Able but autocratic: Piech ploy to oust another VW executive failed this time

Able but autocratic: Piech ploy to oust another VW executive failed this time

Ferdinand Piech has resigned, with immediate effect, as chairman of the Volkswagen supervisory board, the automaker announced in a stark statement on Saturday.

"The executive committee of the supervisory board of Volkswagen AG discussed again today in detail the situation of the Volkswagen Group.

"The members of the executive committee have unanimously determined that in view of the background of the last weeks the mutual trust necessary ‎for successful cooperation no longer exists.

For this reason [Piëch] has resigned with immediate effect from his position as chairman of the supervisory board and from all his mandates as a supervisory board member within the Volkswagen Group. In addition, Ms Ursula Piëch [Ferdinand's wife] has resigned with immediate effect from all her supervisory board mandates within the Volkswagen Group," the statement said.

Current deputy supervisory board chairman Berthold Huber (a labour leader) will be chairman temporarily and will chair both the supervisory board meeting on 4 May s well as the annual general meeting on 5 May, the statement added.

Representatives of shareholders and employees will propose a new chairman for election in due course, the statement added.

Wolfgang Porsche, chairman of the supervisory board of Porsche Automobil Holding SE, said in a statement: "We have full confidence in the board of management of Volkswagen Group and we deeply regret the developments of the last few days. We thank Ferdinand Piëch for his decades of extraordinary and highly successful service to the Volkswagen Group. Our great loyalty to the Volkswagen Group and its 600,000 employees remains unchanged and we assume our responsibility as a principal shareholder."

Karl Brauer, senior analyst at Kelley Blue Book, said: "As the world’s second largest automaker, Volkswagen and its leadership are operating under incredible pressure to remain competitive in a turbulent period for the auto industry. VW has kept pace with General Motors and Toyota’s growth in recent years, making it a very tight three-way race for the title of largest global automaker, but VW’s struggles in markets like the US and Brazil, along with lower profit margins versus GM and Toyota, shows there’s still much work to be done.

"Ferdinand Piech’s attempt to blame Martin Winterkorn for VW’s issues clearly didn’t resonate with the supervisory board, leaving him isolated and making it clear his influence at VW has waned. As the grandson of Ferdinand Porsche, Piech’s history at VW goes back decades. He became chairman of the automaker’s supervisory board in 1993 and has defined the Volkswagen Group in the modern era. Piech's departure represents a seismic shift in Volkswagen’s power structure, and could foretell drastic changes in how one of the world's largest automaker operates."

It was an ignominious end for Piëch, the Porsche family scion who has dominated Volkswagen for more than two decades, in what the New York Times, in one of numerous weekend reports of the developments, said "appeared to be a stunning defeat for a manager used to getting his way".

Piëch, a 78 year old Austrian, recently sought to force out Martin Winterkorn, a onetime protégé, as Volkswagen’s chief executive. But the move backfired after Winterkorn refused to go and other members of the supervisory board rallied behind him, the paper said.

Volkswagen said in statement on Saturday that “the mutual trust necessary for successful cooperation no longer exists” on the supervisory board. As a result, Mr. Piëch will give up his post as chairman, effective immediately. Ursula Piëch, his wife, will also give up her seat on the board, Volkswagen said.

"Ferdinand Piëch has made an enormous contribution to Volkswagen and the entire automobile industry," Huber said in a statement. "The developments of the last two weeks have, however, led to a loss of trust between the supervisory board chairman and the other members, which in recent days has proven to be impossible to resolve."

The NYT said Piëch’s resignation came as a surprise because he had a long history of winning power struggles, and many people assumed he would win this one as well. As an example, when Porsche, the sports car maker, tried to take over Volkswagen in 2008, Piëch was eventually able to turn the tables and take over Porsche instead.

Piëch reportedly initiated the most recent power struggle when he told the German magazine Der Spiegel this month he was distancing himself from Winterkorn. The public undermining of a top manager was classic Piëch, the NYT said. In the past, when he criticised a Volkswagen executive publicly, it was a sure sign that the manager’s days were numbered.

This time, Piëch appeared to have miscalculated. His unilateral attempt to undercut Winterkorn annoyed the labour representatives on the supervisory board, who hold half the seats, as well as representatives of the state of Lower Saxony, which owns a 20% stake. They lined up behind Winterkorn. Volkswagen is based in Wolfsburg in Lower Saxony.

Stephan Weil, the prime minister of Lower Saxony, said Saturday of Piëch, "It is no exaggeration to say that he is one of the most important people in the history of German business.

"Nevertheless, it was urgently necessary to end the speculation about persons and to ensure clarity in top management," Weil said in a statement. "Volkswagen and its many thousand employees must be able to concentrate on business."

The New York Times said that, though demanding, mercurial and often feared, Piëch is credited with rescuing Volkswagen from near bankruptcy after he took over as chief executive in 1993. He is an engineer both by training and by nature who viewed technical excellence as the key to success in the car industry.

As a top executive at VW's Audi division in the 1970s and 1980s, Piëch oversaw the development of all wheel drive in cars, a feature still associated with Audi. After he was appointed chief executive of the parent company, Piëch ensured that even mass market cars like the Volkswagen Golf had driving characteristics normally found in more expensive cars.

Under Piëch, who became chairman of the supervisory board in 2002, Volkswagen became much more than a producer of automobiles for the middle class. In Piech’s zeal to cover all segments of the market, the company acquired Czech automaker Skoda to reach price-conscious buyers, while buying the Bentley, Lamborghini and Porsche brands to appeal to wealthy drivers.

The company also produces trucks under the Scania and MAN names and owns the motorcycle manufacturer Ducati.

The New York Times noted, however, the core Volkswagen brand has suffered from poor profitability and struggled to expand market share in the United States despite spending $1bn to build a plant in Chattanooga, Tennessee where it manufactures Passat sedans and plans to build an SUV.

The paper said Piëch has faced criticism for his obsession with making Volkswagen the largest carmaker in the world rather than the most profitable. Now that he has left, there are sure to be questions about whether it makes sense for one company to be in so many market segments.

Volkswagen booked sales of EUR202.5bn and net profit of EUR10.8bn in 2014. Its unit sales of 10.14m vehicles put it second globally, behind Toyota's 10.23m and ahead of General Motors’ 9.92m.

See also: COMMENT: Volkswagen's Ferdinand Piech got a lot right

Show the press release

Statement of the Executive Committee of the Supervisory Board of Volkswagen AG

 

The Executive Committee of the Supervisory Board of Volkswagen AG discussed again today in detail the situation of the Volkswagen Group.

 

1.:
The members of the Executive Committee have unanimously determined that in view of the background of the last weeks the mutual trust necessary ‎for successful cooperation no longer exists.

2.:
For this reason Professor Dr. Ferdinand K. Piëch has resigned with immediate effect from his position as Chairman of the Supervisory Board and from all his mandates as a Supervisory Board member within the Volkswagen Group. In addition, Ms. Ursula Piëch has resigned with immediate effect from all her Supervisory Board mandates within the Volkswagen Group.

3.:
The position of Chairman of the Supervisory Board will be temporarily assumed by the Deputy Chairman Berthold Huber. Mr. Berthold Huber will chair both the Supervisory Board meeting on May 4 as well as the Annual General Meeting on May 5, 2015.

4.:
Under the chair of Mr. Berthold Huber the representatives of shareholders and employees will in close cooperation determine the candidate for the new Chairman of the Supervisory Board. The election of the future Chairman of the Volkswagen Supervisory Board will follow a proposal made by members of the Supervisory Board representing shareholders.

Original source: VW AG