Ferdinand Piëch, chairman of Volkswagen, who is also the grandson of the original founder of the company, resigned unexpectedly on Saturday after failing to oust the automaker’s CEO, Martin Winterkorn. His resignation will bring about a dramatic end of an era at one of Europe’s largest corporations. Piëch’s move was influenced by what he felt was the CEO’s inability to follow the global market trends and effectively compete with other large motor companies, including, General Motors Company and Toyota Motor Corporation. During his time of heading Volkswagen, Piëch was responsible in helping it to become one of the largest global companies, employing over 600,000 individuals.
In his memoir Auto Biography, Piëch wrote that in 1993, when he first assumed the title of CEO, the company was nearly bankrupt. Within the next decade, he provided an overhaul for the company, which began with cutting pay and working hours in order to streamline production. At the same time, he introduced an array of new brands ranging from large trucks to fuel efficient cars and changed its entire manufacturing process. Because of Piëch’s efforts, Volkswagen went from a company that was 1 billion euros in debt to an empire with 12 different brands and a profit of 2.6 billion euros. The company last year sold 10.2 million of its vehicles and generated a revenue of 202 billion euros. However, while Volkswagen is one of the largest motor companies, it is struggling overall with its sales in the U.S., Brazil and several other markets including China where the company’s made less sales in the first quarter.
Piëch has had a history of moving against executives in the past with whom he has had issues. In 2006, the chairman ousted Volkswagen CEO Bernd Pischetsrieder, replacing the former CEO with his protege Winterkorn, who was his protege at the time and was in charge of Volkswagen brand Audi. However, his move against Winterkorn failed with Piëch being unanimously outnumbered by the company’s steering committee, which included the state of Lower Saxony, labor representatives, as well as his own cousin Wolfgang Porsche.
Porsche, along with Piëch who has resigned as chaiman, is a main shareholder of the Volkswagen and through Porsche Automobil Holding SE., the two executives control 51% of the company’s stock. Shortly after his defeat, Piëch submitted his resignation at a board meeting near the company’s headquarters in Braunschweig. Though he will no longer be working with the board, he still remains a board member of the Porsche holding company. Mr. Porsche will most likely be the dominant force of the company going forward. Following the announcement of Piëch’s resignation, Porsche issued a statement expressing his support of Winterkorn and his overall confidence in the management of the Volkswagen company. He went on to apologize for the crisis caused by his cousin’s attempt to unseat the CEO.
At Kelly Blue Book, an automobile research group, one of its analysts, Karl Brauer stated that the Piëch’s resigning as chairman will mark a change in the company’s power structure and anticipated that things at Volkswagen will change drastically, as the recent crisis has brought with it an atmosphere of mutual distrust in the upper echelons of the company. As the company’s sales fell short earlier this year, board members such as Christian Klingler, who is in charge of the company’s marketing and sales, are not guaranteeing that Volkswagen will have a successful year. Meanwhile, it was announced that in the interim following Piëch’s resignation, deputy chairman and previous head of the IG Metall trade union, Berthold Huber will assume the former chairman’s responsibilities over Volkswagen until new elections are held, which is likely to occur at the next annual shareholders meeting May 5 of this year.
By Bill Ades