Volkswagen Leadership Clash of the Titans

Volkswagen’s supervisory board members are brimming with new-found confidence after facing down former chairman Ferdinand Piëch. Amid the jockeying for position, it remains unclear who will be the new chairman and future chief executive.
Who will manage VW? Its headquarters in Wolfsburg, Lower Saxony.

At the last moment, the main protagonist in the VW drama decided to bail out. Ferdinand Piëch, the Volkswagen patriarch who was the group’s non-executive chairman until last month, decided not to attend Wednesday’s annual shareholder meeting of Porsche Automobil Holding SE.

The holding owns 50.73 percent of Europe’s largest carmaker, and is the vehicle in which the Porsche and Piëch families hold their VW shares and control the group. The families are descendants of the inventor of the Volkswagen Beetle, Ferdinand Porsche.

Mr. Piëch last month lost a boardroom battle with Volkswagen chief executive Martin Winterkorn and other non-executive board members. The 78-year-old had turned against his former protégé Mr. Winterkorn amid disagreements over the carmaker's operations and priorities.

We will ensure that calm returns. Martin Winterkorn, CEO, Volkswagen Group

The meeting of Porsche holding shareholders, which include Mr. Piëch’s younger brother Hans Michel and his cousin Wolfgang Porsche, may shed light on who will become VW’s new non-executive chairman and succeed Mr. Piëch.

“We will ensure that calm returns,” Mr. Winterkorn said at the opening of the Porsche holding shareholders meeting. As well as being Volkswagen chief executive, Mr. Winterkorn is also the executive of the  Porsche Automobil Holding SE which controls the car maker.

Restoring stability at VW and finding a new supervisory board chairman among its 20 members will not be easy. Mr. Piëch’s grasp of the company he led for 13 years as chairman and nine years before that as chief executive was so strong that it won’t be easy to fill his shoes.

Since Mr Piëch’s departure, his power has effectively been spread among five factions in the VW non-executive supervisory board, one of which will produce VW’s next steward.

The factions consist of the members of the steering committee of VW’s supervisory board: Wolfgang Porsche, Lower Saxony governor Stephan Weil as representative of his states’s stake, and union representatives Berthold Huber and Bernd Osterloh. The fifth consists of Hans Michel Piëch, Ferdinand Piëch’s brother.

 

WTB 2014

 

The third-biggest VW shareholder with 17 percent, Qatar Holding, doesn’t play a significant role. The Qataris seem happy just to be observers at the carmaker.

It’s by no means a homogenous group. All of the factions are pursuing their own interests, and they’ve all gained confidence in the last four weeks of upheaval.

For many years, Mr. Piëch reigned supreme. When he declared in an interview with German weekly Der Spiegel last month that he was “at a distance” to Mr. Winterkorn, many in the company were convinced the chief executive’s days were numbered.

The supervisory board members may have been surprised by their own chutzpah in facing Mr. Piëch down. Now that he’s left, at least formally, they have drawn strength from their victory.

Mr. Piëch’s power shattered against a phalanx made up of worker representatives, other family members and the government of Lower Saxony. Their confidence has grown along with an awareness of the problems confronting VW such as weak U.S. sales and slowing growth in the hugely important Chinese market. Moreover, the reorganization of VW is being implemented painfully slowly.

 

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VW must now tackle these issues head-on, one supervisory board member told Handelsblatt. He added that anyone thinking life may now become easier for Mr. Winterkorn was gravely mistaken. The board expects him to get to grips with the problems.

Mr. Winterkorn has responded. A few days after Mr Piëch’s departure, he told 5,000 VW managers that he plans to install a new management structure and will unveil it by October.

But one of Mr. Winterkorn’ most important tasks will be the search for his own successor, said the supervisory board member. The decision is up to the board but Mr. Winterkorn will be involved because he will have to groom his replacement.

His term runs out at the end of next year, but Volkswagen said last month, at the height of the battle between Mr. Piëch and other supervisory board members, it would look at extending Mr. Winterkorn's contract.

It’s not yet clear whether all doubts about Mr. Winterkorn have been allayed. Hans Michel Piëch criticized him a month ago in Spiegel magazine because of weak profit margins at the VW brand and the delays in launching the so-called “budget car” with which VW wants to catch up with local competition in China.

