Crisis Management

Steering Through the Storm

matthias müller dpa march 1 geneva auto show
A new era beckons for VW.
  • Why it matters

    Why it matters

    At this week’s Geneva auto show, Volkswagen projected a contrite but confident face to the global auto industry, promising to put its Dieselgate scandal behind it.

  • Facts

    Facts

    • VW had a low-key presence at the Geneva Motor Show in the wake of an emissions-cheating scandal that has affected 11 million diesel cars worldwide.
    • VW Chief Executive Matthias Müller took pains to avoid a repeat of his remarks at the Detroit Motor Show in January, when he cast Dieselgate as a “technical” problem.
    • Mr. Müller said he expected firm but fair treatment from U.S. authorities.
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    Audio

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In years gone by when Volkswagen took center stage at the Geneva Motor Show, the German automaker celebrated its 12 brands with verve and panache. But this year, in the wake of Dieselgate, the tone is humility, even contrition.

Europe’s largest automaker put on virtually no show this week, and confined itself to part of vast exhibition hall No. 7. Far from its showy galas of the past, the new VW models this year were parked modestly along the edge of the hall.

At the center of a storm that threatens the future of Germany’s biggest listed company stood VW’s top management team, led by its crisis-managing chief executive, Matthias Müller. He was flanked by members of the Porsche and Piëch families, which hold a controlling stake in the troubled giant.

The costs of VW’s emissions-rigging scandal are still unknown, although the automaker has already set aside €6.7 billion ($7.2 billion) to pay for the recalls, fines and legal fees coming its way. No one knows whether the huge sum will be enough — or just a down payment on an even bigger industrial disaster.

 

Automated driving VW Volkswagen Audi BMW Daimler Mercedes cars piloted Hands Off the Wheel-01

 

As the German automaker attempts to broker a reasonable settlement with U.S. regulators, the damage continues to roll in. On Wednesday, sales of VW-brand cars fell 13 percent in the United States, the fourth consecutive monthly decline since the Dieselgate scandal broke last September.

Sales of VW’s luxury Audi unit actually rose 2 percent during February in the United States, but this week in Switzerland, the automaker’s strategy seemed to be: Head down, stiff upper lip and focus on a green, self-driving future.

“2016 is the year in which we want to solve the problem with our diesel engines,” Chief Executive Matthias Müller said as the show opened. “And 2016 is also the year in which we’ll lay the foundation for a new, a better Volkswagen.”

Many in the scrum of reporters around Mr. Müller may have wondered whether he would repeat the gaffe that turned his visit in January at the Detroit Motor Show into a public relations disaster.

In an interview with U.S. radio broadcaster NPR in Detroit, he had sounded dismissive rather than contrite about the scandal that has rocked the company.

“2016 is the year in which we want to solve the problem with our diesel engines. And 2016 is also the year in which we’ll lay the foundation for a new, a better Volkswagen.”

Matthias Müller, Volkswagen CEO

He said Volkswagen “didn’t lie” to U.S. regulators when confronted with false diesel emissions data — which the U.S. Environmental Protection Agency has said — and called the situation “a technical problem,” rather than fraud.

But in Geneva this time, there were no blunders. “The misunderstanding was very unfortunate, I made a mistake,” Mr. Müller said on Monday, referring to the Detroit interview.

The media criticism clearly stung him. He called it “unfair.”

To avoid a repeat of such a faux pas, Mr. Müller gave all of his TV and radio interviews on Monday afternoon, before VW’s main presentation. And he played it safe. In interviews with many English-language broadcasters, he spoke German and had an interpreter translate statements into English.

 

VW Volkswagen Toyota General Motors GM The Biggest Carmakers-01

 

But then, as the evening wore on, Mr. Müller became surprisingly open, to the surprise of many observers. He spoke at length about the scandal, standing upright and answering all questions, even sensitive ones about the delicate talks underway between VW and U.S. justice and environmental authorities, where it faces billions in potential fines and compensation payments.

