Volkswagen AG shocked employees and investors Tuesday when it said that CEO Bernd Pischetsrieder will step down at the end of the year, and will be replaced by Martin Winterkorn, CEO of the automaker’s Audi unit.
Volkswagen has lately been recovering from steep losses in 2004 and 2005, posting an operating profit in the third quarter. And VW shares have been trading at a 52-week high at a price nearly twice its one-year low. And after having a public battle with labor and supervisory board chief Ferdinand Piech last winter and early spring over his restructuring plans, Pischetsrieder seemed to have survived the debacle when he got a contract extension through 2012.
The surprise announcement had not even been hinted at in the German business press, a rarity for a move so big. Pischetsrieder has been a favorite subject of the press since his dramatic ouster as CEO of BMW AG in 1999. And Volkswagen, after all, is the largest automaker in
Executives at Volkswagen of America said Tuesday they were totally taken aback by the announcement. “I’m floored,” said one. A spokesperson for VW AG said she did not expect the company to give reasons for Pischetsrieder’s departure ahead of the November 17 board meeting at which the changeover will be confirmed by the entire board. Tuesday’s action was dictated by a steering committee of the board.
In the third quarter, the Volkswagen Group’s operating profit increased to $1.25 billion (991 million euros), excluding $849.0 million (668 million euros) in one-time charges to top up its pension fund as well as reduce excess staffing at six unprofitable western German plants.
Absent explanations from VW about personal or health issues with Pischetsrieder, or a restatement of earnings or some such that would be put at his doorstep, most of the speculation about his departure centers on his deteriorated relationship with Piech and organized labor.
Pischetsrieder a year ago began pushing for an aggressive and unpopular restructuring that called for eliminating at least 20,000 jobs. Volkswagen has the most expensive labor force among European automakers, and the CEO said publicly that such high costs would bring the company down around their ears. He also wants to build a new plant outside
Piech, who handpicked Pischetsrieder to be his successor as chairman of the management board, is widely known to have cooled to Pischetsrieder. Among Piech’s beefs have been the CEOs occasional public criticism of Piech’s strategies and decisions, such as the development of the $90,000 Volkswagen Phaeton (Pischetsrieder killed the car’s distribution in the U.S.) the failure to adequately plan for a small SUV to be built off the current Golf platform and the deterioration of quality that has cost VW revenues, profit, and market share in Europe and the U.S.
Pischetsreider’s struggle has been waged against a backdrop of German corporate intrigue with Piech playing a starring role. Not only is Piech supervisory board chairman, but his family controls all the voting stock of Porsche AG. Porsche has acquired 21 percent of VW in the last year, with an eye toward acquiring up to 25 percent or 29.9 percent of the company. Even after Piech retires as board chairman, that situation will give the grandson of Ferdinand Porsche a lot of say-so over VW’s future.
With a contract that was to last until 2012, Pischetsrieder will hardly be sent away empty-handed unless details emerge that allow VW to invalidate the contract.
Pischetsrieder’s career has certainly been topsy-turvy. He was handpicked by BMW chairman Eberhard von Kuenheim to succeed him in the early 1990s. Pischetsrieder, though, led a controversial acquisition of
Winterkorn, 59, has been widely praised for reviving Audi and making the brand a credible competitor to BMW and Mercedes-Benz. Sales and profits at Audi have been climbing, and the latest generation of vehicles has been praised on both sides of the
VW watchers will be looking for clear explanation for Pischetsrieder’s exit. And they will also looking for an indication that Wolfgang Bernhard, the current head of the VW brand worldwide and the expected heir to Pischetsrieder, will stay or leave. Bernhard is widely respected. And if VW shares don’t slide off the news of Pischetsrieder’s departure, they probably would if Bernhard is forced out as well.