The following article is a written adaptation of an episode of Thrilling Tales of Modern Capitalism, Slate’s new podcast about companies in the news and how they got there.
Volkswagen was a uniquely beloved brand in the 1960s and ’70s, known for its flower power hippie-mobiles. But it was born 90 years ago as the vision of—no joke—Adolf Hitler. “When you think about it, it was an amazing rebranding that this fascist propaganda product then became the sort of official vehicle of the counterculture,” says Jack Ewing, a New York Times business reporter. “I don’t think there’s ever been anything like it.”
That transformation was powered by advertising. By the late 1950s, Volkswagen had made headway in the U.S., but the Beetle was still a curiosity compared with mainstream American cars from Ford or Chevrolet. Volkswagen’s head of American operations decided he needed an attention-getting ad campaign to raise the Beetle’s profile. He made the rounds on Madison Avenue but ended up going with an upstart agency called Doyle Dane Bernbach, or DDB. The first ad DDB came up with was a radical departure from the automotive ads of the era.
“Basically all advertising of the time was illustrated, was paintbrushed,” says Dominik Imseng, a marketing consultant in Switzerland and author of Ugly Is Only Skin-Deep: The Story of the Ads That Changed the World. “When you had a car in an ad, it was always longer and wider than in reality, and the people were even painted smaller to make the car look bigger. You have the car in front of a beautiful house with the housewife waiting for her handsome husband, successful husband, obviously, who brought home a new car. And that was the kind of car advertising that Detroit did. All the ads looked like this. They were interchangeable. And Volkswagen broke with every rule in that category and with every rule in advertising entirely.”
DDB bought a full page in Life magazine for its first VW ad. Then it put a tiny photograph of a tiny little Beetle in the upper-left corner of the ad. Instead of a big illustration of a big tailfins car front and center, and instead of lots of flowery prose about technical specs, most of the ad’s page was left as blank space. At the very bottom was a surprising tagline: “Think small.” The ad looks modern even now.
“We cannot imagine how different the ad must have felt back then in 1959, but I’m sure it was a shock,” says Imseng. “It was something you had never seen. It was the start of something completely new. I’m sure you could viscerally feel this is something else, what is going on?” The incident notably inspired a scene in Mad Men where Don Draper and the gang puzzle over why Volkswagen would pay for an ad that’s mostly empty.
The DDB ads went little when Detroit went huge. They went humble and wry when Detroit went boastful and brassy. Maybe most important, DDB’s ads felt honest when other advertising felt like lies. DDB would also use underdog brand positioning in its famous long-running campaign for Avis car rentals, claiming that because it was No. 2 to Hertz, Avis tried harder.
But the VW campaign seemed to touch some kind of exposed nerve in America. It felt almost subversive. Remarkably, nearly all the people who worked on the campaign were Jewish, helping a Nazi-founded company only 14 years after World War II had ended. But there was something else interesting about the campaign’s copywriter, Julian Koenig. “He really hated consumerism,” Imseng says. “He hated the American way of life of the 1950s and early 1960s. He hated materialism. And he really, I think, brought this philosophy into his ads. Think small, not think big.”
The campaign Koenig created for the “homely” and “humble little Bug” continued into the 1960s in print and on TV. It tapped into a transformation happening in American society. According to Imseng, it even contributed to that transformation: “The campaign definitely had a cultural impact and helped grow, basically, this dissent with consumerism and helped make the States of the 1960s a freer and more colorful place.”
Driving a Beetle or a Volkswagen Bus became a sort of countercultural statement, a badge of nonconformity. In 1972, the Beetle surpassed the Ford Model T as the most-produced car model ever. “Imagine what great advertising can do,” says Imseng. “If it can turn the car of Hitler into the car of the hippies, it can do anything.”
But by the mid-1970s, the cultural wave Volkswagen surfed had crested, and compact cars from Japanese brands like Honda and Datsun were erasing Volkswagen’s practical advantages, offering better mileage and reliability. Sales of the Beetle and the Bus began to wane, and Volkswagen struggled to find an identity in the United States. It introduced new models—the Rabbit, the Jetta—but none stood out from the competition or tickled the popular imagination in the same way. VW was getting beat by Korean cars at the bottom of the market and by Japanese cars in the middle, and it couldn’t compete with the European luxury brands at the top.
