Tag Archive | "Volkswagen"

VW Does Not Need Chairman Until New Structure in Place – Labour Chief

WOLFSBURG, Germany – Volkswagen needs to come up with a new structure before thinking about appointing a permanent chairman, the powerful labour chief at Europe’s biggest carmaker said in an interview, reported Reuters.

For the first time in more than two decades, Volkswagen no longer has Ferdinand Piech at the helm, a corporate scion who controlled the balance of power between the interests of shareholders and workers representatives.

Analysts and investors had hoped for the appointment of a strong chairman to work with Chief Executive Martin Winterkorn to tackle some of the company’s problems, such as a low profitability at the core VW brand, which posted an operating margin of 2 percent in the first quarter.

Since Piech was ousted in April, Volkswagen’s workers representatives have sought to exert more influence over strategy, to strengthen the focus on raising production efficiency without cutting jobs.

“We want to first have a debate about the company structure, then we can talk about a supervisory board chair,” Bernd Osterloh, who is head of VW’s works council, told Reuters.

Winterkorn promised to present a new company structure by October after surviving a showdown with Piech in April, thanks to support from Osterloh and the State of Lower Saxony.

Workers representatives control half the seats on VW’s supervisory board while Lower Saxony, which owns 20 percent of the company, has another two seats, meaning they could potentially veto any candidate for chairman.

The power vacuum at the top comes at a crucial time for Volkswagen. The company wants to raise profits and boost sales in the United States in a bid to overtake rivals such as Toyota and become the best selling carmaker in the world.


In the past, Piech played a key role helping to chart the carmaker’s strategic direction, first as chief executive and then as chairman of Volkswagen.

Piech masterminded a push into so-called modular construction techniques and bought truckmakers MAN and Scania, as well as Bentley, Bugatti, Lamborghini and Porsche and took the Audi brand upmarket.

In a bid to improve profitability, the company has long faced calls to cut fixed costs in Germany and improve production efficiency at its factory in Wolfsburg, where 50,000 of its nearly 600,000 employees around the world work.

Osterloh and representatives from Lower Saxony, where Wolfsburg is based, have been opponents of any such cuts and are now in a stronger position, since Winterkorn relied on their backing to fend off Piech’s challenge.

Rather than opening the door to deeper cuts in Wolfsburg and other German VW plants, Osterloh’s proposals for a new structure would further centralise power at the company’s headquarters in Lower Saxony.

For example, he wants the company’s 12 brands to stick to specifications set out by headquarters so VW can benefit from economies of scale across the board, rather than making costly modifications to suit the needs of individual brands.

“Corporate headquarters needs to be able to supervise whether the technical specifications of the modular platforms have been adhered to,” Osterloh said.

He is also demanding the management board be reduced and the corporate structure be adjusted to reflect the company’s various modular production platforms: MQB for small to mid-sized cars, MLB for larger vehicles and MSB for sports cars.

At the moment, Volkswagen Group’s structure is devolved and based around its various brands such as Audi, Lamborghini, Bentley, Bugatti, Skoda, Seat, Ducati, MAN and Scania.

“The company needs to be able to take decisions quicker, and a smaller management board. Regions need more competence to take decisions,” Osterloh said.

Volkswagen’s management board is made up of nine members and includes positions responsible for procurement, China, commercial vehicles, production, sales and Audi.

Osterloh declined to elaborate on how the board should be reduced, but said the company should think about whether the board needs members for production and sales.


Osterloh said a new company structure should be ready to be presented in September, including a strategy that goes beyond 2018. He is against the idea of raising profits by selling off some of the company assets, such as MAN Diesel & Turbo.

“Before we sell anything we will make acquisitions in this area,” Osterloh said.

Expansion is also his preferred strategy for fixing problems in the United States. He said that to succeed going forward, the company should think about making large pick-up trucks.

“We want to accelerate efforts to catch up with rivals. To do this, a pick-up is needed in the medium term,” Osterloh said.

