Is This the End of Volkswagen AG as We Know It?
You couldn’t make up the kind of year Volkswagen Auto Group is having. Strong sales in Europe and China have helped it overtake General Motors to become the world’s second largest automaker, and strong showings in the first quarter could have it overtaking Toyota to become top dog by the end of the year. Despite continuing sales struggles in the U.S. (it ranked 13 on the list of best-selling brands through May), the new Volkswagen Golf Sportwagen was America’s fastest-selling new car in April. To top it all off, two of its brands, Porsche and Audi, took the top five spots at this year’s 24 Hours of Le Mans. And all of this happened while the company’s leadership was embroiled in a corporate drama worthy of daytime soap operas.
In April, Volkswagen board members forced CEO Ferdinand Piëch out of the company after 22 years at the helm. A grandson of Ferdinand Porsche with over 50 years in the company, the board was fed up with Piëch’s top-down management and machiavellian control over company politics. For years, the company’s focus on groundbreaking engineering projects, like the Bugatti Veyron, Porsche 918, and Volkswagen XL-1 took precedent over growing issues like its U.S. sales problems. When Piëch began maneuvering to replace his once hand-picked successor (and current Volkswagen brand boss) Martin Winterkorn with the performance-oriented Porsche chief Matthias Mueller, the board had had enough.
Now, just weeks after Piëch’s removal, Winterkorn has been installed as chairman, and is already taking drastic measures to make the company even more competitive. Speaking to employees at the company’s Wolfsburg headquarters earlier this week, Automotive News reports that Winterkorn and the company are gearing up for something big. “Volkswagen must become faster, more flexible and more agile,” he said, adding “Our company is much more than the sum of its parts… That requires the right balance between central leadership and even more independence.”
These remarks came hot on the heels of some very interesting reports coming from company insiders, and if they prove to be true, than the company Ferdinand Piëch ran with an iron fist could soon be unrecognizable to the former chairman.
According to sources inside the company, Volkswagen AG will be reorganized into four separate holding companies, giving its 12 brands better structure, and destroying the top-down corporate model that came to dominate the company for over two decades. While Piëch encouraged competition between the brands, resulting in overlapping products (like the Volkswagen Phaeton competing with the Audi A8), and letting others languish into obsolescence, the brands will be now organized in a way that allows for more autonomy and (hopefully) less room for political meddling at the executive level.
According to sources within the company, Volkswagen, along with European brands Seat and Skoda will make up one holding company, run by former BMW manager Herbert Diess. Audi, Lamborghini, and motorcycle builder Ducati will be helmed by current Audi chief Rupert Stadler. The company containing Porsche, Bentley, and Bugatti will be run by Matthias Mueller, and former Daimler truck chief Andreas Renschler will be brought in to run the fourth company, which will be made up of commercial truck brands Scania and MAN.
According to Automotive News Europe, Volkswagen AG will hammer out the details of this transition over the summer, and hopefully win the approval of its advisory board at a meeting in September. While the company hopes this reorganizing will help it to streamline, and better react to changes in the marketplace, it should cause little to change for its dealer networks or consumers.
In less than 20 years, Volkswagen AG has gone from a struggling company to being within striking distance of becoming the world’s dominant automaker. If it wants to stay there, it needs a solid organizational plan like this one. Just months after the ouster of Ferdinand Piëch, Volkswagen AG as we know it could soon be history. If this plan goes through, it could be the most important – and least dramatic – move the company has made in a long time.