VW boss survives and prospers

Volkswagen Group CEO Dr Martin Winterkorn has done what few executives have ever managed: go head-to-head with Dr Ferdinand Piëch and win.

After board level disagreements sparked by Dr Piëch’s profit criticisms spilled out into the public arena, Dr Winterkorn has emerged with a stronger position than he had a week ago.

“Martin Winterkorn is the best possible chairman of the board of management for Volkswagen,” a statement from the supervisory board’s leadership panel said on Friday. Not only that, it came out with a recommendation that his contract be extended when it expires in February next year.

“The Executive Committee places great importance on the fact that Professor Doctor Winterkorn will pursue his role as Chairman of the Board of Management with the same vigor and success as before, and that he has the full support of the Committee in doing so,” the statement reiterated.

The brouhaha began when Dr Piëch, the Chairman of Volkswagen’s supervisory board, told German magazine Der Spiegel that “there is a distance between me and Winterkorn”. The automotive world read that as Dr Piëch telling his long-time collaborator Dr Winterkorn that at best he was giving him a nudge in the ribs and that worst he wanted him out.

The German automotive press, especially those with usually impeccable connections “to Salzburg” (as Dr Piëch’s office is euphemistically referred to internally) speculated that the Dr Piëch had become fed up with the Volkswagen brand’s falling profit margins and its inability to translate its European dominance into American volumes.

Even though the Volkswagen Group has lifted its sales to challenge Toyota as the world’s biggest car-maker and even though it’s posting record profits year-on-year, it’s not without its issues.

For starters, the Volkswagen brand’s profit margin stood at around six percent when Dr Piëch vacated the CEO seat for Dr Winterkorn in 2002 and it stands at around 2.5 percent today. Instead, the Volkswagen Group’s record profits are largely driven by Porsche and Audi.

There are also unresolved issues with finding a unique character for Seat, getting its push into Brazil back on track, learning how to engineer cars cheaply for emerging markets like India and Russia (made difficult by the ending of a joint-venture deal with Suzuki) and securing enough work for its Tennessee factory.

While Dr Piëch usually gets his way on the Supervisory Board (on which his wife also sits), Dr Winterkorn fought back with the support of the Worker’s Council and the President of the German state of Lower Saxony, which owns 20 per cent of Volkswagen.

The Porsche family also swung its voting bloc behind Dr Winterkorn, with German and Austrian media speculating they had taken some joy out of stifling Dr Piëch’s plans. Dr Piëch, after all, was the Porsche heir who successfully outmaneuvered the attempted Porsche takeover of Volkswagen in 2009.