Chairman Piech Instigates Turmoil At The Top Of Volkswagen – Forbes
Volkswagen Chairman Ferdinand Piech has thrown the future leadership of the company into question with his withdrawal of support for VW CEO Martin Winterkorn.
Winterkorn, 67, has been in place since 2007, and was expected to take over from 77 year old Piech when he retires in 2017.
With a weekend to digest the news which emerged Friday following a Piech interview with German magazine Der Spiegel, some of the various factions on the Volkswagen board have made it clear that Piech doesn’t have a majority of the votes. Lower Saxony, with one-fifth of the shares, was with Winterkorn, as were some Porsche Porsche controlling family members and union boss Bernd Osterloch too.
So why did Piech make his explosive intervention?
According to investment researcher Evercore ISI, Piech realized he was in a minority, but wanted to launch a debate about the future of the company.
During Winterkorn’s tenure, VW has expanded at a huge rate, but hasn’t managed the transition well. Volkswagen, Europe’s biggest car maker, is said to employ too many people, doesn’t make enough money, and is relying on raising sales to flex its muscles rather than focusing on the bottom line. Profits at its namesake VW brand have been under pressure. Volkswagen has earned the ire of investors by increasing sales by 30 per cent in five years while profits remained relatively flat. The U.S. operation has failed to make serious inroads in the market there.
The company is in the midst of $11.8 billion cost cutting programme. The efficient administration of the company is hampered because it is dominated by the state government of Lower Saxony and the trade unions.The state of Lower Saxony and labor leaders have majority control of Volkswagen’s supervisory board, the powerful body that appoints and dismisses members of the management. Any important decisions, such as the building or shuttering of plants, need a two-thirds majority on the board.
VW has been on a brand buying spree and now has 12, including the upmarket luxury Bentley, Lamborghini supercars, Ducati motorbikes and MAN MAN trucks. It sells cheaper versions of VW brand cars disguised as Skodas and SEATs.