War is not only a question of ethics and humanitarian disaster. It is bad news for business. For a car giant like Volkswagen, whose business model is built on consumer appeal, it made sense to stop and pause when Turkey attacked the Kurds in Syria. A $1.4 billion Volkswagen investment in a new plant in Turkey has been put on hold by the management and rightly so.
Unlike business areas more or less immune from consumer pressure — like some financial sectors, for example — car buying is a people thing. It is done by regular people who follow the news and don’t want to associate themselves with or stimulate crimes against humanity and war crimes through their purchases. Investing in a war-mongering country simply is bad for an international brand. As soon as the news hit that Turkey would be starting their military invasion against the Kurds, questions about plans for genocide appeared in the public discourse. Investing over a billion in such a political climate does not make sense.
By investing in a new plant next to the Turkish city Izmir, Volkswagen is not risking security that much. Izmir itself is far removed from Turkey’s southern border — although terrorist attacks in the current environment are generally not out of the question. But business likes stability and predictability. Aggressive economic sanctions, that are likely to be imposed on Turkey by the European Union and potentially the United States, would affect many economic and business aspects that the company has to factor in. Economic sanctions affect negatively the purchasing power of the population. And Volkswagen’s new business would rely greatly on the Turkish client in a market of over 80 million people.
Sanctions also have a psychological “buckle-up” effect on customers in economies “under siege,” whereby clients are less likely to want to splurge on a new car in strenuous times.
So, it is not only about reputational damage which Volkswagen seems to be concerned with. There are real business counterarguments that coincide with anti-war concerns.
Dogus Otomotiv, the Turkish distributor of Volkswagen vehicles, fell as much as 6.5% in Istanbul trading after the news for the Turkish offensive.
Apart from their effects on the Turkish consumer, economic sanctions will also likely keep Turkey away from international capital markets.
News emerged last month that Volkswagen has gone back to its short-list of locations among Eastern European countries, eyeing Slovakia where Volkswagen already has a plant. Other commentators do not believe that Volkswagen would scrap the Turkey deal altogether and is only delaying the decision. But it is worth remembering that the Syria conflict is a complex, multiplayer conflict which has gone on for more than eight years. Turkey’s foray into Syria is unlikely to end in a month.
Turkish President Recep Tayyip Erdoğan communicated his intention to stay in Syria until the Kurds back down. And last month it was reported that Turkish forces might have been using chemical weapons on the Kurdish population, which potentially makes Erdoğan a war criminal. For a corporate giant like Volkswagen, giving an economic boost to such a state would mean indirectly supporting war crimes.
Even though Kurdish forces have struck a deal for protection with the Syrian Assad forces, this does not seem to be ending any time soon. Turkey has just thrown a whole lot of wood into the fire.
Volkswagen will find itself “monitoring” the situation for a long time. There is a case for making the sustainable business decision to drop the risky deal altogether soon.
Iveta Cherneva is an author in the fields of human rights and security, writing from Sofia, Bulgaria.