Mr. Müller was clearly at pains to demonstrate that he has understood the key challenges facing automaking. He now actively supports electric mobility and self-driving cars, two concepts he had voiced skepticism about as chief executive of Porsche, before being named to lead VW as the scandal broke.

To underscore his point, Mr. Müller called Johann Jungwirth onto the stage. The 42-year-old former Apple executive was hired in November to take on the new role of chief digital officer at VW.

 

skoda vision s concept car getty images harold cunningham
Volkswagen kept a low-key profile at this week’s Geneva Motor Show, but there were exceptions, like the Vision S concept car, an SUV from VW’s Czech unit, Skoda. Source: Getty Images / Harold Cunningham

 

“Talking with him about the future of mobility is fascinating,” Mr. Müller said. “JJ,” as VW’s new pop star is called, walks the line between the conventional auto industry and the world of Silicon Valley, he said.

“The industry is going through fundamental change,” Mr. Jungwirth said.

That change has yet to happen at VW, which could be seen from the new models on display in Geneva.

As the evening wore on, Mr. Müller became surprisingly open, to the surprise of many observers. He spoke at length about the scandal, standing upright and answering all questions, even sensitive ones about the delicate talks underway between VW and the U.S.

With 1,500 horsepower and a top speed of 420 kilometers (260 miles) per hour, the Bugatti Chiron, a beast of a sports car, can’t be described as environmentally friendly. But exclusive customers want this high-margin product and VW needs every euro it can get right now.

The company’s €6.7 billion set aside to cover the fallout of Dieselgate will likely not be enough. Will the eventual costs — some horror scenarios put the final tab at €40 billion — endanger VW, Mr. Müller was asked.

He said he doesn’t think so.

“We hope that the authorities will treat us firmly, but fairly. The Americans don’t intend to ruin us,” he said.

He’s well aware U.S. authorities are scrutinizing every word he utters. But he insisted he won’t let that change him. He stayed almost until the end of Monday’s event, flanked by his supervisory board member and top shareholder Wolfgang Porsche, who slapped him on the back.

 

Matthias Mueller CEO VW Volkswagen Detroit Auto Show Jan 2016 Source Larry W Smith dpa
In Geneva this week, VW CEO Matthias Müller avoided a gaffe he made at the Detroit Auto Show in January (pictured), when he described Dieselgate as a “technical” problem, angering U.S. authorities. Source: DPA

 

There’s a palpable feeling of relief that the era of bombastic self-promotion and megashows at Volkswagen is over. The automaker has apparently entered a new age of modesty, brought on by its fall from grace.

“The (more modest) Volkswagen loft instead of the Grand Hall; focused conversations instead of the big show,” as Mr. Müller put it.

Some of his colleagues said VW was seizing on the crisis as an opportunity. Amid the drumbeat of bad news, the automaker has little other choice.

The motto of VW’s presentation in Geneva was “Get closer. New Perspectives” and there was a sense of a fresh start with new faces. Six of 10 members of the group management board have joined the company since 2015, and seven of 12 brands have new chief executives.

Almost all of them were in Geneva on Monday.

It had the air of a get-to-know-you gathering under the glare of the limelight.

Whether VW’s much-vaunted relaunch is a success will become evident in its rollout of its new battery-powered cars.

 

VW Volkswagen Daimler BMW GM General Motors Diesel Has Gained Popularity in the United States-01

 

The company plans 20 new fully electric and hybrid models by 2020, which some in the industry see as overly ambitious. But for VW, time is of the essence, and the future is a much better place to be than the present.

“In the long term, electric cars will cost less than combustion ones,” Mr. Müller said.

All it will take, he said, is a joint effort.

 

Martin Murphy and Christian Schnell are editors at Handelsblatt who write about Volkswagen and the German auto industry. Kevin O’Brien is editor in chief of Handelsblatt Global Edition. To reach the authors: murphy@handelsblatt.com, schnell@handelsblatt.com and obrien@handelsblatt.com.

 

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