labor day

The Kingmaker at VW

VW Osterloh, PR
Bernd Osterloh heads the workers' council and represents labor on VW's board.
  • Why it matters

    Why it matters

    Bernd Osterloh, who heads up Volkswagen’s 600,000-strong workforce, is a major behind-the-scenes player in the power struggle over current CEO Martin Winterkorn.

  • Facts

    Facts

    • Supervisory board chief Ferdinand Piëch last Friday withdrew his support for Mr. Winterkorn.
    • The steering committee of the supervisory board is expected to meet at the end of this week.
    • Global VW brand sales fell 1.3 percent, U.S. sales even 9.3 percent in the first quarter of 2015.
  • Audio

    Audio

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Few labor leaders enjoy as much power as Bernd Osterloh, the leader of Volkswagen’s army of 600,000 workers. He will be a key figure in efforts to resolve the leadership dispute triggered by supervisory board chairman Ferdinand Piëch, who last Friday declared that chief executive Martin Winterkorn had fallen out of favor.

The phone lines are running hot in Mr. Osterloh’s fourth-floor office in Volkswagen’s gigantic home plant in Wolfsburg. All the main players in the power struggle are seeking his input, say sources close to the proceedings.

Mr. Osterloh is in touch with Mr. Piëch, Mr. Winterkorn, Wolfgang Porsche – chairman of the Porsche SE holding company which controls 51 percent of VW common stock – and with Stephan Weil, premier of the state of Lower Saxony, which is VW’s second-largest shareholder.

“We’re looking for a swift, comprehensive solution,” said a source close to engineering union IG Metall, which Mr. Osterloh and 97 percent of Volkswagen’s workers in Germany belong to.

There are plans to hold a special meeting of the board’s steering committee at the end of the week but no exact time has yet been set.

While the works council is looking for common ground with the Piëch and Porsche families that own a majority of the group, Mr. Winterkorn is doing his job “at full throttle,” said a person close to him, adding, however, that it was clear that he’s no longer master of his own fate. “The decision will have to be taken in the supervisory board,” the person said.

Managers come and go, family owners stay.

In the final analysis, said one person close to the families, the matter isn’t about people but about the issues at hand.

A worker representative agreed: “Managers come and go, family owners stay.” The aim now isn’t just to resolve the Winterkorn issue but to arrive at an overall agreement that could include, for example, settling the replacement of Horst Neumann, Volkswagen’s outgoing head of human resources.

Mr. Osterloh’s declaration of support for Mr. Winterkorn last weekend was genuine and “heartfelt,” said someone who knows him well. But his priority is to protect the workforce and the German VW plants, his power base.

First-quarter unit sales figures for Volkswagen brand vehicles show how critical the situation has become. In China, the most important single market, sales were down 0.6 percent year-on-year. In Brazil, they fell 18 percent and in Russia they slumped as much as 47 percent.

Global VW brand sales fell 1.3 percent to 1.48 million units. And U.S. sales in the first quarter of 2015 fell 9.3 percent year-on-year to 79,200 vehicles, continuing a two-year downtrend.

 

Different Cars Different Results-01

 

Mr. Winterkorn, who has been in charge of Volkswagen since 2007, admits that he left it too long to tackle the carmaker’s problems in the prestigious U.S. market. He’s now trying to recover lost ground, announcing at the Detroit Motor Show in January that Volkswagen was switching into “attack mode,” investing $900 million in enlarging its Chattanooga plant and pledging to at last offer the kind of cars that American drivers have always loved most: Big sports utility vehicles.

In 2016, Volkswagen will roll out its biggest such car yet: A five-meter-long giant with three seat rows, specially designed for the U.S. market.

Mr. Osterloh’s power is evident in his position as deputy chairman of the supervisory board that hires and fires chief executives. It was also illustrated in a small but telling scene at the Geneva Car Show this year.

On March 4, on the eve of the show, a large scrum of reporters had gathered around Mr. Osterloh, who was holding forth on a grandstand a few rows above Mr. Winterkorn. The chief executive was speaking into a comparatively small number of microphones. When he looked up and realized that the union boss was getting all the attention, he shook his head. Mr. Osterloh grinned and called down to him: “Do you want me to send some down to you?”

It was a joke, but it reflected the balance of power in the Volkswagen group. On the one hand, the manager Mr. Winterkorn, formally an employee of the supervisory board. On the other hand, Mr. Osterloh, deputy chairman of that very panel.

True, Mr. Osterloh could happily go on working with Mr. Winterkorn and wouldn’t be averse to extending his contract beyond 2016, as he declared on Friday. But he is preparing himself for the post-Winterkorn era, according to works council sources, not least because he sees himself as a co-chief of Europe’s largest automaker.

Piech, Winterkorn, Polaris
Will he stay or will he go? Source: Polaris

 

He surprised the management board recently by stating publicly that he could envisage bigger savings than the €5 billion “efficiency program” that Mr. Winterkorn last summer prescribed for the coming years. He sounded like a true executive when he appealed to his own side: “It’s necessary that everyone in the company shows more discipline,” he said. It was hard to make out who was speaking there: the union leader or the secret chief executive.

And it was Mr. Osterloh who pinpointed VW’s biggest failing even before Mr. Piëch did. The ill-fated U.S. expansion drive ordered by Mr. Winterkorn had been a “disaster,” the union boss said in January of last year. Volkswagen, he said, had misunderstood American customers. “The worm has to appeal to the fish, not the angler,” he declared.

Mr. Osterloh and the IG Metall union are focused on preserving their own power at Volkswagen, partly for historic reasons. After all, it was expropriated union wealth that the Nazis invested in the construction of the Volkswagen plant in 1938.

He’s secured union power in recent years with a twin-track strategy, signing off on Mr. Winterkorn’s aggressive expansion drive in world markets while making sure that German plants and workers benefited most from the growth. Of the €85.6 billion, or $91.3 billion, investment program that the supervisory board agreed for the years up to 2019, more than half will flow into the German plants.

“With this planning round, Volkswagen once again has given its clear commitment to Germany as an industrial location,” said Mr. Osterloh, every bit the politician. He declined to add that even though most of Volkswagen’s future growth will come from far-flung countries, German workers were benefiting most from the investment drive.

But Mr. Osterloh’s plan only works as long as the group rakes in big profits in foreign markets. Now that the global growth strategy is starting to backfire, IG Metall and Mr. Osterloh are looking well beyond 2016, when Mr. Winterkorn’s contract runs out.

 

Christian Schnell, Martin Murphy and Markus Fasse are editors at Handelsblatt who cover the auto industry. Carsten Herz is a London correspondent. To reach them: schnell@handelsblatt.com, murphy@handelsblatt.com,  fasse@handelsblatt.com and herz@handelsblatt.com

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