Martin Winterkorn VW's Powerful King

VW Group boss Martin Winterkorn has never been more powerful, but his obsession with quality and control remain significant chinks in his armor and could threaten the company’s long-term outlook.
Ferdinand Piëch turned his back on CEO Martin Winterkorn, but the VW patriarch gambled wrong and resigned as supervisory board chairman in April.

Volkswagen seemed paralyzed in April when hostilities broke out between the two most powerful men at the world's largest carmaker, supervisory board chairman Ferdinand Piëch and chief executive Martin Winterkron.

“I am distancing myself from Martin Winterkorn,” Mr. Piëch, 78, declared in an interview. The standoff between the patriarch of Volkswagen and his foster son threw the automaker into turmoil.

Days of speculation over who would emerge victorious ended with a simple press release announcing the supervisory board had determined that Mr. Winterkorn “is the best possible chairman of the board of management for Volkswagen.” Mr. Winterkorn stayed, Mr. Piëch left.

Profitability suffers from Mr. Winterkorn's love affair with quality and often decisions are made too late.

Mr. Winterkorn has never been as powerful as he is now. First, the supervisory board on Wednesday said that it would extend his contract until the end of 2018. Then, on Thursday, a new appointment further cemented his position when the controlling shareholders of VW, the Porsche and Piëch families, announced chief financial officer, Hans Dieter Pötsch, 64, would very likely become the new chairman of the supervisory board. The decision puts to an end speculation about who would ultimately replace Mr. Piëch.

Mr. Pötsch, 64, has been responsible for finances in Wolfsburg since 2003, and is considered a close confidant of Mr. Winterkorn.

The irony is that when Mr. Winterkorn’s predecessor, Bernd Pischetsrieder, stepped down in 2006, Mr. Piëch also wanted Mr. Pötsch dismissed. The head of finance was only allowed to remain on probation, but now he’s taking Mr. Piëch’s place.

More important to Mr. Winterkorn, who is nicknamed “Wiko” by VW staff, is that an outside candidate, which Mr. Piëch had repeatedly touted, is off the table.

And so, Mr. Winterkorn’s desk remains the center of power at VW, where the trained engineer rules over his 12-brand kingdom. In his office, he and his team will decide over careers, new car models and billion-euro investments.

“Some things can’t be delegated,” Mr. Winterkorn once said.

He never quite gave up his job as head of quality assurance, the position he held when he began his career at Audi in 1981. When checking out VW vehicles on display at car shows, he pulls out a measuring tape to check gap widths and caresses the paint to detect even the slightest irregularities. The message is clear: Quality at VW is a serous concern for the boss.

The success Mr. Winterkorn enjoys is indisputable. Since taking the top job in 2007, the VW Group has doubled sales, tripled profits and become the largest automaker in the world, three years earlier than planned.

 

Winterkorn 007 - Neu 2015-07-03-01 resume WTB 2014

 

Global brands such as Porsche, Scania and Ducati were integrated into the group. Even the cash Mr. Winterkorn put into the company’s soccer club VfL Wolfsburg was well invested. The team has scored a German championship title and a German Super Cup victory.

But profitability suffers from Mr. Winterkorn’s love affair with quality and often decisions are made too late. Problems are too seldom a topic of discussion in the corporate offices because Mr. Winterkorn takes personal offense at mistakes.

The latest to experience his anger was the VW management team in the United States. Mr. Winterkorn replaced U.S. executives, publicly criticized their performance in public and declared he now would keep a personal eye on the U.S. market. Whenever there is a fire in the VW realm, it’s the boss who extinguishes it.

At the moment, Mr. Winterkorn looks to be indispensable. Already, he has eliminated promising candidates that might succeed him, including Karl-Thomas Neumann, now the chief executive of Opel but formerly in charge of VW’s operations in China.

None of the remaining crown princes are openly laying claim to the throne. Herbert Diess, the new head of VW’s core brand and a former BMW manager, hasn’t yet built a power base. The executive in charge of Porsche, Matthias Müller, is already 62 years old. Now that Mr. Winterkorn’s contract has been extended, Mr. Müller would be a transitional candidate at best.

If Mr. Winterkorn stays until 2018, he would be 71. It is highly questionable whether the older “Car Guy” can credibly steer VW into the digital world.

The company urgently needs this transition. Profit margins are going down, the vital Chinese market is ailing and fresh challengers from Apple, Google and Tesla challenge the business models of established carmakers.

It may be that the greatest tests facing Mr. Winterkorn lie ahead.

 

Lukas Bay is an editor with Handelsblatt's companies and markets desk. To contact the author: bay@handelsblatt.com

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