VW hit by internal combustion
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DESPITE RECORD PROFITS LAST YEAR, VW CONTINUES TO STRUGGLE WITH CORE VEHICLES SUCH AS THE GOLF AND PASSAT AND HAS FAILED TO MAKE SERIOUS PROGRESS IN BUDGET CAR DEVELOPMENT.
Martin Winterkorn had taken his future at Europe’s biggest carmaker for granted. The 67-year-old Volkswagen chief executive had planned to stay on until the end of 2016.
At that point, it was agreed, he would become board chairman for his outstanding services to the company.
But last week Winterkorn suddenly received what Germany’s media has described as “notice of his forthcoming execution” from the man into whose shoes he had assumed he would be stepping — current chairman Ferdinand Piech, who is scheduled to retire in 2017.
Piech is the 77-year-old grandson of Beetle inventor Ferdinand Porsche.
He and his cousin Wolfgang Porsche are the leading members of the “Porsche family clan” which holds a 51 per cent stake in VW and maintains a controlling influence on all management decisions. Der Spiegel magazine quoted Piech as saying he was “distancing himself” from Winterkorn.
“Piech wants to kill him but Winterkorn is fighting back,” is how Bild newspaper depicted the conflict.
The dispute has shocked industry observers.
Winterkorn’s record has enabled VW to post profits of €12.7 billion ($17.9 billion) and produce nearly 10 million vehicles last year.
Piech and Winterkorn are seen as the dynamic duo of the car industry. Piech turned Audi into a runaway success after taking it over in 1988.
He put Winterkorn in charge of quality control. When Piech became VW chief in 1993, he rewarded Winterkorn by making him Audi chief executive.
When Piech stepped down as VW boss in 2002, he handed his job initially to former BMW boss Bernd Pischetsrieder.
He was soon replaced by Winterkorn.
What went wrong? German media speculation that Piech’s criticism was motivated by his secret desire to install wife Ursula as his successor appears scotched after Piech insisted his wife had nothing to do with it.
The problem appears to be VW itself. In 2009 VW merged with Porsche. Today it is a giant with overall responsibility for legendary marques ranging from Bentley and Lamborghini to Skoda and VW.
The concern employs 592,000 at 118 plants worldwide.
However, the company’s attempts to compete with firms such as Toyota have not worked. Toyota remains market leader because it manufactures its vehicles much more cheaply and earns the equivalent of €38,000 more per head of workforce.
Despite record profits last year, VW continues to struggle with core vehicles such as the Golf and Passat and has failed to make serious progress in budget car development. Its MAN and Scania truck brands face difficulties. The company has serious problems in gaining a foothold in the US.
That failure recently prompted Piech to remark: “We have so far only managed a limited understanding of the United States.”
The comment was taken as a direct, if veiled, attack on Winterkorn.
Since Piech’s bombshell several influential figures in the VW arena have spoken out against his condemnation of Winterkorn. Even Wolfgang Porsche objected, saying his cousin was giving a “private opinion which is not aligned with that of the family”.
That has been echoed by the VW staff council, which holds 20 seats on the company’s supervisory board.
Piech has a record of preparing the dismissal of senior staff via leaked comments to the press. In 2006 he dispensed with Pischetsrieder with similar remarks to the Wall Street Journal.
Der Spiegel admitted that he faces the possibility of a row with the rest of the Porsche clan.
But it concluded: “In the past the result has always been the same — Ferdinand Piech won.”