Volkswagen Management

Desperately Seeking New Blood

VW2
Matthias Müller wants to shake up the management culture at Volkswagen.
  • Why it matters

    Why it matters

    Mr Müller is trying to fill key posts with outsiders to help change VW’s hierarchical management culture, which some say is partly to blame for the emissions scandal.

  • Facts

    Facts

    • As a result of the scandal, VW on Wednesday posted a third-quarter loss of €3.48 billion ($3.85 billion), its first loss in at least 15 years.
    • Mr. Müller says the automaker will in the future place a greater emphasis on profits than growth.
    • VW must shortly fill key posts, including the heads of North America, China and the personnel department.
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    Audio

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At his first major public presentation on Wednesday, new Volkswagen chief executive Matthias Müller pledged to focus on rebuilding trust after the emissions scandal rather than growing at all costs.

His predecessors Martin Winterkorn and Ferdinand Piëch were bent on selling more vehicles than Toyota and General Motors, a goal that VW has achieved. But the scandal, which erupted when VW was found to have fitted devices that artificially lowered emissions to millions of engines, has forced the carmaker to radically change its management culture and philosophy.

“Much has been secondary to going ‘higher, faster, further’, especially return on sales,” Mr. Müller said. The priority in future wouldn’t be to sell 100,000 cars more or less than a big competitor, but to achieve qualitative growth. “We must change our thinking and the way in which we deal with each other and with problems and mistakes,” he said in a brief address to investors while presenting VW’s first quarterly loss in at least 15 years.

VW reported a third-quarter operating loss of €3.48 billion, or $3.85 billion, and said the €6.7 billion it has set aside in the period to cover the costs of its biggest ever scandal was likely just the beginning.

Mr. Müller wants more young, female and international executives to break up the old-boy networks at VW.

Mr. Müller said VW’s new “Strategy 2025” would be worked out by the middle of 2016 and that the firm would place a strong emphasis on uncovering risks and quickly setting aside provisions for legal costs and compensation payouts from “Dieselgate.”

“We will do everything to win back lost trust,” said Mr. Müller, who later flew to China with Chancellor Angela Merkel and other business leaders to promote trade and try to limit the fallout of the scandal.

But he still has to find the right crew to help him reach his aims. The second tier management level below the board doesn’t have enough executives who think for themselves, said people close to the chief executive. Under previous VW leaders, independent thinking wasn’t encouraged, where managers were taught to carry out orders rather than provide constructive criticism.

Mr. Müller wants to tackle that by building a culture of shared responsibility where employees are encouraged to give their views. He has already started bringing in new people in recent weeks, hiring Daimler manager Christine Hohmann-Dennhardt as compliance manager, and Thomas Sedran, a former chief executive of General Motors’ European division Opel, is joining VW to run group strategy, the company announced on Monday.

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Former Opel boss Thomas Sedran is joing VW as its strategy chief. Source: DPA

 

Both of them are outsiders, which is a signal to VW’s established managers who tend to see themselves as the crème de la crème of automotive decision-makers. The emissions scandal, which could cost the automaker up to €40 billion according to some estimates, has disproved that self-assessment.

“In the meetings you mostly get gray-haired men from Germany who in most cases never worked at any other company apart from VW,” said one insider. Mr. Müller wants more young, female and international executives to break up the old-boy networks at VW.

Industrial groups Siemens and Thyssen-Krupp, two other major companies that were hit by scandals, went through a similar rejuvenation.

Dieselgate Weighs on VW-01 (2)

 

The next new hires will come quickly. A number of important positions are vacant. VW must find a North America chief who ideally should be experienced in dealing with authorities and preferably be American, said company sources. The core VW brand has struggled to find its way in the U.S. market because it doesn’t understand the needs of U.S. customers. But it will be difficult to find suitable managers because it’s a tough job and there’s a good chance that he or she will fail, said one manager.

The future North America chief will have to face U.S. authorities and be accountable for handling the aftermath of the diesel scandal. That’s a role that Michael Horn, who is responsible for the U.S. market, can’t fulfill because he has been in his job since early 2014. He’s not a new broom.

VW also needs a new head of China to succeed Jochem Heizmann, 63, whose contract is unlikely to be extended because of his age. It’s possible that an Asian candidate might get the job — for VW, that would be nothing short of a revolution.

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Bernd Osterloh, current head of VW’s Works Council, is in the running to take over as head of personnel. Source: Reuters

 

The most important vacant position is the head of personnel. The incumbent, Horst Neumann, 66, retires at the end of the year. Whoever succeeds him will have a direct impact on VW’s management culture by nurturing a new generation of managers and shaping the structure of the workforce.

For a long time, VW’s works council chief, Bernd Osterloh, was seen as the favorite for the job. But the diesel disaster has changed that and Mr. Müller wants someone fresh for that position, preferably from outside the company and female, said sources close to the management board. No decision has been taken yet, partly because powerful engineering union IG Metall wants a say in the appointment.

 

Markus Fasse is a Handelsblatt editor specialized in the automobile and aviation industries. Martin Murphy specializes in the automotive, defence and steel industries. To contact the authors: fasse@handelsblatt.com, murphy@handelsblatt.com

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