wheel men A Fork in the Road at BMW

A reshuffle in the executive boards of BMW and Volkswagen will bring cost-focused managers to the helms of two of the world's biggest car makers.
Leaving BMW to take the wheel at Volkswagen: Herbert Diess.

BMW, the world’s largest luxury carmaker, had two top candidates to become the new executive. Only one could win.

Harald Krüger, a job cutter and accomplished manager who helped re-launch BMW’s Mini brand, won the race to succeed the BMW chief, Norbert Reithofer, next May, a year before Mr. Reithofer was supposed to step down.

Mr. Krüger, a 49-year old executive responsible for production at BMW, will be charged with continuing BMW’s string of luxury car successes, from BMW to Rolls-Royce to Mini, and to keep the heat on Daimler’s Mercedes and Volkswagen's main luxury brand, Audi.

If successful, Mr. Diess might one day become the new chief executive of Volkswagen Group.

Herbert Diess, a BMW cost cutter and development chief who also helped make the Mini a success, lost out and has left the Munich car maker with a bang, switching to Volkswagen.

As it announced Mr. Krüger's elevation on Tuesday, BMW devoted just a single line to Mr. Diess, saying he had “left the company of his own accord.”

Volkswagen, announcing the hiring coup on the same day as BMW, was more fulsome in its praise of the newly acquired Mr. Diess.

 

Munich vs Wolfsburg-01

 

A 56-year-old engineer, Mr. Diess will be responsible for boosting operating profit margins at Volkswagen to 6 percent in 2017. Currently, VW stands at around 2 percent, lagging behind the group’s more profitable Audi, Porsche and MAN truck brands.

The challenges at Volkswagen are huge, and if successful, Mr. Diess might one day become the new chief executive of Volkswagen Group, which is headed by 67-year old Martin Winterkorn.

The departure of Mr. Diess, described by insiders as “successful, ambitious and power hungry,” hit BMW like a bomb. Although there had been speculation he would not sulkily accept losing to Mr. Krüger, it was a surprise he had been in talks with Volkswagen since the summer.

Wolfsburg-based Volkswagen, the world’s second-largest carmaker after Toyota, and ahead of GM, will need Mr. Diess’ knowledge. Sales at the German company have reached an all-time high of €197 billion ($244 billion), partly due to the sale of more than 6 million Volkswagen cars, but the brand’s profitability has been weak.

The Volkswagen brand is currently executing a €5 billion cost-cutting program and Mr. Diess, who takes on his new role at the automaker next October, will have to come up with more ideas to improve efficiency.

 

Quelle: dpa
Taking the driver's seat at BMW: Harald Krüger.
(Source: dpa)

 

At BMW, Mr. Diess helped lower costs, for example by cutting supplier expenses by €4 billion. He fine tuned production of the Mini, a British carmaker BMW bought in 1994.

His tough approach to reducing costs and increasing production efficiency may have cost him the top job at BMW, people familiar with the matter told Handelsblatt.

His rival, Mr. Krüger, is also seen as a sometimes driven, cost-conscious manager, but his execution of 8,000 job cuts was well received. He earned a reputation by building up BMW’s first U.S. production factory in the early 1990s, and in 2003 did the same for the Mini motor production factory in Britain.

Mr. Krüger is taking over next year from the current BMW chief, Mr. Reithofer, who was originally scheduled to serve until 2016.

The appointment came as a surprise to investors and analysts. The nomination as new chief executive is related to BMW’s 100 year anniversary in 2016, people familiar with the matter told Handelsblatt.

The Quandt family, which owns almost half of BMW’s shares, wanted to have a new, fresh executive team leading the luxury carmaker during the anniversary year, the sources said.

 

Markus Fasse is specialized in aviation and automobile industry news and based in Munich. Christian Schnell covers the auto industry for Handelsblatt's companies and markets section. Gilbert Kreijger is an editor for Handelsblatt Global Edition and has covered companies and markets across Europe.  To contact the authors: [email protected], [email protected] and [email protected]