In 1993, Volkswagen hit a low point in U.S. sales. Enter Ferdinand Piech, who took charge of the company that year. Piech was the grandson of Ferdinand Porsche, the designer of the Beetle. The Porsche family has been in the car business for almost as long as there’s been a car business, with connections to VW, Audi, and of course Porsche. Ferdinand Piech was a child when Volkswagen was founded, but he was steeped in its history. “He used to play at the factory when slave laborers were working there,” says Jack Ewing, who wrote a book about Volkswagen. “It was a very tough family, and both his parents were Nazis, and I don’t think Piech himself was a Nazi but he grew up in that atmosphere.”
When Piech took over Volkswagen, he returned to the foundation of VW’s success, with affordable cars that were well made and good value for the money. He rebooted the Beetle in 1998, giving it an updated look that got a lot of headlines. He also went on a buying spree, adding to the Volkswagen Group’s luxury brand holdings, which these days include Lamborghini, Bugatti, and Bentley. Behind the scenes, though, Piech was cracking the whip. “He would set these very tough engineering goals, and if his people didn’t meet them, he would fire them,” Ewing says. “And he made no bones about this. It was well known in the company—you just couldn’t fail.”
With the hard-driving Piech at the wheel, Volkswagen began to take some dubious shortcuts. Ewing explains: “Very soon after he came into office, Volkswagen was accused of stealing a lot of documents from GM. It was pretty clear that he was willing to really push the boundaries to win. And a few years after that, there was another big scandal where it turned out that Volkswagen had been paying for prostitutes for union leaders to keep them compliant. When these things happen, there was never any real soul-searching. They never said, ‘Gee, how could this terrible thing have happened? We have to make sure this doesn’t happen again.’ They never did that. There was sort of a sense that we got away with it, everything’s good.”
One of Volkswagen’s engineering triumphs under Piech was with diesel engines, which are more fuel-efficient but in the past have been kind of smelly and noisy. Volkswagen figured out how to overcome those problems and make a more civilized diesel, which they had great success with in Europe. “The problem,” Ewing says, “was that in the United States, there were stricter limits on nitrogen oxides, which are the big pollutant that comes out of a diesel engine. They were about twice as strict as Europe. So Volkswagen could meet the European standards with its cars, but it was having trouble meeting the U.S. standards. And they fiddled around with the technology for a long time and they couldn’t do it. And so at a certain point, the engineers, under a lot of pressure from the top, decided that they would cheat.”
Starting in the mid-aughts, VW engineers put a special device in their American diesel cars. This device could tell when the cars were being inspected by recognizing that the inspectors were using a specific regimen of engine tests and were spinning the wheels without moving the car. During these inspections, the cars would run more cleanly in a way that wasn’t feasible under normal conditions. When they were back out on the road, the cars ran much dirtier than promised. Eventually VW got caught.
Its executives at first tried to lie their way out of the problem. Their hypocrisy was galling. “Not only were they cheating,” Ewing says, “but they were advertising that these were very virtuous cars and they specifically targeted the sort of environmentally conscious green driver—in a way, the grown-up versions of the people that had bought the Beetle.” In 2017, after a Department of Justice investigation that indicted several of its executives, Volkswagen pleaded guilty and paid $4.3 billion in fines. Piech had resigned two years before.
In the years since the scandal, Volkswagen has sworn it’s turning over a new leaf. It’s shifted away from diesel, and it launched an emissions-free all-electric SUV in the U.S. this year. But, true to its recent history, VW couldn’t manage to avoid a stumble. In March, the company’s U.S. subsidiary announced it was changing its name from Volkswagen to Voltswagen to signal its future as “the people’s electric car.” It turned out to be a botched April Fools’ joke. But this marketing stunt, which involved Volkswagen reps lying to news outlets in order to maintain the ruse, resulted in a brief surge in Volkswagen stock—which in turn spurred the opening of a Securities and Exchange Commission investigation, results pending.
Whatever the fallout from the Volkswagen debacle, VW’s push into electric vehicles is real. And in a sense, it marks a return to VW’s old playbook. “They’re now trying to do for electric cars what they did for personal transportation back in the 1930s,” says Ewing. “They’re trying to make it affordable for everybody. Teslas are pretty expensive. They’re trying to come up with a decent electric car that a middle-class person can afford.”