The Volkswagen car scandal has been all over the news for the past week, but for those of you that have been living on Mars (which could have happened) here’s a quick reminder:
- Volkswagen admitted to ‘cheating’ emissions tests in the US
- About 11 million cars worldwide are fitted with a device that detects when being tested and decreases emissions
- VW have recalled over 500,000 cars in the US alone. They’ve also set aside €6.5 billion to cover the costs of repairs and they could be liable to pay a fine of up to $18 billion to the US authorities.
Whilst this has will have a huge effect on the motoring world, the fallout could be just as devastating in football. Volkswagen have a huge influence, as well as monetary stake, in football across the world, not just Germany. The ripple effect could see a lot of clubs and competitions suffer as the motorcar company seeks to recover its gargantuan stock price loss and the costs needed to cover repairs.
Volkswagen’s hometown of Wolfsburg will see its Bundesliga club, VfL Wolfsburg, be one such victim of the crippling losses. Whilst the company says it will not be cutting back on expenditure towards the club, it is extremely hard to see how they can continue their estimated €100 million per year investment in the side, when all other parts of the company look set to take a fiscal hit.
Many financial experts point towards the idea that Wolfsburg could be the best place for Volkswagen to save some face. It’s been mooted that, if they can keep the club a success, as it has been in the past few years, it will “create a bond with fans” who will in turn buy their cars. That’s not entirely crazy, and it makes sense for VW to keep their club running on full steam, with the car manufacturer being considered synonymous with the football club.
Of course Volkswagen aren’t Wolfsburg’s only source of income, but any large transfer sales now would seem a step backwards, particularly given the club has just lost Kevin de Bruyne to Manchester City and Ivan Perisic to Inter Milan this summer.
The club did make €85 million from these two departures, but they spent more than half of that on the acquisitions of Julian Draxler and Max Kruse. With any less investment than usual, Wolfsburg seem destined to fall into a decline of some sorts; something they definitely don’t need with the Bayern Munich powerhouse still marching on confidently.
Of course, there have been moans from various people surrounding the future of the club, including former striker Jonathan Akpoborie who said, “Volkswagen is the backbone of Wolfsburg. It would be a disaster if they separated. You know that without Volkswagen the team cannot survive, it would crumble.” The stricken company owns VfL Wolfsburg 100% outright, meaning this potential cost could see one of the most exciting teams in Europe facing an existential crisis.
Simon Chadwick, a sports economics expert, has already stressed how it will not only be Wolfsburg suffering from this scandal. He stated that “around 18 of the 36 clubs that make up Germany’s top two divisions” are sponsored by Volkswagen and its subsidiaries, but this isn’t where it stops.
Several big clubs across the world could find their sponsorships cut by Volkswagen Group, with Audi (a sponsor of Barcelona) amongst the companies it owns. Puebla F.C, of Liga MX, and Sligo Rovers, of the League of Ireland Premier League, are currently shirt-sponsored by the brand. Whilst Wolfsburg can seek to recoup their losses from their lucrative Champions League venture, the two other teams bearing the famous VW logo on their shirts will be fretting about what is set to happen to one of their major sources of income. The Americas have their own Champions League, but it doesn’t generate even a fraction of its European counterpart’s income. Sligo Rovers can only dream of competing in the Champions League proper, so they’ll be hoping the cuts don’t hit Ireland too hard.
Was it mentioned that Volkswagen also sponsor competitions? Ironically, considering it’s the US and its citizens filing most of the lawsuits, it is the official car manufacturer of MLS. Audi is also an official sponsor of MLS. A drop in revenue is expected to hit there, although it won’t be major and is more likely to harm Volkswagen than MLS or its clubs.
They are also the official partner of the DfB Pokal, the premier cup competition in Germany, and, should they decide to finish that deal, the competition will find it hard to find a sponsor to match the price Volkswagen pay.
In years gone by, some other sponsors have gone bust and, in turn, seen teams enter slippery slopes, although none quite to a full-on meltdown. XL (with West Ham), BenQ (Real Madrid), Parmalat (Parma), All:Sports, and Llanera (both Charlton Athletic) have all been examples of sponsors going bust, with varying consequences for the sides.
Everyone knows Real Madrid can quite easily cope if they lose £30m in a year, but what about the others? West Ham had a torrid time because XL’s demise came at a similar time to the whole Kia Joorabchian/Carlos Tevez/Javier Mascherano saga, which was a huge cost to the club over transfer fees, legal costs and wages. They were very nearly relegated shortly before and, had they been hit with the dreaded drop, they could still have been reeling from the episode now.
Charlton, first hit by All:Sports going under in 2005, are one such example. A fellow London club to West Ham, they saw themselves relegated in 2007. Their latest sponsor, Llanera, then decided it was a good time to compound the misery and went the same way as All:Sports. Charlton have been dawdling ever since in the lower middle region of the Championship (as well as having a three year stint in League One). They are a cautionary tale for those that do lose their riches and haven’t planned for a life without them.
That leaves us with Parma. The Italian club needs no introduction to those well versed with football and its financial troubles. The Parmalat financial fraud case is a similar case in the sense that the owners of Parmalat also owned Parma. The echoes of this case will be resounding around Volkswagen and Wolfsburg in the coming few weeks, months, and possibly years. Parma had been a force in Europe, much like Wolfsburg. They had been filled with admirable talent, much like Wolfsburg. They found their majority funding stopped, much like Wolfsburg could. Parma now present a sorry tale of a once great team that now languishes in Serie B. Since the Parmalat scandal, they’ve achieved a highest Serie A finish of 8th. Mostly they’ve been sat around the relegation spots, and last season saw their fears confirmed, as they were sentenced to playing football in a lower tier.
So with Volkswagen certain to take a hit, and Wolfsburg, amongst other clubs, likely to suffer, where does the company go from here?
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