UNTIL last Friday, the mighty Volkswagen brand symbolized German engineering prowess and reliability.

    In just four days, that has changed radically. A scandal over cheating on U.S. diesel emission tests has engulfed the company and many Germans worry it will have a domino effect on their businesses, eroding the cherished “Made in Germany” label.

    Following a series of other blows to Germany’s reputation — from repeated delays in Berlin’s new airport to a string of financial misdeeds at flagship lender Deutsche Bank — Germany’s business image looks tainted.

    “Made in Germany is quality and trust. Now that trust is lost,” said Ferdinand Dudenhoeffer of the University of Duisburg-Essen. “No one could have imagined the scale of this and the damage it will cause for German industry will go on and on. This is just the tip of the iceberg.”

    Top-selling Bild daily described VW as the crown jewels of German industry and said its success must not be gambled away.

    The reality, however, is that VW has been caught deliberately misleading the U.S. environmental regulator and U.S. consumers over emissions from its diesel engines.

    Its shares have tumbled 33 percent in the last two days. Earlier Tuesday the Wolfsburg-based firm said it would set aside some 6.5 billion euros (US$8.45 billion) in provisions this quarter to cover costs related to the scandal. Media are reporting that chief executive Martin Winterkorn will go.

    The impact of such a scandal is especially great in Germany, Europe’s biggest economy, because of its reliance on exports which make up more than 45 percent of gross domestic product.

    “The great success of the export nation of Germany rests on the quality label ‘Made in Germany,’” said Marcel Fratzscher, head of the DIW economic institute in Berlin. “VW stands for this German quality — for perfection, reliability and trust.”

    “Even if we don’t know how much the VW case will affect the German economy, the risk is high due to a reliance on exports.”

    Germany’s auto industry accounts for roughly one in five jobs. It accounted for 17.9 percent of Germany’s 1.1 trillion euros in exported goods last year, according to Deutsche Bank, and has enjoyed above-average export growth since 2009.

    (SD-Agencies)