Bernd Pischetsrieder clearly does not want to get sacked again. Getting dumped by BMW was a case of shouldering the blame for the ruinous handling of Rover after the 1993 acquisition. But having to leave the chief executive’s chair at Volkswagen as well would make him look a bit of a serial loser.
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A recent Financial Times article quoted an unnamed senior German industrialist describing Pischetsrieder as “weak” for not jumping ship the moment Ferdinand Piech, the VW supervisory board chairman, imposed upon him a new personnel director drawn from union ranks.
To a large degree, the VW that Pischetsrieder has to make fitter, is the VW that Piech made fatter during his time in charge. It has been clear for years that the German cost base was high to the point of suicide. Then came the Phaeton. That car was a no-hoper with the VW badge on the bonnet, and it competed internally and unsuccessfully with the group’s big Audis.
Pischetsrieder has withdrawn it from the US market where it had no hope of competing against the domestic cruisers. That’s fighting talk. To confront your predecessor when he is after your hide (allegedly) is certainly not weak.
While Piech was in charge, the problem at home was partially masked by the success in the newer economies – notably China where it came to control nearly 50% of the market for a short time. That position has collapsed – due to neglect of the product.
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By GlobalDataIn his state of the nations speech to the press at the annual results meeting today, Pischetsrieder said that it had been a fallacy in the past that as long as the product was right everything else would follow. The cross-subsidy arrangement whereby the VW brand acted the role of German employment agency and the sister brands span the profit just did not work. Every part of the group had to be “weatherproof” and profitable.
He said that the “VW brand was only just above break-even and that the German plants could not export on competitive terms.”
“All this must be eliminated and quickly.”
This is where the politics get the company entangled. Pischetsrieder wants the company to put on the hair shirt. There has to be a thorough study before anything final is decided, he says, but the VW passenger car business may have to lose as many as 20,000 jobs.
Piech meantime, through his family’s control of Porsche, now has a major shout at VW through Porsche’s 21.28% share of VW’s listed shares. Because of the German institution of strong employee representation on the supervisory board, Piech aligned with unions may gain him a commanding alliance. To win that friendship, the easy thing is to promise to preserve more German jobs than the chief executive thinks can be saved.
Pischetsrieder acknowledged that journalists attending the conference this morning were probably far more interested in the “reports of power struggles” than they were interested in the plain vanilla financial results.
There are rumours of all sorts of things going on, he conceded. But in reality, the board was not concerned with disagreement. “There are tasks for us to perform and without co-operation, we cannot make our contribution.”
It sounded like a public plea for unity. It will probably be the last we hear. If the “unity” of the operating board slips just a little in tackling the fatty parts of the VW brand business in Germany, the case for reform will go out of the window. And Pischetsrieder will be through the door. Again.
Rob Golding