As a stop-gap solution, VW has appointed Berthold Huber, a former boss of the IG Metall labour union as interim chair, pledging to find a permanent chairman quickly.

Asked whether Wolfgang Porsche, head of the family which controls Volkswagen, could become chairman, Osterloh said:

“I value and respect Mr. Porsche, we worked together in a confidential and close manner in the past weeks, but the structure has to take precedent. The question of the supervisory board chairman still has some time to be resolved.”

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VW’s Audi Sales Up 2.5 Percent in April to 152,850 Cars

Volkswagen’s Audi luxury division said on Friday sales increased 2.5 percent in April to 152,850 cars and sport-utility vehicles, the highest-ever level recorded for any month in the carmaker’s history, reported Reuters.

Sales in Europe edged up 0.9 percent as gains in Italy and Spain offset a 42 percent slump in deliveries in Russia to 2,116 vehicles, Ingolstadt-based Audi said.

In the Americas, sales were up 12.7 percent, bolstered by a two-thirds increase in Brazil to 1,856 cars and a 37 percent jump to 3,219 cars in Canada.

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VW Aims to Find New Chairman Quickly and Return Focus to Business

Volkswagen said it would try to find a new chairman quickly and announced a long-planned tie-up of its truck brands, seeking to return the focus to business following the carmaker’s shock ouster of former patriarch Ferdinand Piech, reported Reuters.

Chief Executive Martin Winterkorn, who survived the public showdown that triggered Piech’s resignation last month, told shareholders on Tuesday the group would tackle the trouble spots that Piech complained about in provoking the leadership crisis.

“It is good that we have returned to calmer waters and that we have clarity about our future direction,” Winterkorn said at Volkswagen’s (VW) annual shareholder meeting. “We cannot and must not stand still.”

VW, Europe’s biggest carmaker, is cutting costs at its namesake car brand in a bid to improve profitability, while also battling to revive its fortunes in North America and build a trucks business to challenge sector leader Daimler (DAIGn.DE).

Piech, who retains a stake in VW and has clashed with the group about board appointments since his departure, did not attend the shareholder meeting for the first time in more than two decades.

Winterkorn said the supervisory board’s steering committee and board members were working hard to swiftly find a replacement for former IG Metall union chief Berthold Huber, who is acting as interim chairman.

However Stephan Weil, governor of Lower Saxony, VW’s No. 2 stakeholder and Huber told reporters VW would not be over-hasty. Weil declined to say whether the supervisory board had agreed a roadmap for the search at its meeting on Monday.

Ulrich Hocker of Germany’s DSW association of private investors was keen for VW to move on.

“It’s a disaster that’s hurting the company,” he said. While hailing Piech’s accomplishments, he condemned his public criticisms of Winterkorn as “terribly unprofessional.”

VW shares have fallen about 8 percent since the crisis broke. They were down 0.9 percent to 228.6 euros at 1457 GMT (10.57 a.m. EDT).

In a bid to address a long-standing criticism of its set-up, VW announced the creation of a truck holding company to combine its heavy-duty commercial vehicle brands MAN (MANG.DE) and Scania, aiming to boost synergies between them.

The automaker will hold a special meeting next month to discuss further changes to its leadership structure, such as possibly aligning individual brands more closely, a supervisory board member told Reuters.

Winterkorn addressed VW’s business challenges in his speech to shareholders and paid tribute to Piech.

“The group and its people have much to thank Piech for,” he said. “We and I have tremendous respect for his lifetime achievement.”

Piech’s vision of creating an all-encompassing automotive group ranging from motorcycles and small city cars to 40-tonne trucks was in full display at the Hanover exhibition center where almost 3,000 VW shareholders gathered.

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At Volkswagen, a Game of Thrones as Chairman Ferdinand Piech Quits

On April 16, the tables turned on Ferdinand Piech, the powerful patriarch of Volkswagen AG, reported The WSJ.

