By on April 13, 2015

A grim Winterkorn. Picture courtesy Bertel Schmitt

Disparaging remarks uttered by Volkswagen chairman Ferdinand Piech have led to speculation that the legendary auto exec is positioning himself to oust VW’s current CEO, Martin Winterkorn, a one-time ally of Piech who has overseen substantial growth during his tenure.

Under Winterkorn’s leadership, VW Group’s sales and profits have both increased dramatically, and the automotive conglomerate is positioning itself to be the world’s #1 auto maker. But Winterkorn has also come under fire for VW’s continued struggles in the United States (particlarly with the Volkswagen brand itself) and the slow progress of a low-cost car for emerging markets.

In remarks to German media, Piech says that he has “distanced himself” from Winterkorn, a cryptic comment that echoes his past remarks that have led to the undoing of the careers of past VW executives. But this time, Winterkorn has the support of both the German government and VW’s organized labor union. Together, these comprise roughly a substantial bloc on the 20 seat supervisory board, while the Porsche family, which traditionally aligns with the Peich-controlled seats, has thrown its support behind Winterkorn.

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31 Comments on “Volkswagen Gearing Up For Battle Over CEO Position...”


  • avatar
    FractureCritical

    huh,
    I figured it would take them longer to figure out MQB is a definitive failure and make heads roll. Time for some good old fashioned corporate infighting.

    • 0 avatar
      hreardon

      Fracture,

      This has more to do with Piech than it does with Winterkorn, especially when you consider that other major members of the supervisory board made *immediate* statements contradicting Piech and supporting Winterkorn. In the past when Piech made statements like this, the rest of the board fell in line.

      MQB has been anything but an abject failure – the stories last year of problems not withstanding. Like MLB over at Audi, it took several years to get everything working in concert, but once that was in place the cadence of product rollout increased and warranty costs dropped.

      I suspect the two biggies that Piech is furious about are Brazil and North America, where they’re burning cash like it’s going out of style. He’s probably especially ticked that North American operations won’t see an appreciable improvement for another 3 – 5 years.

  • avatar
    turf3

    No matter how old, no matter how many people’s livelihoods and futures they hold in their hands, corporate executives continue to act like squabbling toddlers. It would be highly inappropriate for the foreman of a bricklaying crew to speak disparagingly about one of his bricklayers to a customer; such issues are to be taken care of privately. But here is someone at one of the highest levels of responsibility in our culture acting just that way.

    Maybe it’s because the guy he’s publicly sneering at, doesn’t carry bricks and hods all day, and is unlikely to (probably unable to) take exception with his dukes.

    • 0 avatar
      psarhjinian

      “But here is someone at one of the highest levels of responsibility in our culture acting just that way.”

      For many, many senior execs, this is the majority of their job: it’s isn’t about strategy, vision or competency, it’s about power plays, increasing your fiefdom and cutting down others.

      In business at this level, your actual competition isn’t your real competition—your colleagues are.

      VW is hardly alone in this, but in companies with a strong leader-for-life like Piech, you do see the operational leaders undermined as various factions jockey for Dear Leader’s approval, usually by undermining their colleagues.

      I’ll wager the next steps will be Winkertorn’s subordinates falling like dominoes as he (Winkertorn) sacrifices them to save himself.

  • avatar
    bumpy ii

    This is one of perils of working in a family business and not being family.

  • avatar
    mike978

    “Together, these comprise roughly a substantial bloc on the 20 seat supervisory board” – a minority of seats?

    • 0 avatar
      Lorenzo

      Yeah, it won’t be unanimous, but Piech can count votes and is too smart to make cryptic comments that mean nothing. I can see Piech making sure the Porsche family, which tried to buy out VW and in turn got taken over by VW, not having enough influence in the company to prevent Piech from getting his way. Still, the expression on Winterkorn’s face in the photo seems to encapsulate the level of arrogance in Wolfsburg that prevents VW from succeeding in the U.S. and Brazil.

