The words may be different, but the tune is the same: despite a great many statements to the contrary, the message sent out by VAG management is still one steeped in technocratic arrogance.
With the press already on the Volkswagen big guns’ heels, Matthias Müller et al will now have to face their second most powerful opponent: the mighty work council. VAG is a special company, not just because it accommodates such a vast number of car brands (12) or because of the number of people it employs (almost 600.000). The most peculiar element of VAG is its ownership structure. For it is neither semi-state owned nor a family run business – or both at the same time, depending on one’s point of view. There are also ‘normal’ shareholders – what with the AG in VAG standing for Aktiengesellschaft (public limited company) – but it is obvious that one needs to have either the state of Lower Saxony or the mighty Porsche/Piëch clan standing behind oneself (or, ideally, both) if one intends to get things moving in Wolfsburg.
But it’s not just these two parties which are heavily, shall we say, influencing VAG’s management. The state of Lower Saxony’s main aim, at least on par with ensuring VAG’s financial wellbeing, is to ensure high employment at the company’s motherland factories. This unites whoever may be elected the state’s prime minister with VAG’s shop chairman, whose intentions are broadly similar, as well as with the incumbent head of Germany’s IG Metall union, who is traditionally awarded membership of the board of directors.
So what’s good for employment is basically good for the unions and Lower Saxony. In contrast, rich earnings should supposedly be the Porsche/Piëch family’s main agenda, one would believe. And yet, there has been a unique collaboration between these three parties that has been ongoing for the past two decades – including the odd disruption (such as Wendelin Wiedeking’s plan to take over VAG, which was foiled by an alliance of convenience forged by the machiavellian Ferdinand Piëch).
But in general, all was well, as long as VAG didn’t become too efficient (so no painful redundancies at the German factories) and Piëch was allowed to indulge in his own vision of the future of the automobile (which meant luxury brands and, yes, diesel engines). Even a sleazy affair revolving around a former VAG shop chairman, union officials’ regular visits to brothels all over the globe and a Brazilian mistress that was getting paid by VAG for obscure services couldn’t bring an end to this agreement.
Now, what with diesel at the crossroads and Piëch alumnus Martin Winterkorn presumably hiding in some Swabian mediaeval castle, the VAG accord is being jeopardised like never before. Some of this disruption could be interpreted as being in keeping with new CEO, Matthias Müller’s promises to establish a new corporate culture at VAG, an environment in which both open-mindedness and critical thinking are allowed to thrive. But the truth looks very different indeed.
The Wolfsburgian battle lines are many and often intertwined. The work council is obviously most interested in keeping both domestic employment and wages high. Management, on the other hand, is hoping to find a way to maintain a healthy r&d budget, despite the heavy anticipated and acute financial losses. Moreover – and most damningly in the current climate – a great many members of the board are unwilling to do without this year’s boni, to the great disdain of the press, workers and shareholders.
The seemingly absurd fact that VAG is intending to pay any kind of bonus at all is actually due to German legislation, which had been changed in the wake of 2008’s financial crisis. Since then, boni paid by German businesses are to be evaluated based not on the past year’s performance, but the previous two to four years’ figures. Some managers therefore believe that the current crisis does not relate to those past achievements that are now supposed to be honoured. New chairman of the supervisory board, former VAG CEO, Hans Dieter Pötsch, is even entitled to an incentive to the tune of ten million Euros, as some of his pension rights are being forfeited as a consequence of his move to the supervisory board.
A compromise has just appeared on the horizon: Matthias Müller et al have allegedly proposed cutting their boni by 30%. The trouble is that this only relates to the part of the bonus that’s based on last year’s performance. The significant rest remains untouched.
Ironically, the situation isn’t all that different when looking at the workers’ demands. VAG is a notoriously overstaffed enterprise (Toyota, for example, employs about half as many people as Volkswagen) and workers are among the best-paid in the industry.
Which leads to Herbert Diess, a new face at VAG, who had incidentally been hired before the diesel fumes started to stink. Diess, a former BMW CEO hopeful, is leading the Volkswagen brand, and is supposed to act in almost exactly the same capacity as one of his successors, Wolfgang Bernhard (who had arrived from what was still DaimlerChrysler back in the day). Yet again, an outsider is tasked with blowing away the cobwebs and building up an even remotely modern corporate structure and cost basis at Volkswagen. And just like Bernhard, Diess has already made some powerful enemies within the VAG empire, which led to him offering his resignation to the workers council recently, on the basis of a perceived lack of trust in his person. His offer was declined, but the situation serves to highlight the difficulty of trying and not doing things ‘the Volkswagen way’ in Wolfsburg.
In the upper echelons, the Porsche/Piëch family also has an agenda of its own. Which is mostly about consolidation of power. The canny purchase of VAG shares once their prices had plummeted was one such move, but right now, the powers that be are very concerned about the prospect of dividends being held off as a consequence of the current crisis. This is not directly a financial concern on the Salzburg clan’s part, which doesn’t rely on this kind of payment. The worries are revolving around a clause in stock corporation laws that endows non-voting shares with additional rights if no dividends are being paid for a certain period of time. This would effect the Porsches/Piëchs to significantly lose influence over Volkswagen, which would be, one can presume, even more painful than negative fiscal consequences.
For the first time in years, the different camps’ aims are, sometimes severely so, at odds with one another. Ferdinand Piëch, ever the great puppeteer, will certainly make his move sooner or later to gain another party’s commitment to his cause, the price for which can only be guessed at present. But even he will find the current situation particularly taxing, especially as it is unthinkable that Piëch will once again be able to forge an alliance with the work council (as he had been the case when fighting against Wiedeking and, to a lesser degree, Pischetsrieder & Bernhard) in order to achieve his goal.
And all this is just the infighting. There’s still an ongoing crisis revolving around the corporate behemoth that needs all the attention it can get. Trust needs to be regained, the product range needs to be realigned, costs need to be saved and, above all else, a new corporate culture needs to be established. Yes, really.
All of these factors appear to be overwhelming the man who is charged with making the big decisions. Matthias Müller’s performance has thus far been lacking, to say the least. In his public statements, he has far too often contradicted himself to be considered a true reformer. There is still a sense that VAG believes it can get away with its misdeeds, possibly because there’s a feeling that the corporation is too big to fail. But so was GM, once upon a time. And even if there’s a feeling that the average car driver cares more about decent consumption figures and soft touch plastics than NOx emissions, the legal dangers, especially in the US, are simply immense.
Despite grand claims to the contrary, “weiter so“- a very German term that, at its worst, can stand for narrow-mindedness, arrogance and ignorance at the same time – seems to be the order of the day at VAG. “Weiter so” will not do. That is for certain.
Sources: Manager Magazin/Süddeutsche Zeitung/Die Zeit