Volkswagen’s Dieselgate emissions-rigging scandal was a massive blow for Europe’s largest carmaker, its shareholders and customers – not to mention the environment. It may even have dented Germany’s own reputation for quality engineering.
But there’s one big winner, at least financially: Hans Dieter Pötsch.
The former VW chief financial officer, in exchange for taking the reins of VW’s non-executive supervisory board from patriarch Ferdinand Piëch last October, will receive a €10 million, or $11.4 million, signing bonus of sorts in a series of payments.
The sum, disclosed by magazine Der Spiegel on Thursday, comes from Volkswagen’s forthcoming report on employee compensation in 2015, which is scheduled for public release at the end of this month.
Considering the deep state of the company’s crisis and its plummeting profitability, it is difficult to follow how Mr. Pötsch’s €10 million adds up.
Mr. Piëch received only €1.5 million for his services as supervisory board chairman.
In contrast to the new chairman’s jackpot, Volkswagen shareholders, including hundreds of thousands of individual stockholders, have lost about €23.3 billion since the company’s emissions-cheating machinations came to light last September. VW’s preference share price has shed nearly 40 percent in that time.
VW’s more than half-a-million employees – 95 percent of whom are probably innocent of any wrongdoing – must also pay the price. Because the company faces legal claims and fines in the double-digit billions of euros, VW is tightening belts across its global industrial empire. Investments, jobs and bonuses are being slashed.
But Mr. Pötsch faces anything but hard times.
From his point of view, however, this is neither unusual nor unreasonable since he did not seek out his new position and his executive-level contract as chief financial officer was valid until 2017.
Thus, it seemed reasonable that his contract should be paid out, even if he was the chief finance official during much of the period when the diesel deception took place.
After all, he has agreed to forego his compensation as supervisory board chairman for this year and next, so as not to double-dip, company sources told Handelsblatt.
As chief financial officer, Mr. Pötsch earned an annual base salary of €1.5 million. Including performance-based bonuses, he earned €7.7 million in 2013 and €6.5 million in 2014 – two very profitable years for the carmaker.
But considering the existential crisis and VW’s plummeting profitability, it is difficult to follow how Mr. Pötsch’s €10 million adds up. While Volkswagen is expected to post a loss when it presents its 2015 financial results later this month, Dieselgate litigation and warranty violations could cost an astounding €50 billion to €80 billion.
As the former right-hand man of ex-CEO Martin Winterkorn, Mr. Pötsch owns at least a share of responsibility for the disaster. But he is the only person still at Volkswagen who has managed to increase his wealth in the face of the automaker’s collapsing share price, eroding employee base and mounting legal liabilities.
His mentor, Mr. Winterkorn, resigned days after the scandal became public last September but he continues to earn well. According to Handelsblatt information, the former CEO will earn at least €10 million from VW through this year. As VW’s supervisory board chairman, Mr. Pötsch wields even more power: He can set corporate strategy and hire and fire the top executives.
His sweetheart deal has irritated some at Volkswagen.
Officially, neither VW’s works council nor the state of Lower Saxony, which owns 20 percent of the carmaker, would comment on the payment. But several members of the supervisory board told Handelsblatt they did not understand why Mr. Pötsch should receive so much for transitioning into his new job.
“It definitely would have been better if Pötsch had been paid this amount after the completion of the internal auditor’s investigation,” said one member of the supervisory board, who wished to remain unnamed.
The supervisory board is discussing whether or not to exonerate the former executive board at the annual general meeting of shareholders in June – an awkward discussion given the board’s current head, who is after all the former chief financial officer. Some members of the board favor delaying a vote, in part to keep liability questions open.
It still has not been completely determined who knew what, when and how about the Volkswagen’s emissions-cheating affair. Officially, the company has painted the deception as the work of a few mid-level rogue engineers. All of the top managers, Mr. Winterkorn, Mr. Pötsch, the new CEO, Matthias Müller — have all denied knowledge of the emissions-rigging at the heart of the affair.
But Mr. Pötsch’s €10 million windfall – the first tranche of which has already been deposited in his account – seems like an acquittal.
Whether it is remains to be seen.
Leaked documents suggest that Mr. Pötsch knew of VW’s emissions rigging weeks, if not months, before the public found out.
Meanwhile, employee bonuses are likely to fall well below last year’s level of €5,900 for each of 115,000 workers covered by VW’s core labor contract.
“Ten percent of zero is zero,” Bernd Osterloh, VW’s powerful labor chief, said at a pre-Christmas event. Typically, 10 percent of VW’s earnings before interest and taxes are spread among employees fortunate enough to be covered by the core contract. For 2015, they will receive a “recognition reward.”
At the time, Mr. Osterhoh also said he expected top managers to forfeit their own bonuses too. But Der Spiegel on Thursday reported that management board members were only prepared to receive a smaller bonus – rather than none at all.
Members of VW’s management board are accustomed to receiving among the biggest bonuses in Germany, which are based on performance. Mr. Winterkorn, the former chief executive, received €15.9 million in total compensation in 2014, more than any other head of a Dax blue-chip company. Only €1.9 million of it was guaranteed.
The supervisory board has yet to make a decision on 2015 bonuses for management.
Members of the board are still “forming their opinions,” said a spokeswoman for Stephan Weil, the prime minister of Lower Saxony, a member of the supervisory board.
A decision is expected at the board’s April 20 meeting, when the supervisors also plan to approve Volkswagen’s 2015 financial results. VW will present the results to investors and the public on April 28.
With Volkswagen’s earnings likely dipping deep into the red, the topic of management bonuses could become an awkward one in the face of upcoming collective-bargaining negotiations. These also are scheduled for the end of April.
Sven Afhüppe is editor in chief of Handelsblatt. Martin Murphy and Christian Schnell are editors with Handelsblatt. To contact the authors: firstname.lastname@example.org, email@example.com, firstname.lastname@example.org