Career Interrupted

Volkswagen, Struggling With Factory Breakdowns, Parts Ways With Top Production Manager

VW Production chief Michael Macht and CEO Martin Winterkorn at the May 13, 2014, annual shareholders meeting in Wolfsburg, Germany. Source DPA
Volkswagen on Sunday announced the departure of its top VW production manager, Michael Macht, left, after a series of breakdowns at factories in Germany, the United States and Brazil. Mr. Macht appeared recently with the VW CEO Martin Winterkorn, right, at a new model presentation.
  • Why it matters

    Why it matters

    Management upheaval at Volkswagen, Europe’s largest automaker, could hinder the automaker from its plan to overtake global leaders Toyota and General Motors.

  • Facts

    Facts

    • Volkswagen on Sunday announced the departure of its top VW production manager, Michael Macht.
    • The personnel move came following complaints by VW workers about persistent production breakdowns in Germany and abroad.
    • Mr. Macht, who had run VW production for four years, left the German automaker through “mutual agreement,” the company said.
  • Audio

    Audio

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Volkswagen, Europe’s largest automaker, over the weekend said that it was parting ways with its top production manager, Michael Macht, following complaints about repeated breakdowns at the automaker’s main factory in Wolfsburg.

In a statement, Volkswagen said Mr. Macht, a 53-year-old board member responsible for production, would leave the company “in mutual agreement.’’ The Volkswagen chief executive, Martin Winterkorn, thanked the departing executive for his “service.’’

The high-level departure came less than a month after Volkswagen’s rank-and-file, at a companywide workers meeting, complained about a spate of technical breakdowns that interrupted auto assembly in Wolfsburg.

At the meeting, Bernd Osterloh, the head of Volkswagen’s workers council, said employees would “not be held responsible for the defective processes and technical problems in production.’’ At the meeting, Mr. Winterkorn, the Volkswagen chief executive, did not rise to defend his manager, but also joined in the criticism of problems with a new production line.

“The planning of these facilities is often too big, too complex and too expensive,’’ he told about 20,000 workers who attended the meeting in Wolfsburg.

The VW brand, the core line of the world’s third-largest automaker, is not as profitable as its premium lines Audi and Porsche. The most recent VW operating profit margin was just 2.9 percent, far less than its competitors and only half of the company’s target.

The departure of Mr. Macht, the former head of the Volkswagen luxury line Audi, is the most visible sign to date of the automaker’s commitment to trimming €5 billion ($6.7 billion) in costs from VW production through 2017.

The VW brand, the core line of the world’s third-largest automaker, is not as profitable as its premium lines Audi and Porsche. The most recent VW operating profit margin was just 2.9 percent, far less than its competitors and only half of the company’s target.

According to people close to the company, who declined to be identified, Volkswagen has been experiencing repeated production interruptions at its factories around the world, especially in Wolfsburg.

The breakdowns have cost the company millions of euros, the person said.

Mr. Winterkorn had become disappointed with the inability of Mr. Macht, who has the reputation as a gentle, easy-going manager, to get the situation under control. He had preferred someone who would pound his fist on the table and get results, the person said.

 

Vollkswagen factory in Wolfsburg, Germany
Volkwagen’s main factory in Wolfsburg, Germany, has been hit by technical breakdowns. Source: Creative Commons

 

The lagging profitability of the VW brand is a result of the automaker’s rapid expansion, which has been marked by soaring costs. Volkwsagen produced 5.2 million vehicles in the first half of this year at 106 factories around the world.

Under Mr. Macht, who had been in charge of VW production for four years, the annual production of vehicles rose to almost 10 million in 2013 from 6.7 million in 2009, as the company overtook GM in output and set its sights on global leader Toyota.

Mr. Macht was not the first victim of VW’s new profitability push. A few days earlier, the VW marketing chief, Simon Thomas, also left the company. According to a person close to the situation, who declined to be named, Mr. Thomas lacked the ideas to improve the situation with the automaker’s core Golf and Passat models.

Similar departures have also taken place in the last year among the top production managers at Audi, as well as at VW production sites in the United States and Brazil.

But the series of top-level management changes do not address an underlying structural problem at Volkswagen: a stultifying top-down corporate structure that prevents top managers from identifying and addressing problems as they arise.

One good example is the situation in the United States, where VW managers were quicker than their German counterparts to demand new models to address a slowdown in sales. But managers at headquarters in Germany did not react quickly, and sales in the United States declined rapidly. The same is true with the demand for a new, more sporty VW SUV, which top managers identified as a priority two years ago.

A new model is planned – but won’t roll off the assembly line before the end of 2016, at the earliest. The latest departures may not be the last.

The head of sales at Volkswagen, Christian Klingler, is apparently also being sharply criticized by VW employees, who also as is the custom in Germany have two members on the company’s supervisory board. Mr. Klingler is now under pressure to deliver the results of his new strategy to revive the VW brand and make it more profitable – or else.

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