VW to go electric

Volkswagen Group was to become the world's largest auto maker by 2018. That was Martin Winterkorn's dream - formally called "Strategy 2018" - when the gruff engineer was CEO of Volkswagen Group, before "Dieselgate" cost him his job in September last year. Now Winterkorn, 69, is VW's best-paid pensioner, and his big goal has been jettisoned by Volkswagen Group's new leadership team under CEO Matthias Müller.

The new team has a new plan, which they're calling "TOGETHER - Strategy 2025." Pretty much everything is supposed to change in Wolfsburg, the company's global headquarters, and at all the other locations around the world where the company develops, makes or markets cars, trucks, or buses under a dozen distinct brands, led by Volkswagen, Audi and Porsche.

New goals

Unter Winterkorn's autocratic leadership, gigantomania was the main order of business. Winterkorn was a details-obsessed autocrat who went around showrooms measuring the fit and finish of the company's cars, and loosing his wrath upon his minions when things didn't meet his exacting standards.

But somehow, or so he claimed in the wake of Dieselgate, he never noticed that the emissions from VW's diesel cars had been thoroughly rigged for years, misrepresenting the pollution-spewing VW diesel engines as "clean diesel." And he was an old-school auto maker who wasn't at all interested in new-fangled gadgetry like electric cars.

Matthias Müller, who was elevated to VW Group CEO after having briefly been CEO of VW subsidiary Porsche, is only six years younger than Winterkorn, but nonetheless seems to represent a new generation. Müller's new job is scarcely to be envied: He's tasked with reinventing VW in the wake of Dieselgate and in the face of massive emerging competition from new carmakers in China as well as the US. Those include e-car maker Tesla and soon, industry circles say, the likes of Apple and Google, who are also getting into the electric vehicle business.

Müller likes to use words like structure, culture, efficiency, profitability as he sets about pulling VW out of the swamp and regaining the confidence of consumers and investors, whilst at the same time navigating the corporate equivalent of a supertanker through troubled waters. VW Group is one of the world's biggest companies, with over 600,000 employees, 200 billion euros ($223 billion) in annual sales, and over 10 million vehicles pumped out in 2015 in production facilities in 27 countries.

It's a good thing VW is under new management, because although old-school Winterkorn had perhaps seen the memo explaining that the automotive world is at the cusp of a gigantic technological revolution, he hadn't shown much sign of reacting to the information. Over the course of the next 10 years, automobiles are set to evolve into self-driving, battery-powered electric vehicles. Not all of them, perhaps - but an awful lot of them, and a company that's not in the game is likely to find itself short of a future.

Between past and future

Müller's plan is to steer VW Group toward simultaneously becoming a globally leading provider of "mobility services" and continuing to be a leading carmaker, with about a quarter of all production in the year 2025 - just nine years from now - meant to consist of BEVs, battery-powered all-electric vehicles.

Meantime, the sins of the past - i.e. Dieselgate - will continue to haunt the company. Many billions of dollars in fines are yet to be paid, and millions of diesel cars on the road now must be recalled and somehow fixed up so they become less polluting. It's going to be very expensive - and it's a financial and logistical distraction from the monumental challenge of putting VW on its new trajectory toward an electric future, as Müller and his team intend. It's rare for a bright, shining future and a dark, messy past to be simultaneously so present in the here-and-now reality of a major corporation.

A company that wants a quarter of its cars to be BEVs needs a quarter fewer internal combusion (IC) engines, but a very large number of battery packs and the factories to produce them in. Those factories don't exist yet. So another priority for VW Group, Müller says, will be to evaluate seriously whether the company should go whole-hog into the battery production business, possibly selling battery packs to other clients as well as using them for its own vehicle production needs - a bit like Tesla, VW's new California competitor, with its household battery packs meant for home owners with solar rooftops.

All this is meant to happen at the same time as a corporate reorganization away from the central-diktat model of Winterkorn and toward a more decentralized company in which each of the 12 marques and the main regional headquarters have more autonomy - at least in some respects: The marques are also supposed to cooperate more, in order to realize efficiencies, for example in the parts supply business.

Nobody said this was going to be easy.

But at any rate, the times when designers in Wolfsburg worked out what sort of cars clients in Beijing or Wisconsin were expected to want to buy are meant to be over.

Exciting times in Wolfsburg

The grand plan isn't free of a considerable dose of risk. It's not yet certain that electric vehicles will achieve the great breakthrough so many are hoping for - or assuming. The ecological bottom-line performance of today's BEVs remains pretty modest. Nor has a change of corporate culture yet been achieved. Ambitious managers of other major corporations have tried that sort of "corporate culture change" thing in the past, and failed.

Nor is it yet certain that VW Group will financially survive the big changes and the heavy fines and fees yet to come. The pathway to a new automotive world is very expensive, as Müller himself said as he presented the new strategy: Many tens of billions of euros will have to be spent, euros which will have to be brought in from sales of cars of the pre-BEV era.

If despite these worries Volkswagen manages to become, in a few years' time, among the world's leading producers of electric cars, then the folks in Wolfsburg may end up saying: Dieselgate was a stroke of luck for us - it forced us out of our complacency and got us investing into the new era's emerging dominant technological infrastructure before it was too late, before Tesla, Apple and Google had a chance to flood the market with autonomous BEVs and eat our lunch.

At any rate, it will be interesting to see how long "Strategy 2025" lasts before it's replaced with Strategy 20XX.