Matthias Müller, the new CEO of Volkswagen, has the full confidence of the board—but can he win back the confidence of consumers and regulators?
As expected, Porsche group CEO Müller was today named the new CEO of Volkswagen AG, but you can resist the temptation to send him a card of congratulations. He begins one of the most difficult jobs anywhere right now: restoring the systems and reputation at the world’s largest automaker during the biggest scandal in the company’s nearly 80-year history.
After long deliberations, the board of the company approved Müller to take over the company’s top spot “with immediate effect.” The 62-year-old former chairman of Porsche AG, a Volkswagen unit, “will continue in this function until a successor has been found,” the board said in its statement, although the extent of this crisis begs the question of how much (if any) attention Müller can give Porsche as he looks to right the ship at Volkswagen.
As such, Müller will work closely with automaker’s board to try to stem the damage from the Dieselgate scandal in financial and operational terms as well as to somehow maintain the appeal of VW brands and products even as the admission of deceptive emissions levels would seem to knock the props out from under the company’s vaunted “clean diesel” engines—and a huge brand platform.
“Matthias Müller is a person of great strategic, entrepreneurial and social competence,” Berthed Huber, interim chairman of the supervisory board of Volkswagen AG, stated. “He knows the group and its brands well and can immediately engage in his new task with full energy. We expressly value his critical and constructive approach.”
VW’s new leader has another attribute: he had no involvement with the small-displacement Turbo Direct Injection (TDI) diesel engines at the center of the Dieselgate emissions test manipulation.
Müller received other important endorsements as well. “When it comes to leadership appointments, the Volkswagen Group does not need hasty decisions,” Bernd Osterloh, chairman of the Group Works Council and the powerful organized labor representative on the VW board, stated.
For his part, Müller said that his “most urgent task is to win back trust for the Volkswagen Group— by leaving no stone unturned and with maximum transparency, as well as drawing the right conclusions from the current situation. Under my leadership, Volkswagen will do everything it can to develop and implement the most stringent compliance and governance standards in our industry.”
There are increasing indications that Müller will have plenty of help in leaving no stone unturned in terms of who’s to blame for Dieselgate, at least. From dozens of US attorneys general to American federal regulators to European Union regulators and inquiries in individual European nations including the UK, hundreds of trained eyes will be fixed on finding out not only about the depth of the treachery that created the diesel deception but who committed it—and how high the dishonesty went.
America’s EPA environment watchdog already has used Dieselgate as a reason to vow to step up its enforcement of emissions standards across the entire auto industry.
Dr Herbert Diess, CEO of the Volkswagen Passenger Cars brand, explains:“We are working at full speed on a solution.” https://t.co/CqDkTO2Xr4
— Volkswagen (@Volkswagen) September 25, 2015
The Porsche exec has several factors going for him in this critical new role, including the fact that “he’s not tainted” because he was at Porsche and that he also has strong “internal support,” he’s a “Volkswagen lifer,” has a strong track record at Porsche and boasts a “broad skill set,” as Fortune put it.
Müller stated today that “If we manage to achieve” this bold initial agenda of finding out what went wrong and addressing it firmly, “then the Volkswagen Group with its innovative strength, its strong brands and above all its competent and highly motivated team has the opportunity to emerge from this crisis stronger than before.”
— Volkswagen (@Volkswagen) September 25, 2015
He’d better hurry. Already, there are predictions in the US that Volkswagen will be the only automaker to report lower September sales than a year earlier. The scandal already has rattled consumers: SurveyMonkey asked more than 500 US consumers how Dieselgate affected their perception of the Volkswagen brand, and 70 percent said they now have a more negative opinion.
And there’s a lot of external impatience about getting to the bottom of this. Commentators on Friday already were agog at how little bloodletting there has been so far at Volkswagen, even after a marathon eight-hour board meeting about the crisis. Volkswagen US president and CEO Michael Horn keeps his job. No top engineers were let go on Friday, though this had been rumored. Instead, the company announced a new organizational structure for its brands, especially in North America.
Volkswagen’s operations in the USA, Mexico, and Canada will be combined and significantly strengthened to form a new North America region. Effective November 1, the Group’s activities in the region will be led by Prof. Dr. Winfried Vahland, formerly Chairman of the Board of Directors at Škoda, while Horn remains President and CEO of Volkswagen Group of America.
According to Volkswagen’s press release, its corporate Group functions will now “concentrate more closely on efficiency and future-oriented fields; organizational units, for example for Group product strategy, new business fields, cooperations and holdings, connected car activities, and CO2 steering, will therefore be set up (and) new, strong Group functions, such as for standardization and harmonized production processes, will lay the timely foundations for efficient decision-making. We will become faster and more agile.
Furthermore, a Chief Technology Officer “will analyze and, if necessary, co-steer technical developments throughout the Group as mandated by the Group Board of Management.”
Brands are also being aligned differently: “At the same time, existing corporate bodies, structures and processes will be streamlined at Group level, in particular by strengthening the brands and regional accountability. To that end the Volkswagen brand will introduce a management structure with four regions, each led by a local CEO with a direct reporting line to the brand Chairman, Herbert Diess.”
Furthermore, “The production department at Group level, until now led by Thomas Ulbrich in an interim capacity, will be abolished with immediate effect. This is one consequence of delegating responsibility to the brands and regions. Berthold Huber commented: “Going forward, the brands and regions will also have greater independence with regard to production. So it follows that they should also hold the responsibility for these activities.”
The interim Supervisory Board Chairman emphasized that “one key point is that we are scaling back complexity in the Group. In recent weeks, we have already undertaken important steps such as separating Group and brand functions.” He said the developments of the last few days had underscored the urgency of this project: “We will not lose any time. The new management model will be implemented at the beginning of 2016.”
Christian Klingler, VW’s board member with responsibility for Sales and Marketing, is leaving the company “as part of long-term planned structural changes and as a result of differences with regard to business strategy. This is not related to recent events.” New CEO Müller will head the Sales department at Group level “in an interim capacity until further notice.”
On Oct. 1, Jürgen Stackmann, previously Chairman of SEAT, will take over Klingler’s function as a member of the Volkswagen brand Board of Management. Stackmann is succeeded by Luca de Meo (48), currently Audi AG Board of Management member for Sales and Marketing.
“What all this amounts to, really, is a shuffling of the deck chairs on the Titanic,” Forbes commented. Volkswagen “is in crisis, and it’s not at all clear what the board plans to do about it… Although the company had promised earlier in the week that there would be ‘further personnel consequences in the next days’ it still appears that no one has been assigned blame for the scandal.”
And for now, anyway, it looks like Volkswagen and Müller are on their own in Dieselgate. There doesn’t appear to be a smoking cylinder in how BMW handles its emissions tests, after an alarm yesterday. On Friday, the company reiterated that it is “committed to observing the legal requirements in each country and fulfilling all local testing requirements.
BMW also underscored its conviction about the broad importance of making sure that clean-diesel power overall doesn’t follow VW’s credibility down the alternative-fuel rat hole. The progress achieved so far in CO2 reduction in Europe is largely due to the use of diesel technology,” its statement said. “Meeting future requirements will not be feasible without diesel drive trains.”