the top half (39th).

Phew, you go, it could have been a lot worse. And then, as you survey the corporate devastation around you go…’how the f**k did they make that number up?’.

I normally feel an immense sense of ‘meh’ about these brand valuations in which, yet again, Apple, Google and Coca-Cola came top (same as everybody else’s brand league tables too).

I wish I could get the point of them. Apply the ‘So what?’ test. Who cares? What difference does it make that Apple has increased its brand value by 43pc, while Coke’s has dropped by 4pc? Sure, some corporate titans will get a nice warm feeling in their trousers, but that’s it.

Put it this way: they are as useful as those polls that seek to rank the greatest footballer ever (Pele, Maradona or Messi), or the best album (Sgt Pepper versus Dark Side of the Moon versus Thriller versus…zzzzzz). As if it matters…

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But what does matter, if you are a VW executive, is what has happened in the month since the scandal broke:

– The VW Group (including Audi, Skoda etc) share price has declined by about a third, and its market cap is now to approximately $62bn

– It faces fines of $18bn from the US Environmental Protection Agency alone; the equivalents in other countries where it has cheated have yet to say how much they will fine VW

– It faces class action law suits across the world from consumers the resale values of whose cars will be hit

– It faces action from governments like the UK to reclaim back the car tax consumers should have paid on higher-pollutant vehicles

– It faces civil and/or criminal litigation from countries/cities/states for polluting their areas, and these may even extend to manslaughter claims. By comparison, BP paid $53bn in fines and settlements for the Deepwater Horizon disaster, and it wasn’t even guilty of criminal conspiracy. Imagine how a politically ambitious US state attorney will feel as they take aim at VW. Kerching!

– Some calculate the total penalties imposed could hit as much as $150bn

– The latest European figures show VW sales in Europe in September (including just 10 days of the scandal) are already under pressure, with its group share down 0.3 of a percentage point, and that for the VW brand alone down 0.4 of a percentage point. US September sales also show a decline in market share.

– And, those same figures show, it has been losing share in Europe all year – which sort of undermines the strength of its brand anyway.

So how Interbrand factors this near-perfect storm of negativity as a mere 9pc decline in the value of the VW brand stumps me completely.

So, I thought, let’s see which other global brands have been marked down by Interbrand by similar amounts? The answers are: Gucci (-14pc); Shell (-12pc); Caterpillar (-12pc); HSBC (-11pc); and IBM (-10pc).

Hmm. Well, HSBC’s Swiss tax travails apart, I’m not aware of any of these facing brand issues that compare to anything confronting VW.

And if part of that brand value calculation is, as Interbrand says, derived from “the strength of the brand to command a premium price or secure earnings for the company”, then VW’s much-vaunted price premium is going to come under heavy attack.

This is inevitable. Even as the scandal unfolds, it still has to sell cars. If unsold inventory stacks up either in its own factories or in the backyards of its dealers, then it is even bigger trouble: to generate the cash to pay the fines it simply has to shift metal, and fast. That means offering deals: in fact, if you want to buy a VW for a bargain, now is as good a time as ever.

In fact, you can already see how dealers are discounting VWs – in this case the VW Up by around 6.5pc. And this comparison site is showing discounts of more than 10pc on a diesel Golf. The VW price premium may already be washing away.

So, if Interbrand is so out of sync on VW, then what is the point of these meaningless league tables? Perhaps there is some brilliant insight to offer our troubled friends in Wolfsburg?

Here’s Interbrand chief executive Jez Frampton, aka Lord Obvious, telling us in this video that “understanding your customer, having deep insights and being able to deliver them fast will become fundamentally important.”

Wow. Who’d have thought it, eh? Understand your customers and it’s sorted.

Here’s some more help from Interbrand: “For brands to truly move [love that split infinitive, Jez] at the speed of life [sic], it means completely rethinking what speed means in an enterprise. It’s not about forward movement but about holistic evolution…”.

The message that I’m getting about the brand that is Interbrand is this: to be, in its words, the “world’s leading brand consultancy”, the secret is to produce bollocks league tables and master the art of the vacuous cliché.