Bernhard Set To Run Familiar Gameplan at VW

July 17, 2005
Head of Volkswagen AG’s Volkswagen brand unit Wolfgang Bernhard has been quiet with the media since taking over the new job last Spring, but in an interview published in the German automaker’s in-house magazine indicated employees and suppliers are going to feel the pinch in the next few years as he works to improve the brand’s, and the company’s, profitability.

“We have to be “ready to tread new paths" and warned that "if we carry on as we have so far, we won't make it,” Bernhard said. The executive who is credited with revitalizing Chrysler Group’s product portfolio and hatcheting its costs also said there are no “sacred cows” at Volkswagen that will be spared. VW chairman Bernd Pischetsreider has pledged to raise net earnings at the company by $4.9 billion by 2008.

Much of what is being proposed inside VW feels like a replay of Bernhard’s gameplan when he arrived at Chrysler in 2000 with Chrysler Group CEO Dieter Zetsche. As chief operating officer, Bernhard was the sharp end of Zetsche’s reform: cutting employee headcount, cutting supplier prices by 15%, shortening product development times from sketch to showroom and sharing more components across product lines.

Volkswagen Group exceeded its 2004 earnings guidance when it reported last March. At more than € 2.0 billion, operating profit before special items was better than the forecast €1.9 billion. Eleven new passenger cars last year increased unit sales to 5.079 million. But the company’s profitability is being hurt by high labor costs in Germany, a weak U.S. dollar and quality problems that have made Asian brands more attractive to many Europeans who were once loyal to VW.

"I expect everyone to be clear about what situation we are in and what a crossroads we are standing at," Bernhard said when asked what he expects from employees. "And I expect everyone to play a part .”

Pischetsreider brought Bernhard to VW last year after the former Chrysler executive was ousted from running DaimlerChrysler’s Mercedes-benz division just before he was set to take over the unit. He had upset Mercedes-Benz executives and labor leaders by suggesting sweeping changes to the division’s operation to make it more efficient and improve quality. Pischetsreider has said he was surprised Bernhard became available and recruited him, in part, to help him break the status quo at Volkswagen. Pischetsreider was recruited to VW by former chairman Ferdinand Piech after being ousted from BMW.--Jim Burt

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