Mr. Piëch’s heirs will need to keep a tighter rein on management from now on. Since he left, the Piëch and Porsche families have looked conspicuously united.  Cousins Wolfgang Porsche and Hans Michel Piëch last week traveled together to the grand opening of Porsche’s new U.S. headquarters in Atlanta. Both of them supported Hans Michel’s daughter Julia Kuhn-Piëch, 34, who filled one of the two vacant positions on VW’s supervisory board after Mr. Piëch and his wife Ursula stepped down.

 

Video: Mr. Winterkorn presented VW's state of affairs at the company's annual shareholders meeting last week.

 

Mr. Winterkorn’s room for maneuver may be getting smaller. The “Gang of Five Factions” has divergent interests ranging from cost savings to protecting jobs. And all of them are keen to use the power vacuum at the top of VW.

 

Bernd Osterloh - The Tactician

The top worker representative at VW has always wielded considerable power. And his influence has grown in recent weeks. He stood by Mr. Winterkorn after Mr. Piëch launched his attack, and he didn’t waver. That has welded the chief executive and the head of the works council even more closely together. But it has also increased Mr. Winterkorn’s dependence on the union boss. He will find it extremely hard to take measures that hurt the workforce despite all the criticism of weak profits at the VW brand, most of whose models are assembled in Germany. Mr. Osterloh’s agenda is: cost savings are acceptable, as long as they don’t hurt the workers. Especially not the German ones.

Stephan Weil - VW Shareholder Lower Saxony

For a long time, Mr. Weil, Lower Saxony's prime minister, was happy to sit back and watch VW boost its earnings and its workforce. The state of Lower Saxony owns 20 percent of VW. The management dispute at VW triggered calls for the politician to exert more influence. He finally had to acknowledge that VW faces some pressing problems that stem partly from the fact that the costs of its main plant in Wolfsburg, Lower Saxony, are simply too high. Mr. Weil will closely scrutinize the candidates for the next chairman of VW’s supervisory board. It’s clear that the new guardian will seek a successor for Mr. Winterkorn as chief executive and lay the foundations for VW’s renewal. Mr. Weil’s natural allies will be the worker representatives because he won’t want to risk the wrath of VW’s more than 80,000 employees in Lower Saxony.

Berthold Huber - The Moderator

The former chairman of engineering union IG Metall sees his role as restoring peace and calm at VW after the upheaval of the last month. Mr. Huber, 55, won praise for helping to ensure that last week’s VW shareholders meeting passed smoothly. He enjoys universal respect across the supervisory board, from worker representatives and capital representatives alike. That makes him a potential kingmaker.

Hans Michel Piëch - The Brother

In past years, when media cited the name Piëch, they invariably referred not to Hans Michel but to his older brother Ferdinand Piëch, the former all-powerful supervisory board chairman. That has changed in recent weeks. Hans Michel Piëch has become noticeably more visible, attending company events and engaging executives in conversation. He also seems more self-confident now that he’s stepped out of his brother’s shadow. And he’s got a close ally in the supervisory board: his daughter Julia Kuhn-Piëch.

Wolfgang Porsche - The Cousin

Mr. Porsche, 72, also appears to have grown since Mr. Piëch left. For years, his cousin made him feel that he was too soft, and his role seemed confined to social events like attending classic Porsche rallies or posing for photos alongside vehicles at corporate events, duties he performed with good humor and charm in his trademark Austrian dialect.  How times have changed. He’s a favorite to become VW’s new supervisory board chief due to his extensive experience and his conciliatory manner.

Ferdinand Piëch - The Former Patriarch

Without a seat on the supervisory board and without a major direct stake in Volkswagen, Ferdinand Piëch has limited scope to wield influence. He has three options: legal action against the decisions taken at the last shareholder meeting, getting out of VW altogether by selling his stake, or using his reputation, still huge, to launch an assault via the media. After all, he hasn’t said much in public since distancing himself from Mr. Winterkorn, and his motives for seeking to oust him remain unclear. By voicing cogent arguments he could yet put VW’s management under a lot of pressure.

 

Martin Murphy specializes in the automotive, defense and steel industries. Christian Schnell is an editor with Handelsblatt, covering the stock market and German auto industry. Markus Fasse is a Handelsblatt editor specialized in the aviation and automobile industry. Gilbert Kreijger, an editor with Handelsblatt Global Edition, contributed to this article. To contact the authors: [email protected][email protected]  and [email protected]