Even before Volkswagen's recent 'dieselgate' scandal erupted, some analysts had been questioning Volkswagen's dash for global growth, which had ramped up costs and made the company overly complex (over 300 models, multiple brands and almost 120 factories worldwide).
Cost ratios have worsened considerably at the firm in recent years, with some suggesting that, if these were brought back under control to 2010 levels, then that could save the firm as much as £14.3 billion a year (which of course would go a long way to cover the costs of the firm's dieselgate scandal)
Like Toyota a decade ago, the firm seemed to have got 'big company disease' where growth itself became the goal. Toyota, of course, had famously put growth ahead of quality (in the words of its own boss before a US Senate Committee hearing), and ran into huge quality and recall issues.
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to try to grow sales, notably in the US. It was targeting a near doubling of sales in the US by 2018, driven by its offer of allegedly "clean diesel".
This now looks impossible. And, like Toyota, it will have to change its strategy and structure and go back to what were its core values so as to repair the damage (more on that in a moment).
We haven't yet seen the full impact of the damage to the firm and .
Volkswagen can say "goodbye" to being the biggest player for the near future, having been overtaken by Toyota again in the global sales league.
The £4.8 billion set aside by VW so far may well not even cover the cost of the recall, let alone any fine in the US, legal action by consumers and others, and the possible need to compensate customers or offer discounts in the future.
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Overall costs may be anywhere between £14.3 billion and £43 billion. Investors will want to know whether it's nearer the lower or higher figure. VW has said very little on that so far, probably because it doesn't know itself.
What's not clear is how much wider brand damage there will be and hence a loss of revenue. Interestingly, Bernstein Research analyst Max Warburton recently suggested that in Europe at least these fears could be misplaced.
He argued buyers understood the latest new cars were unaffected and cancellations were few in number.
"Fears about a shift to other (manufacturers) and brands are overdone. VW is not adding new incentives or cutting prices. Audi is barely affected," he is reported as stating. Of course, that may be the case in Europe but the US picture looks far more bleak for the firm.
Yet some media reports of an existential threat to VW are wide of the mark.
Let's be clear: VW will survive this. It is one of the biggest car firms in the world, with an annual turnover of more than £143 billion a year, and is supported by the German government at various levels which won't anyway let it fail (manufacturing – and VW – are seen by politicians as much more important in Germany than here in the 海角视频).
But the short to medium term hit for the firm will be severe. The firm will have to cut costs and cut investment, and this could affect its ability to compete with rivals.
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Borrowing costs may also increase (Morgan Stanley recently said it’s too early to see any market impact, but the impact on VW of credit rating cuts might undermine its ability to compete on leasing and lending rates).
After posting its first quarterly loss this week in 15 years (reflecting the costs of setting aside that £4.8 billion), the firm said operating profits might well take a hit. The firm may have to sell off stakes in Porsche (although so far VW has scoffed at such suggestions).
Also, the extent of damage to VW's reputation will depend on who knew what at VW about the deception (how high did the rot go?), when they knew, and how VW goes about sorting out the mess.
So what next? To restore its image, the firm has to genuinely show that it's sorry (and not just sorry it has been caught), co-operate fully with regulators, communicate with customers, open up and change its strategy and structure so that this isn't possible again.
While the firm has started along this road, appointing an insider as the new CEO doesn't send a clear message that it is really open for change. for example, brought in outsiders to challenge it on quality issues. VW may have to do something similar.
VW - like some other European brands - had also gone for diesels in a very big way to get tailpipe CO2 emissions down. That increasingly looks like the wrong technological bet given an increasing political backlash over urban air quality, especially at city level.
VW has at least announced a strategy overhaul to focus more on electric and hybrid vehicles – that’s long overdue and maybe some good can come out of this for the firm and the wider industry. It will also have to and revamp its diesels with cleaner exhaust emission systems.
Overall, VW’s growth strategy needs to be ditched, costs brought under control, investment needs to be more focused, and the firm has to embrace technologies like electric and hybrid technologies so as to build a - literally - more sustainable firm.
The well-known saying "never let a good crisis go to waste" (attributed to various people including Winston Churchill and Rahm Emmanuel) seems particularly apt for Volkswagen right now.
Professor David Bailey works at the Aston Business School