Berlin/Frankfurt: Volkswagen AG chief executive officer Martin Winterkorn plans to fight for his post and won’t let himself be easily pushed aside by supervisory board chairman Ferdinand Piech, people familiar with his thinking said.
Winterkorn, 67, has the backing of others on the management board and is determined to prove his strategy will keep VW competitive in the long run, said the officials, who asked not to be identified discussing private deliberations. A VW representative declined to comment on the CEO’s plans.
Piech told Der Spiegel in an interview published on Friday that he was keeping himself “at a distance" from the CEO, and that Winterkorn faced growing supervisory board opposition due to unresolved issues including an ill-fated US sales strategy, the VW brand’s flagging profitability and lack of progress developing a low-cost car. Winterkorn was surprised by Piech’s comments, especially given that the CEO hasn’t had any clashes with board members at recent meetings, the people said.
The falling out is startling because the two have worked closely for decades and Winterkorn has always been seen by insiders as Piech’s likely successor, a role that the 77-year-old chairman said on Friday will no longer go to Winterkorn. Exactly how their power struggle will play out is dependent upon the rest of the supervisory board, which in Germany oversees company strategy and appoints top management.
The dispute comes at a key moment for Winterkorn as he works to complete the last phases of a turnaround of the auto maker that includes snatching the global sales crown from Toyota Motor Corp.—a goal he may achieve as early as this year. Shares of Europe’s largest carmaker have gained 37% this year, valuing VW at €117.8 billion ($124.9 billion).
Winterkorn won a powerful ally in works council chief Bernd Osterloh, who sits on the board and on Friday threw his support behind Winterkorn. Employees hold half the seats on VW’s 20-person board and historically have voted as one block to maximize their power. The backing of worker representatives was crucial to Piech’s ousting of previous CEO Bernd Pischetsrieder in 2006. At the time, Piech hand-picked Winterkorn for the role, calling him a close friend whom he should have appointed to the position sooner.
Also critical in determining who wins is Lower Saxony, the German state where VW is based. Lower Saxony has two board seats. State prime minister Stephan Weil was “unpleasantly surprised" by the report, state government spokesman Michael Juerdens said on Saturday, declining to give further details on Lower Saxony’s view of the matter.
“We appreciate the work of chief executive officer Martin Winterkorn very much," Olaf Lies, the state’s economy minister, told Germany’s Bild am Sonntag newspaper. The public shareholder is taking “a very calm view" of Piech’s announcement “in view of the majority powers on the supervisory board".
Removing Winterkorn, whose term expires next year, would be difficult for Piech because doing so requires being able to show that the CEO has steered the car maker in a direction that has greatly harmed it, according to the company’s articles of incorporation. If workers and Lower Saxony team up to support Winterkorn, Piech would in any case not have enough votes to remove him under the complex voting rules required to do so.
The Porsche-Piech family, which controls the auto maker’s voting rights, has five board seats.
Winterkorn’s appointment as CEO in 2007 accelerated the transformation of Wolfsburg-based VW from a struggling industrial behemoth squeezed by high labour costs into a global automotive powerhouse with 12 carefully orchestrated brands ranging from Bugatti supercars to Scania heavy trucks.
“The sharp tone of Piech’s comments toward Winterkorn is a surprise, given that the duo has led VW successfully for years," said Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Bergisch Gladbach, Germany. “The identified problems aren’t new, but compared to almost all of its competitors, VW as a company is in a very good shape."
While the main mass-market VW brand has gained buyers in most of the world, the division has failed to win a wider share of auto sales in the US. Profitability at the division has also been squeezed by heavy spending on new technology, while progress on getting the MAN and Scania commercial-vehicle units to cooperate has been hampered by internal rivalries.
Acquisitions since Winterkorn became group CEO include sports-car manufacturer Porsche and Italian motorcycle producer Ducati as well as MAN and Scania. The Volkswagen group has more than doubled the number of factories worldwide to 118.
VW’s strong presence in China and the expansion of the Audi and Porsche nameplates in the lucrative luxury-car segment have been key earnings drivers for the group. VW posted record profit in 2014 of €12.7 billion. Bloomberg