Board Shakeup

Audi Seeks a Way Out of the Mess

RTX18L3C
Volkswagen CEO Matthias Müller is shaking things up at Audi. Picture Source: REUTERS

Two weeks ago, Japanese carmakers Toyota and Mazda set the auto world on its ear by announcing they had formed a partnership to develop electric cars and self-driving vehicles together rather than working as competitors.

The implication was that they had seen the future competitive threat coming from the likes of Google, Apple and other tech companies and were moving at warp speed to meet the challenge head on.

So when Volkswagen group announced a management shakeup at Audi,  its luxury car subsidiary, Monday there were high hopes that a similar change in strategy would be forthcoming. But the changes didn’t appear to mark a significant shift in the master plan for the company.

“The whole ethos of the company has to change, not only to prevent things like the diesel scandal happening again, but to carve out a different sort of future.”

Peter Wells, Automotive expert at Cardiff Business School

VW CEO Matthias Müller, who also chairs the supervisory board at Audi, fired four top managers, but replaced them with VW veterans and gave no indication of a strategy shift despite declining sales and a host of legal troubles stemming from the company’s efforts to cheat on emissions tests with its diesel vehicles.

“They are so busy paying fines and dealing with litigation that it’s actually quite hard to turn the attention of senior management to the business of how to run a big, complicated car business,” said Peter Wells, an automotive expert at Cardiff Business School in the UK.  “The continuing saga means it is very difficult for management to focus on the main task, which is to chart a future for the business over the next 10-15 years.”

Three months ago, Audi announced that it hoped to introduce three electric models by 2020 and said it was financing the development out of its own resources. But the man who announced the decision, CFO Axel Strotbeck, was among the four executives dismissed on Monday.

Audi CEO Rupert Stadler, who held onto his job,  said after the shakeup was announced that he now wants “to set the course for the future with a new management board and a strong workforce.” German companies have two boards, one composed of the management and a separate supervisory board that is similar to a board of directors in the US.

Unlike in the US, German supervisory boards also have worker representatives on them under a law of what’s known as co-determination. Mr. Müller’s choice as new head of production, Peter Kössler, nearly caused an open rupture with Wolfgang Porsche, grandson of the car genius Ferdinand Porsche, whose family owns more than half of Volkwagen’s shares.

Mr. Porsche opposed Mr. Kössler’s selection, according to company sources, because he was chosen by the workers to represent them on the supervisory board. The dispute was all the more surprising because Mr. Müller had been anointed by the Porsche family to take over when the previous VW CEO, Martin Winterkorn, took responsibility for the diesel scandal and resigned. But in the end, Mr. Porsche said he was satisfied with the new management team.

The ownership structure of Volkswagen also has become a political topic because the state of Lower Saxony own 20 percent of the company’s shares and exercises an outsize influence on the company’s  planning, more concerned about keeping jobs in the country than adopting a revolutionary technology.

Mr. Wells of the Cardiff Business School says Volkswagen desperately needs to bring in new blood, particularly from such tech sector firms as Google, where autonomous vehicles are currently making the most headway.

“Volkswagen continues to think about cars in a traditional way, when companies like BMW are starting to grasp the changes that are needed,” Mr. Wells said. “The whole ethos of the company has to change, not only to prevent things like the diesel scandal happening again, but to carve out a different sort of future.”

 

Charles Wallace is an editor with Handelsblatt Global. Martin Murphy covers the steel, car and defense industries for Handelsblatt. Markus Fasse specializes in aviation and automobile industry news and works from Handelsblatt’s Munich office. To contact the authors: murphy@handelsblatt.com and fasse@handelsblatt.com

We hope you enjoyed this free article.

Subscribe today and get full access to market-moving news in Europe's leading economy.