Trouble at the top as VW chiefs battle for the wheel

A tyre-smoking row has broken out between Ferdinand Piech, chairman of Volkswagen, and his CEO - and former protégé - Martin Winterkorn. What's going on?

by Andrew Saunders
Last Updated: 29 Jul 2015

VW chairman Piech has unexpectedly described himself as being ‘at a distance from Winterkorn’ currently CEO and the man who until very recently was tipped as heir apparent the 77 yr old Piech.

Now, that gnomic pronouncement may not exactly sound like a declaration of war, but by the normal standards of German exec-speak it is high-octane stuff. This is a country where tussles over corporate leadership are traditionally carried out behind tightly closed doors and require levels of discretion that make the election of a new Pope look positively vulgar by comparison.

Not for our German colleagues the kind of open-season power struggles that we have become more used to here in the UK and USA. So Piech’s words - published by news magazine Der Spiegel - have really set the cat amongst the pigeons, not least because he and Martin Winterkorn have worked together apparently harmoniously since he was hand picked by Piech back in the 80s. Winterkorn has been VW’s CEO since 2007.

But the coded message that seems to be being received now is that Piech wants Winterkorn - Germany's highest paid boss with a salary of 17.5m Euros - out when his contract ends next year, rather than staying on with a view to becoming chairman in the fullness of time, as everyone had been expecting. Crikey.

Now as the corporate governance geeks out there in MT world will already know, anything to do with the leadership of VW is complicated by its unusual and multi-layered organisational structure.

For starters, despite the fact that it is snapping at the heels of Toyota for the title of world’s largest carmaker, it remains effectively a family business. The Porsche family owns 51%. (Yes, the same Porsche family whose name is on the sports cars. Piech is a grandson of its eponymous founder Ferdinand. The Porsche brand has been owned by VW since a failed attempt by the minnow to swallow the giant back in the day).
VW is also something of an oddity in that it counts a regional government amongst its shareholders - Lower Saxony to be precise, whose minority 20% comes with special voting rights and even a veto for certain key decisions. Finally there is the supervisory board, a more common feature of many German firms, half of whose 20 seats are held by members of the workforce.

Piech, who rarely speaks to the press, has got form in trying to oust execs he has taken agin with a well-chosen word or two. Back in 2006 then VW CEO Bernd Pischetsrieder stood down shortly after the chairman described his future as ‘an open issue’.

The whole thing is shaping up to be quite a bunfight, as Winterkorn and his supporters are not going down without a fight. Porsche family spokesman and VW supervisory board member Wolfgang Porsche (also a grandson of Ferdinand Porsche) has made it clear that Piech’s statement is ‘a personal opinion’ rather than official company policy, and both Stephan Weil, the governor of Lower Saxony, and Berdt Osterloh the head of VW’s works council have come out in favour of Winterkorn.

So it looks rather as though VW is facing a classic succession crisis, with an entrenched and hugely influential chairman who is so keen not to stay on (he's due to step down in 2017) that he is even prepared to try and put the kybosh on anyone who gets too close to taking over.

Has Piech bitten off more than he can chew this time? We’ll have to wait and see, but hopefully not too long. The to-and-fro is all very dramatic of course, but unlikely to have anything other than a detrimental effect on the fortunes of one of Europe’s largest employers.

Find this article useful?

Get more great articles like this in your inbox every lunchtime