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Scandal could affect Volkswagen's football sponsorship, claim experts

Scandal could affect Volkswagen's football sponsorship, claim experts

The emissions scandal engulfing German carmaker Volkswagen could have consequences for the Bundesliga, experts warned on Thursday, as the company invests hundreds of millions of euros in German football annually.

The world`s biggest automaker by sales has admitted to U.S. regulators that it programmed its cars to detect when they were being tested and alter the running of their diesel engines to conceal their true emissions. As a result, VW chief executive Martin Winterkorn resigned on Wednesday.

Sports marketing experts say that Volkswagen, fearing compensation claims that could run into the billions, could now potentially start reviewing sponsoring activities.

The company owns German Cup winners VfL Wolfsburg, pumping an estimated 100 million euros annually into the Champions League club. VW also owns stakes in Bundesliga champions Bayern Munich and promoted Ingolstadt through its subsidiary Audi, and is also an official partner of the German Cup competition. 

Further, Volkswagen has various sponsorship deals with more than a dozen other Bundesliga and Second Bundesliga clubs, including Hamburg SV, Schalke 04 and Eintracht Braunschweig, while Winterkorn himself sits on the board at Bayern.

"The financial pressure to save money is there," autos expert Juergen Pieper of Bankhaus Metzler told Reuters. "It is only natural to also look at that (sponsorship) sector."

This is a view shared by Simon Chadwick, Professor for Sport Business Strategy and Marketing at Coventry University, who said sports deals would quickly come under scrutiny as Volkswagen set aside funds for those potential claims.

"You imagine they will now be looking to strip away cost and inevitably sport will fall in the spotlight," he said. "If the kinds of figures talked about (what Volkswagen has already set aside) are accurate, this has to have ramifications for financial performances and the management of the business," 

The U.S. Environmental Protection Agency (EPA) has said Volkswagen could face penalties of up to $18 billion, and the company`s share price has plummeted since the scandal erupted.

"When a company is struggling financially then marketing expenditure is on the very top of the to-scrap list," said Andre Buehler, director of the German Institute for Sports Marketing.

Winterkorn, an ardent football supporter, had strongly pushed for sponsorship deals in the past years -- despite the resistance of supervisory board chairman Ferdinand Piech.

"There is already public pressure to scale it down," Pieper said. "I imagine that Volkswagen will become a bit more careful in that respect."

Pieper estimates Volkswagen`s overall sport and sports marketing activities to be worth several hundred million euros. 

Yet leaving Wolfsburg, a factory club, is something the experts see as a difficult decision given that the club is an asset for Volkswagen in troubled times.

"One of the things football is good at doing is to engage fans and to create a bond with people who will ultimately buy your cars," Chadwick said.

"The other argument is that VW is so deeply embedded in German national culture, it would be difficult to extricate itself from its relationship with clubs. To desert teams or communities would be counter-productive and would further damage the brand."

From Zee News

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