E-letter: Only a flesh wound

We are in an intensive news cycle. Between elections in both the U.S. and Canada, recreational mass murder in Oregon, a Russian invasion in Syria, the Pope, the markets and who-knows-what-all, the likely most far-reaching story of the last two weeks has been all-but buried. I am talking about the discovery of Volkswagen’s desertion from civilized society.

The initial path of destruction seems fairly obvious. Volkswagen’s top management elected to defraud its customer base, which will affect revenues in two ways. First, Volkswagen will have to mitigate damages by offering a recall of some sort. Second, Volkswagen will suffer a reduction in sales from irate potential and existing customers that will now move to a competitor. This is simple enough to have been understood and reported in the media. But there’s more.

Kerry Knudsen

Kerry Knudsen

Let’s back up and take a sober, second look. For example, while Volkswagen’s sabotage of its environmental software was discovered in the U.S., the origin of the fraud was tracked immediately and directly to Germany. That is, the prime suspect is not a renegade underling, but Volkswagen AG — until now, one of the most-respected brands in the universe.

VW’s first response to the breaking news was to fire its c.e.o., Martin Winterkorn. Or he left. Whatever. The fact is, the first head to roll was that of the c.e.o., apparently leaving the president, chairman and board members intact. As an aside, this is a primary illustration of one of my pet peeves — that the current corporate structure tends to make bulletproof redoubts of corporate entities while leaving the family owned business structure vulnerable.

Back to VW. The target market for VW’s diesel push was, for lack of a better word, the Green Millennials. VW duped the Greens into believing VW’s diesel was capable of achieving that which no other diesel could: to be economical and high-performing, while also being far below the emissions rates of comparably performing diesels from competitors. As it is currently reported, the engines were, in fact, economical and snappy. Unfortunately for the philosopher/singer in the ‘80s rock hit by Meatloaf, “two out of three IS bad.” The emissions were not only higher than advertised, they were 40 times higher than allowed.

Greens are nothing, if not convinced of their own validity, so what do you suspect Joe or Joan Green are feeling right now? My guess is that it’s a white-hot hatred for the VW chain of command, starting with their local VW salesman, and going right up to the currently unemployed Winterkorn.

However, as the irked owners think things through, they will see that, not only do they now look exactly as those they most hate — the gas-guzzling, environment-denying, reason-defying population that does NOT own a VW Albatross — but they have almost no chance of selling their claim to shame and are forced to drive it to and fro where life leads them. I am guessing there will be a few “unavailable” respondents to the next Occupy invitation. After all, who but David Suzuki, Kathleen Wynne and Jetta drivers can espouse climate change asceticism on the one hand and still get the other in your pocket? VW should watch out. Hell hath no wrath as a dolt confounded.

Now they may be both confounded and fined. We can assume there will be huge pressure put on regulatory and enforcement officers worldwide, and not a one of them will be able to watch a VW diesel drive by without full knowledge that the vehicle is not in compliance. Therefore, anybody you know that owns a VW diesel can expect to be stopped, inspected and fined the minute they leave their driveways.

 

Of course, there will be a legal firestorm, and, one way or another, VW will have to pay the lawyers, the settlements, the recalls, etc. Further, the firestorm will come from every population of the globe. This will place an unbearable weight on the shoulders of VW AG.

Along with lawsuits, fines and charges — the legal part of the problem — there will be political consequences. There will be an outcry to make laws, “to prevent this from ever happening again.” Never mind that there already are plenty of laws to prevent this from happening in the first place. Normal humans have been trying to rein in corruption approximately from the date humanoids could barter. Rationalization and deceit are as much a function of the human condition as is walking on two legs.

It follows that we can expect VW to experience a significant loss of sales, both for the diesel offenders and for the entire line as retaliation for stupid public relations. Markets are made up of people, and people don’t like being treated as oafs.

This market shrinkage will manifest itself in losses of sales, losses of jobs for salesmen, losses of dealerships and losses in administration in every country, all the way up the ladder to the mother ship. This will affect the portfolio values of pensioners worldwide, increase costs of compliance, remove untold billions from the net-spendable resources of current VW owners, increase enforcement activities and necessitate a huge expense in PR damage control. You can already see some of this in the current headlines, as in this one from BBC: Merkel: VW scandal won’t damage Germany’s reputation. One is tempted to ask, “which reputation is that?”

Casual observation tells us VWs are popular the world over, largely because of their reputation as being economical and environmentally friendly. Now that the skullduggery of VW, itself, is being blamed for the otherwise inexplicably high levels of pollution in oh-so-green Western Europe, one can expect to hear more on that account, as well.

So it’s clear the fiscal effects will be devastating, global and across multiple sectors. Sorry, Angela. Your PR agencies should have told you to assess the damage before you declare it is manageable. Currently, VW claims 11 million vehicles are affected. I don’t believe it. Further, if you have read this far, you don’t either. Germany this minute resembles nothing if not the famous Black Knight of Monty Python fame. Facing the loss of arms, legs, resources and stature, VW declares from the dirt it is only a flesh wound.