  • avatar
    jmo

    I assume Winterkorn is responsible for the decision to offer the decontented Passat and Jetta in NA right when all the other automaker moved in the other direction? If so, he needs to be out.

    There is a scene in “Margin Call” where the CEO John Tuld (played by Jeremy Irons) is called in to deal with a crisis:

    John Tuld: Let me tell you something, Mr. Sullivan. Do you care to know why I’m in this chair with you all? I mean, why I earn the big bucks.

    Peter Sullivan: Yes.

    John Tuld: I’m here for one reason and one reason alone. I’m here to guess what the music might do a week, a month, a year from now. That’s it. Nothing more.

    Winterkorn was in charge of knowing what the market was going to do and he screwed up.

    • 0 avatar
      Pch101

      That attitude to the US market predates Winterkorn. VW took a similar approach with the “Malibu” Rabbits that were built in Pennsylvania.

      The cost cutting mentality goes back at least twenty years, when VW hired Lopez away from GM in an effort to eliminate its losses at the time through cost cutting. Low American prices encourage them to think that way.

      • 0 avatar
        jmo

        My understanding is the powers that be in Wolfsberg thought the recession in the US would be far longer and deeper than it was. I wonder if the willingness of German executives to accept that had its roots in a kind of German chauvinism?

        • 0 avatar
          psarhjinian

          “I wonder if the willingness of German executives to accept that had its roots in a kind of German chauvinism?”

          No, it’s not German: Honda and General Motors do the same thing: it’s a sense of “It’s the right thing to do because I’m the one doing it.”

          You get this in companies that take their successes for granted and attribute luck to their own aptitude.

        • 0 avatar
          hreardon

          Volkswagen has traditionally been exceptionally arrogant when it comes to the US market. The reason why Audi has become so successful here is partially due to the fact that these are the cars that Volkswagen thought Americans should be buying all along. The problem before is that they wore the VW badge, not Audi.

          They’ve also been helped (along with MB and BMW) by the economic recovery favoring the top 5% of earners.

        • 0 avatar
          Pch101

          VAG is not capable of making the reliability improvements that are needed to compete directly with the Japanese. To do so would require cultural changes that are beyond its management’s reach.

          As a result, there is a fair bit of drama as the company struggles to cope with its US dilemma, dancing around the problem instead of addressing the issue at its roots. Hyundai came to terms with this and achieved some gains as a result, but VW has not and probably never will.

    • 0 avatar
      Whatnext

      Really? So it would have been better to stick with the old content rich models that sat glued to dealers’ lots? Both current Passat and Jetta nameplates increased sales strongly over their predecessor, if that’s grounds for dismissal in you world then have at it. If you want a fancy German car, pay the price and get an Audi.

  • avatar
    genuineleather

    I’m not sure who at VW is to blame for sales performance in NA, but if they really wanted to sell 800k units here, offering up two new sedans and then sitting back on your hands for three years with no additional volume products is not the way to do it.

    VW needs SUVs, and their refusal to make them is bewildering given their soaring popularity in every major global market.

    • 0 avatar
      mike978

      Exactly. The new, at the time, Jetta did well, the Passat didn`t hit its mark but did OK sales wise compared to the previous model. They should have followed up with RAV4 and Highlander competitors.
      They did update with the Golf and Beetle but neither of those provide large sales volume.

  • avatar
    wmba

    First of all, VWAG is not partly owned by the German government and never has been. It is, and has been from the beginning after WW2 and British ownership, been about 20% owned by the state government of Lower Saxony. Like Ontario owning shares in a company operating in the province.

    Last year, Winterkorn announced that VW AG needed to save $5 billion, to help pay for MQB and VW’s reduced profitability.

    Not long ago, Piech decided to build his personal signature project vehicle Phaeton 2. Phaeton 1 lost about $28,000 per vehicle according to the Euro-press I read, and all were wondering why on earth VW decided to lose money on another go-around of this turkey.

