Shake-Up at VW
January 12, 2007
Europe's biggest carmaker announced on Thursday that the head of its flagship VW brand, Wolfgang Bernhard, will be leaving.
The move is a part of a major reshuffling of the VW Group led by new chief executive officer Martin Winterkorn, who was promoted after Bernd Pischetsrieder stepped down on Jan. 1. Winterkorn, the former head of Audi, will also assume responsibility for the VW brand and the carmaker's research and development unit.
In a brief statement released Thursday, the Wolfsburg-based company said that Bernhard, "will leave the company by mutual agreement as of Jan. 31, 2007 as part of the reorganization of responsibilities within the Volkswagen Group."
Bernhard has been chairman of the Volkswagen brand group since May 2005 and spearheaded a series of cost-cutting measures including cutting its German workforce by 20,000 jobs and lengthening the work week.
As part of the restructuring, the company also announced that VW's other brands -- Skoda, Bentley, Bugatti, Audi, Seat and Lamborghini -- will operate independently instead of in two groups, with all brands reporting results separately this year.
An auto maverick
Wolfgang Bernhard joined the VW Group from DaimlerChrysler after being credited with turning around the struggling Chrysler brand and cutting 26,000 jobs.
According to reports, Bernhard handed in his resignation to the Volkswagen supervisory board at a meeting Thursday. The move was highly anticipated after Bernhard was passed over for the chief executive position.
Bernhard's resignation has led to speculation that the former Chrysler executive might be heading back to Detroit to take over the struggling US carmaker. However, he would have to negotiate out of a non-compete clause in his VW contract.
Known for his sometimes abrasive methods, Bernhard is regarded as a tough executive who is willing to do what needs to be done in order to bring a company out of the red. His appointment in 2005 was greeted warmly by financial analysts.
Throughout his tenure at VW, Bernhard pushed hard to cut costs and increase productivity. In the process he may have angered members of the VW board including Chairman Ferdinand Piech.
A power struggle
This latest move is seen as part of a long-time power struggle behind the doors at Volkswagen as luxury carmaker Porsche has been fighting to gain greater control of the VW Group.
Porsche, which is controlled by VW's supervisory board chief Ferdinand Piech, now owns just over 21 percent of Volkswagen and is pushing to increase its stake to 27.4 percent and perhaps extending that to 29.9 percent.
According to German law, once Porsche holds a 30 percent control, it would be forced into launching a takeover bid.
All this assumes that a German court will overturn the so-called Volkswagen Law, which was enacted to prevent a hostile takeover of the carmaker and is preventing Porsche from raising its current stake. A decision is expected in February.
In an interview with Business Week on Wednesday, Porsche Chairman Wendelin Wiedeking said that as the major shareholder of VW, Porsche would be able to share some of the product development costs and aggressively push for expansion into new markets like China.
"Everybody knows that all the new technologies you have to use for the environment and safety are getting much more expensive. You need partners willing to share technologies and thinking," said Wiedeking.
Ups and downs
The Volkswagen board also announced Thursday that it had rejected German truckmaker MAN's hostile 10.3 billion euros ($13.3 billion) takeover bid for Swedish rival Scania.
The board hoped that the two companies could work together to reach a "friendly" merger. VW is the biggest shareholder in both groups.
Thursday's board meeting follows a turbulent period for the northern Germany-based company with several former senior executives facing court cases over a sex and bribery scandal that has badly shaken the group.
On Sunday, VW announced that its group vehicle sales across the globe rose 9.3 percent to 5.73 million units in 2006, with the Volkswagen brand rising by 10 percent. Both totals were company records.