For years, he had dominated the automotive giant his grandfather established. But in a meeting with other board members at his family estate in Salzburg, Austria, Mr. Piech didn’t simply fail to win support for his effort to oust VW Chief Executive Martin Winterkorn. This time it was Mr. Piech who felt the sting of rebuke.

Nine days later, one of the most storied businessmen in postwar Europe made a dramatic exit by quitting the company he had turned around.

The boardroom battle distracted the company’s top management and workforce at a time when Volkswagen is losing momentum in its bid to overtake Toyota Motor Co. and General Motors Co. as the leading auto maker world-wide by sales.

Mr. Piech is the grandson of Ferdinand Porsche, the engineer and designer who developed the Volkswagen Beetle. He has spent more than 25 years steering Volkswagen, as CEO and chairman of the supervisory board.

With Mr. Piech’s departure Saturday, Volkswagen faces two weeks of uncertainty before its annual meeting on May 5. The supervisory board would like to have a candidate ready to succeed interim Chairman Berthold Huber. And after that, the automotive giant faces big challenges getting back in gear amid slumping sales in the U.S. and China and high costs in Europe.

The Showdown in Salzburg, as German media are calling that gathering, brought together the men who had cooperated with Mr. Piech for years. But this time was different.

The works council boss Bernd Osterloh, who often stood at Mr. Piech’s side in past battles, abandoned the 78-year-old chairman. Stephan Weil, the socialist premier of Lower Saxony state, which holds a blocking minority in the company, backed Mr. Winterkorn. Mr. Piech’s cousin Wolfgang Porsche refused to support him.

Mr. Piech acquiesced, agreeing to keep Mr. Winterkorn. Soon after, key shareholders and stakeholders told Mr. Piech they had lost confidence in him as chairman, the board said in a statement on Saturday. Mr. Piech immediately resigned, withdrawing from all company functions. His wife, Ursula, also resigned. That leaves Mr. Porsche as the family’s main representative on Volkswagen’s board.

Mr. Porsche is seen as one of the winners of Mr. Piech’s failed plot to oust the Volkswagen CEO. But he has to contend with two players in Wolfsburg’s game of thrones who have also emerged stronger.

The Volkswagen supervisory board is balanced between 10 representatives from labor and 10 representatives of the shareholders. The chairman holds two votes to break a tie, if necessary.

In the battle over Mr. Winterkorn’s future, Lower Saxony, a shareholder, supported the labor camp. By doing so, Mr. Weil, the state premier, tipped the balance in favor of labor and reasserted the state power in the boardroom.

“The union and the state of Lower Saxony are the winners of the power struggle at VW,” Ferdinand Dudenhöffer, director of the Center for Automotive Research in Duisburg-Essen, wrote in a commentary published on Sunday. “As a result of this power struggle Winterkorn has more than ever before become the man of labor.”

If Mr. Dudenhöffer’s analysis is right, it could mean that the choice of a new chairman made necessary by Mr. Piech’s departure could be the first test of the new power structure in Wolfsburg.

Mr. Piech is known for quickly getting rid of executives that have lost his favor. In 2006, Mr. Piech pulled the rug out from Volkswagen CEO Bernd Pischetsrieder by stating in an interview with The Wall Street Journal that the CEO’s future was uncertain. Mr. Pischetsrieder was replaced a few months later with Mr. Winterkorn, a protégé of Mr. Piech and then CEO of Volkswagen’s luxury car brand Audi AG.

When Mr. Piech moved against Mr. Pischetsrieder he had Mr. Osterloh on his side. But when Mr. Piech put Mr. Winterkorn in his cross hairs, labor leaders on the board rushed to defend the CEO.

“The last two weeks have created uncertainty in the minds of the workforce,” Mr. Huber, former head of the IG Metall trade union, said Saturday. “This uncertainty had to be ended today.”

Mr. Porsche moved quickly to reassure the company’s management and workers after the sudden departure of Mr. Piech.

“We have complete confidence in the management of Volkswagen AG and regret the developments of the past few days,” Mr. Porsche said in a statement, adding that the family would continue to play a supportive role as the company anchor shareholder.