    The press had to be fed the numbers from somewhere, and it wasn’t Ferdy Piech announcing publicly what an idiot he’s been and how he planned on continuing to be one. Ergo, it was someone else, and in charge of the someone-elses is Winterkorn.

    My speculation is that the cooling-off of Piech/Winterkorn relations foundered on this rock. The underling should have just trumpeted the genius of Phaeton 2 and kept quiet about VW finances.

    Piech always has seemed to be a dictator with low tolerance of failure, his reputation being you only make a mistake once, second time out. Pointing out his own second mistake, even quietly, WILLNOTBETOLERATED.

    Trouble is nobody else agrees with him.

    For now.

    • 0 avatar
      psarhjinian

      “Phaeton 1 lost about $28,000 per vehicle according to the Euro-press I read, and all were wondering why on earth VW decided to lose money on another go-around of this turkey.”

      They’re a publicly-traded company. Don’t want people to see your arrogance writ large in your own financial statements? Tough, you’ve got to fess up sometime.

    • 0 avatar
      Whatnext

      If Piech is the genius behind the Phaeton, he should be out the door, not Winterkorn.

      • 0 avatar
        psarhjinian

        “If Piech is the genius behind the Phaeton, he should be out the door, not Winterkorn.”

        While that would probably help VW to no end, it’s not an option. The man’s name is (figuratively) on the building.

    • 0 avatar
      Pch101

      The West German government owned 20% of the company between 1949 and 1960. http://www.britannica.com/EBchecked/topic/632329/Volkswagen-AG

  • avatar
    PrincipalDan

    The image of Winterkorn on the projector looks like he was drawn by the animation team that did the “Cloudy with a Chance of Meatballs” films. I didn’t know that Mr. Lockwood had a brother in the automotive industry.

  • avatar
    Znueni

    Just read an interview with Ferdinand Dudenhoeffer, a professor at a German university with a auto-focused centre. His take on the situation is that Winterkorn’s key failure is not fixing the core VW brand (their huge losses are covered up by success of Audi, Skoda et al.) Biggest issues are lack of clear market positioning, large manufacturing inefficiencies vis-a-vis Toyota and GM, and inflexibility from being highly vertically-integrated on components esp. in high-cost Germany. As far as Winterkorn’s support from Porsche family, it’s only one member and rest of family will eventually line up as usual behind Piech. So Winterkorn will slowly but very surely be squeezed out, it’s just a matter of time.
    Of course, Mr Piech isn’t young any more so he also has the issue of time….

  • avatar
    mjz

    Piech is a stubborn old geezer. His clock is ticking quickly at age 77. Winterkorn, while not perfect, has lorded over unprecedented growth for VW. The fact that NO ONE has backed Piech is indicating to me that HIS time is up, not Winterkorn’s. I think this is going to lead to Piech’s ouster, not Winterkorn’s. At the very least, this is going to be interesting.

  • avatar
    pdl2dmtl

    Best book written by a German if you want to understand their mentality:

    Martin Wehrle – “Ich arbeite in einem Irrenhaus“ – I work in a lunatic asylum – first published in 2011, already at 14th edition!

    Ferdinand Piech is at a stage in his life where he will make an excellent case study.

    • 0 avatar
      DeadWeight

      Bertel Schmitt’s ‘I Am A Naughty Jelly Donut In An Underground Tokyo BDSM Dungeon’ is a good read, too.

    • 0 avatar
      RideHeight

      pdl2dmtl,
      Thanks for the tip and for my next brain-project; Amazon.de has that for Kindle and I have the Pons dictionary loaded. I’ll get some of my German back the best way possible.. reading highly interesting stuff.

      • 0 avatar
        Znueni

        Viel Lesenvergnügen – put that in your Pons!
        If you want to save time reading the Wehrle book, just click the window here to get the 25 most interesting sentences/paragraphs (from Spiegel magazine) Like Dilbert – lots of truth here

        http://www.spiegel.de/fotostrecke/irrenhaus-ordnung-die-un-heimlichen-regeln-deutscher-unternehmen-fotostrecke-87900.html

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