VW Decision

Winterkorn Stays at the Wheel

VW Volkswagen Martin Winterkorn CEO Source DPA 46907037
Martin Winterkorn can continue working as VW's chief executive until the end of 2018.
  • Why it matters

    Why it matters

    Stability on the executive board could help Volkswagen to tackle weak profitability at its core VW brand and sales problems in the United States, China and Brazil.

  • Facts

    Facts

    • The term of chief executive Martin Winterkorn was due to expire at the end of 2016.
    • In April, Mr. Winterkorn was in a board battle with VW non-executive chairman Ferdinand Piëch, who resigned.
    • VW is facing several challenges, particularly at its VW brand, where profitability has been weak.
  • Audio

    Audio

  • Pdf

Volkswagen, the world’s largest carmaker in the first half year, has closed one of the open ends of April’s board battle, which had pitted VW patriarch Ferdinand Piëch against his chief executive Martin Winterkorn.

Mr. Winterkorn, 68, will be offered a two year-extension on his contract as chief executive until the end of 2018, the car maker said in a statement on Wednesday.

The extension will lend stability to the maker of VW, Audi, Porsche and Skoda cars, which has seen its biggest market, China, stagnate, while revenue is falling in Brazil and Russia. Also, the company still has no permanent non-executive chairman from the majority owners, the Piëch and Porsche families.

Mr. Piëch, who together with the family of his cousins, the Porsches, controls 50.7 percent of VW shares, stepped down as chairman in April after losing the boardroom battle with Mr. Winterkorn.

“The company now has to cope with the market cool-down in China”

Stefan Bratzel, Managing director of the Center for Automotive Management

“The company is now opting for continuity,” said Stefan Bratzel, the managing director of the Center for Automotive Management in Bergisch Gladbach.

“This empty seat is a big problem,” he said, referring to the chairman position, which is currently only filled temporarily. “The company does not want big changes now when this position has not been filled,” Mr. Bratzel told Handelsblatt Global Edition.

By the end of the year at the latest, VW aims to decide who should permanently fill the position of non-executive chairman, the state premier of Lower Saxony, Stephan Weil, said on Wednesday. The state of Lower Saxony owns 20 percent of VW shares.

Mr. Piëch, one of the grand children of Ferdinand Porsche, who designed the original Volkswagen Beetle, had distanced himself from Mr. Winterkorn in April. The VW patriarch, who had lead the carmaker as chief executive from 1993 to 2002, was displeased with VW’s weak sales in the United States and the poor profitability of VW’s core brand.

These problems have not been solved and new ones have been added to Mr. Winterkorn’s list.

“The company now has to cope with the market cool-down in China,” said Mr. Bratzel of the Center for Automotive Management. “Flexibility is needed. We should not forget the other difficult markets – Brazil, Russia – but China is the most important.”

 

007 VW Volkswagen - Neu 2015-07-03-01 resume WTB 2014

 

VW is also in the midst of a transition, needing to become a more agile company and give subsidiaries more decision-making power.

In a supervisory board meeting scheduled for September 25, Mr. Winterkorn intends to propose to divide the group into four holding units, focusing on sports cars with Porsche, luxury cars with Audi, mass cars with VW and related brands and trucks with MAN and Scania, Handelsblatt learned from people familiar with the matter.

The carmaker has to change from a pure product producer to a service provider of mobility services, such as  connected driving, car sharing and data management, Mr. Bratzel said.

Google has been experimenting with its own self-driving car, Apple has been reported to be developing a car and Tesla Motors, founded in Silicon Valley in 2003, launched its first fully electric car in 2008 and is increasingly seen as an up-and-coming rival to the big automakers in Germany.

“There is the risk that these firms take over all operations, pushing car makers such as VW into the low-margin role of producer,” Mr. Bratzel said.

For newer executives at VW, the extension of Mr. Winterkorn’s contract also means former BMW manager Herbert Diess and former Daimler manager Andreas Renschler, both of whom have been considered potential likely successors to the role of chief executive, know they have two more years to prove themselves.

“The new people on board, Mr. Renschler and Mr. Diess, have not year earned their stripes in the firm, they aren’t yet anchored in the company,” Mr. Bratzel said. “They haven’t showed to VW they have the potential to steer the whole group. By the time Mr. Winterkorn resigns in 2018 they will have had the time to position themselves.”

Mr. Renschler and Mr. Diess are not the only crown princes in waiting. The executives heading Audi and Porsche, Rupert Stadler and Matthias Müller are also seen as potential candidates to one day lead the VW group.

 

Gilbert Kreijger is an editor with Handelsblatt Global Edition in Berlin, covering companies and markets. Markus Fasse from Handelsblatt contributed to this article. To contact the author:  kreijger@handelsblatt.com

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!