Mr. Piech is still a major investor in Volkswagen and retains his seat on the board of Porsche Automobil Holding SE, the investment company that manages the Porsche and Piech family holdings.

Mr. Piech couldn’t be reached for comment.

Porsche SE controls 51% of Volkswagen’s voting capital and is itself the outcome of an earlier family feud. A few years ago, the much smaller Porsche AG tried to use its financial muscle to take over Volkswagen, using debt and financial instruments to amass Volkswagen shares. The plan blew up and Mr. Piech rescued Porsche, allowing him to set the terms of integrating the family businesses together under one roof.

But because Porsche was more valuable than Volkswagen, Mr. Porsche’s immediate family ended up with the majority of voting shares in Porsche SE. The Porsche car-making business was integrated into Volkswagen, which had management control and Mr. Piech as chairman.

Whoever emerges as the new chairman of Volkswagen, Mr. Osterloh and Mr. Weil will want a firm commitment to protect jobs at Volkswagen’s German plants—most of which are in Lower Saxony. The strength of the labor side of the table could make it harder to revive the company’s profit.

One inside candidate is Ulrich Hackenberg, the company’s chief developer, who worked closely with Mr. Piech and Mr. Winterkorn for years. He has a deep network within Volkswagen and has often been mentioned as a potential chairman. He would bring Mr. Piech’s passion for engineering and enthusiasm for the Volkswagen brands and would likely be acceptable to the works council, analysts say.

Mr. Hackenberg couldn’t immediately be reached for comment.

Mr. Piech has left, but the problems that he exposed aren’t going away. And some analysts suggest that Mr. Winterkorn is now more dependent on the support of the works council to keep his job, making it less likely that he will push through tough restructuring at Volkswagen to boost the profitability of the brand.

“It is hard to imagine there will be a new strategic orientation of VW’s core brand under such a constellation,” said Mr. Dudenhöffer.

Volkswagen makes the bulk of its profit with Audi, Porsche, Skoda and the VW brand’s business in China. Mr. Winterkorn has been unable to stop Volkswagen of America from bleeding cash, and emerging markets in Brazil, India and Russia have turned sour, further weakening the VW brand.

“The biggest development in China is in budget cars and SUVs, segments where we are not present,” Jochem Heizmann, CEO of Volkswagen of China, told reporters on the sidelines of the Shanghai auto show this month.

Mr. Winterkorn last week cancelled a planned trip to the auto show in Shanghai. VW cited flu as the reason.

Mr. Piech always placed a high premium on engineering and was driven by the desire to make VW the best and biggest car maker in the world. His departure leaves a void at the top of Volkswagen’s leadership that won’t easily be filled.

“I regret the resignation of Ferdinand Piech, but it was unavoidable in the end,” said Mr. Weil, the premier of Lower Saxony. “Without exaggerating, it is fair to say that he is one of the most important personalities in Germany’s (postwar) economic history.”

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Volkswagen’s CEO Gets Backing of Key Shareholders in Leadership Feud

Volkswagen AG Chairman Ferdinand Piech may have lost the battle to oust Chief Executive Martin Winterkorn, but the war isn’t over, reported The WSJ.

Key members of VW’s supervisory board Friday proposed extending Mr. Winterkorn’s contract, one week after Mr. Piech expressed a lack of confidence in the CEO and threw his future into doubt. The supervisory board group, its executive committee, said Mr. Winterkorn was the “best possible” leader for Volkswagen and had its full support.

The committee proposed that the supervisory board extend Mr. Winterkorn’s contract in February next year. The move was welcomed by a major Volkswagen shareholder, the state of Lower Saxony, which holds 20% of Volkswagen’s voting rights and two seats on its supervisory board.

“The committee’s conclusion provides the clarity Volkswagen needs,” state Premier Stephan Weil said. Lower Saxony has confidence in Mr. Winterkorn and wants to continue working closely with him, he said, praising the company’s “excellent development” in recent years.