How about this for a theory: The automotive industry is a major factor in global, regional and national economics. It accounts for 1.5 percent of every job in Germany. Faced with re-engineering taxi fleets, commercial-delivery pizza Beetles and private transportation, the economy of the E.U. comes under added pressure. Those at the bottom – Greece, Italy and Spain come to mind, the burden becomes too great and they turn where they habitually turn for support, that being Germany. Oh, well. It’s only a flesh wound.

 

W.I. Media has been promoting in all its properties for years that common, old-fashioned standards are not a moral issue, so much as a business model for long-term success. In every culture and in every literature, one lesson resounds above all. There are consequences for uncivilized behavior. Standards do not come from nowhere. Even if you go back to the oldest-extant texts, you find such standards as “Thou shalt not steal.”

Well and good. We shouldn’t steal because it’s bad. However, we also need to ask ourselves where that standards came from. Why is it that it was necessary to document a standard 10,000 years ago, advising people it’s bad to steal? As a hypothesis, I suggest stealing had been an issue, and it had not worked out well.

Remarkably, there are those even today that disagree about standards. They claim their competitors practice unethical behaviour, and so they must, as well. So we see the Indian practice of baksheesh slowly infesting Canadian culture. The Third-World protocol of cash-only transactions is expanding, leaving tax-paying Canadians to support an infrastructure that is used and abused by those that won’t pay.

My guess is the scales will not stay tipped in the negative balance. They never have and never will. Marcel Aubut, the president of the Canadian Olympic Committee has resigned in disgrace. A tip-o’-the-scales to you, Marcel. VW AG is in the public pillory, and will stay there. Bill Cosby has defamed himself for eternity and beyond. So you see, this is not a sermon; this is a report.

 

I guess that brings me to the Canadian Woodworking Machinery Distributors Association, or CWMDA. I have promised repeatedly to report on this association’s dealings, but they provide little to report. They seem to exist for only two reasons, those being to compel kickbacks from trade shows, as previously reported and to try to manipulate and dominate the media, as previously reported. We have seen one claim that they supply a $300 grant to a selected student, but I have a hard time ascribing that as a virtue. I have done as much for a single-mom waitress along a cold stretch of highway on Christmas eve. The difference is, I don’t announce it as a virtue, and wouldn’t mention it, now, except for the relevance.

Our little industry cannot survive overmanipulation by special interests. At the moment, the CWMDA claims to be a representative voice for the wood industry in Canada, but it seems to represent only itself. Wood Industry magazine actually IS a representative voice, and our repeated requests for information and cooperation are ignored. In fact, we have asked to address the CWMDA’s annual meeting at the upcoming WMS show, and we have requested a reply by October 16. We will report the outcome. If you see the CWMDA at WMS, you might ask what it does to advance the industry. You might also ask what good it does for its members’ competitors.

In the view of Wood Industry, if the CWMDA was operating in the best interests of anybody, it would be happy to let the media know so we can report. It’s our duty.

Conversely, if the CWMDA is operating against the interests of the industry, any magazine that does not raise the appropriate concern can hardly be said to be a magazine, at all, but rather a golf circular for a geriatric scotch club. You can tell the difference by looking at the pictures.

We have been patient for over six years, periodically prodding and probing. Now, inspired by the vicious damage being caused on the global economy by Volkswagen AG, we simply must move forward.

 

Turning on a dime, yesterday was Thanksgiving. As we look out across the turmoil and inexplicably high European pollution, the latest bombing in the Middle East, China’s economy and African violence, I hope each of us can see how much we have to be grateful for … to give thanks for. Things across the world may not be all roses, but we are privileged to be in a position to be grateful for what we have, and grateful we can fight to keep it instead of die trying to gain it. That cost has been paid before, will be paid again, but is ours to enjoy today.

The colours in our little valley are peaking today, the house is quiet after the grandkids left. The turkey remains are in the fridge. In balance, we have nothing to complain about, and we can pray for a better business environment for manufacturing, for the economy, for Canada and for the world. We may not have it all, but we can see from our media perspective on the world outside that, in balance, we have done well so far.

On the 19th, we vote. My vote will be for the side of personal, professional and political accountability. VW’s fall from its arrogant heights will not go unnoticed. In fact, I believe Germany will not be able to absorb the hit, but will need to cash out resources to survive. The wisdom of the ages teaches us that the arrogant and avaricious do not prosper. It seems that applies not only to people, but to companies, to industries and to nations, as well. Sometimes it just takes a while.

 

Hot Flash!!

Remember Wood Industry and the Italian Trade Commission are giving away two (2) free trips to Xylexpo in Italy. The rules, as usual, are posted on our web site. The drawing will be held at the Wood Industry booth (#2136) at WMS in November. The prize includes return air fare, four hotel nights and show admission.

If you would like to enter in advance of the show, or if you cannot attend, please visit http://www.machinesitalia.org/event/win-trip-xylexpo-2016

There is nothing so beautiful as Italy in May. Best of luck.

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Comments

  1. Charles Penner says:

    Thank-you Kerry for saying it as it is
    Charles

  2. Wendell Yip says:

    Won’t be the first time German managers were only following orders…..

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