War is not only a question of ethics and humanitarian disaster. It is bad news for business.
For a car giant like Volkwagen whose business model is built on consumer appeal, it made sense to stop and pause when Turkey attacked the Kurds in Syria. A USD 1.4bln Volkswagen investment in a new plant in Turkey is being put on hold by the management, and rightly so.
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.
The risk question rather lies elsewhere. Business likes stability and predictability. Aggressive economic sanctions which are likely to be imposed on Turkey by the EU and the US would affect many economic and business aspects which 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 80mln 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 counter-arguments which coincide with anti-war concerns.
Dogus Otomotiv, the Turkish distributor of VW 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.