The backing is seen as a defeat for Mr. Piech, who couldn’t convince the committee to withdraw support for Mr. Winterkorn, according to people familiar with the matter.

Mr. Piech and five other members of the VW supervisory board’s executive committee met with Mr. Winterkorn on Thursday at Mr. Piech’s private estate in Salzburg, Austria, in an attempt to resolve the leadership crisis.

Mr. Winterkorn, 67, had signaled his determination to serve out his term to the end of next year. Late Thursday, he was able to sway members of the supervisory board with his strategic plans, according to a person familiar with the content of the meeting.

But Friday’s endorsement leaves unresolved whether Mr. Winterkorn will eventually become the head of the auto maker’s supervisory board when he finishes his term, as had been planned. Mr. Piech is set to head the supervisory board until the spring of 2017, meaning he could have two years to push his agenda.

Few observers familiar with VW were willing to call Mr. Piech’s setback an absolute defeat.

“Mr. Piech isn’t easily dissuaded from his ideas,” as previous clashes have shown, said Stefan Bratzel at the Center of Automotive Management at Bergisch-Gladbach’s University of Applied Sciences.

It may be business as usual in the near term, said Arndt Ellinghorst at Evercore ISI, but a debate on leadership isn’t likely to subside entirely.

“It seems (Mr.) Piech has lost the battle and an apparent desire for change at the top of VW,” Mr. Ellinghorst said. “What is not clear, however, is whether this puts an end to the war.”

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VW in Full-Blown Crisis as CEO Vows to Fight

Volkswagen has plunged into a full-blown leadership crisis after Chief Executive Martin Winterkorn let it be known on Saturday he will fight for his job even though the carmaker’s chairman has reportedly withdrawn confidence in the CEO, reported Reuters.

Ferdinand Piech, who has spent almost 22 years at the helm of VW, nine as CEO, said he has “distanced” himself from Winterkorn, Der Spiegel reported on Friday, exposing unusual dissent between VW’s two top leaders.

Piech’s remark is viewed by analysts as undermining the CEO’s prospects of renewing his contract, due to expire in December 2016 and to become chairman himself when Piech retires.

It comes as VW is seeking to cut billions of euros of costs to boost profitability at its troubled core division while struggling to forge a long-planned alliance of truck brands and to revive operations in the United States.

Winterkorn, who in his eight-year reign has overseen VW’s transformation from a struggling German group saddled with high labor costs into one of the world’s most successful automotive companies, will not run away from his job and feels emboldened by support from strong allies, two sources at Wolfsburg-based VW told Reuters on Saturday.

A spokesman for Volkswagen declined to comment on the report. Piech’s office in Salzburg, Austria, didn’t return calls seeking comment.

Germany’s Frankfurter Allgemeine Sonntagszeitung reported earlier on Saturday that Winterkorn would not allow himself to be edged out of VW, citing unnamed sources at the carmaker who referred to his successful track record as CEO.

Under Winterkorn’s watch, VW has expanded from eight to twelve brands, more than doubled the number of production plants to over 100 and boosted sales 64 percent to a record 10.1 million vehicles last year.

The state of Lower Saxony, where VW is based and which owns a fifth of VW’s voting shares, as well as the carmaker’s labor leaders who represent half the 20 members on VW’s supervisory board on Friday came out backing Winterkorn.

Together they have majority control of the panel which appoints and dismisses executives. Important decisions such as the building and shuttering of plants need a two-thirds majority.

Still, VW’s chairman has a track record of undermining his own executives. In a Wall St Journal interview published in March 2006, Piech, already chairman of the supervisory board at the time, said it was an “open issue” whether the contract of then-CEO Bernd Pischetsrieder would be extended because of opposition from labor representatives.

In November 2006, VW announced that Pischetsrieder had agreed to resign, and in 2007 it installed Winterkorn, then a close ally of Piech and head of VW’s Audi division.

In 2009, Piech publicly damaged the reputation of Porsche CEO Wendelin Wiedeking and chief financial officer Holger Haerter. Both executives quit within two months.

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