After a long stretch of peace, the Volkswagen Group appears to be headed for another period of management turmoil as the company’s chairman, Ferdinand Piech, expressed dissatisfaction with performance of the company’s long-time chief executive officer.
Piech appeared to withdraw support for Winterkorn, who has been at the helm of the automaker since 2007 and led a dramatic turnaround in VW’s fortunes, by telling German magazine Der Spiegel he has “distanced” himself from the CEO.
Part of the stress at Volkswagen appears to stem from the fact that neither Winterkorn nor the company’s board of supervisors, headed by Piech, has reached agreement on a successor to Winterkorn.
Winterkorn has transformed VW from a struggling German enterprise with high labor costs into one of the world’s most successful automakers that is on the verge of replacing Toyota as the world’s top automaker.
Piech, the grandson of VW founder Ferdinand Porsche, has served as VW’s CEO and in the past has been able to shake up VW’s management almost on a whim. He was also instrumental in installing Winterkorn as CEO in 2007. But Winterkorn’s success has given him some key allies for a showdown with Piech, including Wolfgang Porsche, chairman of the Porsche SE holding company, which controls 51% of VW common stock. On Sunday, Porsche threw his backing behind Winterkorn,
“The comment from Dr. Piech represents his personal opinion which has in substance and factually not been coordinated with the family,” said Porsche in a statement.
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Winterkorn also appears to have picked up the support of the state of Lower Saxony, which owns 20% of VW’s stock and the union’s led by IG Metal, which control 50% of the seats on the board of supervisors. In past boardroom disputes, Lower Saxony and the unions have sided with Piech. Winterkorn is also a friend and ally of Angela Merkel, Germany’s chancellor.
While the reasons for Piech’s campaign remain unclear, a senior labor representative said the chairman had criticized Winterkorn at past board meetings, particularly with regard to the weak U.S. operations, according to Reuters.
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VW’s $1 billion plant in Chattanooga has been underutilized for more than a year after demand for VW’s passenger cars began to sink, starting with the Passat, a model that Winterkorn had selected for production.
George Peterson, president of Auto Pacific, said that in contrast to Audi, which has pursued one strategy over the past decade, the Volkswagen brand has never quite settled on what approach it wants to use to reach American consumers.
The results show in the maker’s sales results in the U.S. in the past few years. In 2013, they were down 6.9% and last year, they were down 10%. That trend has continued into 2015. Through March, sales were off 9.26%.
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The company has gaps in its product line-up that contribute to the decline, and they’re working to fill them now with the new CrossBlue SUV due to arrive in dealerships late this year, but will it be too little too late for Winterkorn and VW in the U.S.?
The company recently announced plans to double the size of its assembly plant in Chattanooga, confirming it will boost the size of that factory by yet another 25% as part of the $900 million project. The plant will produce at least one of two new SUV models the German maker is developing for the U.S. market.