Storm clouds gather over Volkswagen’s Winterkorn

There seems to be stormy weather approaching for Volkswagen as they plunge headlong into a full-blown leadership crisis following the public announcement that VW Group Chairman, Ferdinand Piech, is distancing himself from the Chief Executive Officer, Martin Winterkorn. Following the surprise announcement, Winterkorn vowed that he would fight for his job even without the support of the Chairman.

The spat came shortly prior to when Winterkorn was due to renew his contract as the CEO and is seen by analysts as potentially damaging to his attempts to gain a renewal of his tenure in the position. The dissent between the two is unusual and comes at a time when the German auto industry giant is wrestling with its budget, trying to cut perhaps billions of euro’s in costs to boost profitability at its flagging core divisions; it is also struggling to meld its various truck operations into a more cohesive force and reboot the ailing North American market after it was hit with major sludge damage.

Winterkorn (left) and Piech during happier times. Image: Reuters.

Winterkorn is no lightweight though and reports in German newspapers indicate that he will not allow himself to be edged out of VW easily. The same newspapers also cited his exceptional record as CEO in the past eight years, during which the Group had gone from strength to strength under his guidance. During his reign, a once struggling German auto group that was saddled with high labour costs had been transformed into a truly global group on the brink of becoming the largest auto manufacturer in the world this year (read: Toyota set to lose top spot to VW). The Group has in fact prospered rather well with Winterkorn at the helm; it has grown from eight to twelve brands, doubled the number of production plants to over 100 and boosted production by 65% to a record 10.1 million cars made last year.

VW is a very democratic company; though with nearly half of the 40 board members elected to the supervisory board by the trade union and with the German State of Saxony owning 20% of the voting shares, Piech will need to win these important stakeholders over if he is intent on ousting Winterkorn. Here he may have a problem though, as both the Union and State have come out in support of the current CEO.

It would seem that there is more trouble on the horizon for VW, this time coming from China where a former executive of Sino-German joint venture FAW-Volkswagen was convicted for taking bribes totalling millions of dollars. According to reports from the Chinese press, a court in the northeast province of Jilin has sentenced a VW executive, Shi Tao, to life in prison for excepting about US$5.3 million in bribes from advertisers and car dealers.