Volkswagen Emissions Scandal: What Next for VFL Wolfsburg?

The Vanguard
The Vanguard
Published in
4 min readNov 4, 2015

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By: Joseph Mondello

Kevin De Bruyne’s prolonged move to Manchester City was arguably the transfer saga of the 2015 summer window. His ten goals and 20 assists in a mere 34 league appearances meant that MCFC owner, Sheikh Mansour, would have to stump up some serious cash to pry the Belgian away from VFL Wolfsburg.

In fact, for a while it seemed that the deal might not go through, as Wolfsburg executives repeatedly denied any need to sell. Why would they? Their qualification for Champions League, combined with their relationship with Volkswagen, meant they had the financial clout to reject City’s advances. More importantly, their financial strength meant they could build a squad around a mercurial creative talent such as De Bruyne, and potentially challenge Bayern Munich for the honors of top German club.

However, with two days remaining in the window, Manchester City announced that they had signed the former Chelsea player for 55 million pounds. While the move was widely criticized by some sections of Wolfsburg supporters, the recent Volkswagen emissions scandal makes this move seem like a good bit of business.

The news of this institutional failure is commonplace in today’s public eye. The German auto company installed sophisticated software that was able to identify when the car was being tested for emissions, and promptly produced falsified energy efficiency. It’s been estimated that more than 11 million vehicles worldwide are affected by this emissions crisis. Despite the news breaking over a month ago, the full scope of the crisis has not yet been realized.

Volkswagen has set aside 6.5 billion euros to cover potential recall costs and fines, but potential class-action lawsuits could see this number rise to over 12 billion pounds. The effects on Volkswagen, as well as its many subsidiaries such as Porsche, Audi, and Lamborghini, could be incredibly dire. If the company is in fact in crisis, what does that mean for the city of Wolfsburg, and its beloved soccer club?

Volkswagen employs roughly 72,000 workers at its Wolfsburg plant. When you consider the fact that the city has a population of 125,000 people, massive overhauls of the company could potentially cripple the local economy. If fans are unable to pay for tickets to home matches, the club will lose out on a massive revenue stream.

VFL is one of the few clubs that meets the criteria for exemption from Germany’s 50+1 rule, which prevents corporations from holding a majority stake in a professional club. As a result, Volkswagen is able to pump about 100 million euros annually into the organization, which can be used for transfer fees, salaries, or investment in the club’s infrastructure.

This financial strength has led to signings such as Andre Schurrle, Julian Draxler, and the aforementioned De Bruyne. With limited television revenue from the domestic league and the potential scaling back of investment from Volkswagen, annual participation in the Champions League becomes vital to VFL Wolfsburg if they hope to challenge Bayern Munich. Even failing to qualify just once for the CL could condemn the club to mediocrity in the ethos of German soccer.

While the executives of both VFL Wolfsburg and Volkswagen are saying all the right things to ease the supporter’s fears, the cracks are already beginning to form. In the wake of the emissions scandal breaking, Wolfsburg Sporting Director Klaus-Allofs confidently declared that the crisis would not affect the club. Within a couple of weeks, they announced that the club is cancelling their plans for a new, 40 million euro, training centre for their Academy system.

This decision may seem intuitive, but the massive rates of inflation for transfer fees in the international market means that clubs must produce world-class players from their own Academy. If clubs cannot develop first-team talent from their youth teams, they’re forced to dip into the transfer market to stay competitive. In this scenario, the market will turn into an oligopoly where soccer’s global elites compete in an arms race to stockpile the best players.

An even more worrying sign for the German club is the resignation of Volkswagen CEO Martin Winterkorn. It is widely believed that Winterkorn is the driving force behind the auto company’s investment in German soccer. In addition to investing heavily in Wolfsburg, the former executive also holds a seat on Bayern Munich’s board. Under his leadership, Volkswagen has purchased an 8.33% stake in Bayern and a 19.94% share in FC Ingolstadt.

Furthermore, both Volkswagen and their subsidiary Audi are two of the primary sponsors for Germany’s domestic cup competition, the DFB Pokal (the same tournament VFL Wolfsburg lost just last year). While the situation is bleak for Wolfsburg, a negative macro effect on all of German soccer could follow.

The future of VFL Wolfsburg now lies in the hands of new CEO Mathias Muller. Although Volkswagen has gone on the record saying that Wolfsburg is not an issue at all, the early warning signs indicate otherwise. In light of the current transfer market and skyrocketing television revenues in England, the German club may not survive even a small cutback in investment.

If Volkswagen contributes less money, or if the team finish outside of the Champions League qualifying positions, Wolfsburg could spiral out of competitive relevancy. In a matter of years, the club could go from annually challenging for titles to mid-table finishes, or even flirting with relegation.

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The Vanguard
The Vanguard

The Vanguard is an online publication affiliated with Claremont McKenna College where we try to bring student perspectives to current events in entrepreneurship