VW has replaced Martin Winterkorn, after US authorities accused the company of cheating emissions tests. The eventful week has concluded with Porsche CEO, Matthias Mueller acquiring Winterkorn’s position, says Alex Kreetzer.
Last week, the Volkswagen Group (VW) took fire from the US Environmental Protection Agency and the California Air Resources Board, after the authorities identified that the automaker’s diesel vehicles held software that manipulated test results, violating American environmental standards.
After the reports emerged, Winterkorn released a statement in which he apologised for the allegations: “I personally am deeply sorry that we have broken the trust of our customers and the public. We will cooperate fully with the responsible agencies, with transparency and urgency, to clearly, openly, and completely establish all of the facts of this case. VW has ordered an external investigation of this matter.”
The allegations stated that a range of diesel VW vehicles had been fitted with software which would lower emissions during tests, while turning off when the car operated normally. The German Automaker has admitted to cheating these emission tests, which has affected 11 million units worldwide.
Following VW’s plan to use €6.5 billion in its third quarter to recover from this serious issue, shares decreased almost 20% on September 21 – the lowest for the group in over four years. The company has also stated that this figure could rise further. This is extremely bad news for VW as almost €15 billion, a fifth of the company’s market value, along with up to €18 billion in fines, more than a year’s net profit, will join criminal charges from authorities on behalf of VW customers. These issues could detrementally damage the so-called ‘environmentally concious’ automaker, which could fall from its podium with a number of its models.
VW allegations will now spark off multiple investigations woldwide, in attempt to prevent and stop other manufacturer’s manipulating these tests. South Korean authorities have already issued a probe into three automaker’s diesel vehicles, with 4,000-5,000 VW Golf, Jetta and Audi A3 models produced since last year under the spotlight. If these authorities uncover simular problems in diesel cars, the probe could be expanded to all German diesel cars.
Now, Porsche CEO Matthias Mueller has replaced Winterkorn, after the unfortunate timing of the management decision meeting on September 25, ending the former CEO’s nine year reign within the company. Only two days before his management review, Winterkorn ‘resigned’ from his position.
The interim Chairman of the Supervisory Board of VW AG, Berthold Huber, underscored: “Matthias Müller is a person of great strategic, entrepreneurial and social competence. 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.”
Matthias Müller said: “My most urgent task is to win back trust for the VW Group – by leaving no stone unturned and with maximum transparency, as well as drawing the right conclusions from the current situation. Under my leadership, VW will do everything it can to develop and implement the most stringent compliance and governance standards in our industry. If we manage to achieve that then the VW 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.”
The board will also appoint Juergen Stackmann, formally head of SEAT to the VW management board as the new Sales Chief. Luca de Meo, the Sales Cheif at Audi, is expected to take Stackmann’s position at SEAT. Audi CEO, Rupert Stadler will remain in his position, after being one of the top candidates to replace Winterkorn. Audi’s head of R&D, Ulrich Hackenberg and Porsche Engine Chief, Wolfgang Hatz have both been dismissed, along with VW Chief Executive (US) Michael Horn who will be replaced by the current Cheif Executive of Skoda, Winfried Vahland.
Winterkorn released a statement shortly after the breaking news:
“I am shocked by the events of the past few days. Above all, I am stunned that misconduct on such a scale was possible in the VW Group.
As CEO I accept responsibility for the irregularities that have been found in diesel engines and have therefore requested the Supervisory Board to agree on terminating my function as CEO of the VW Group. I am doing this in the interests of the company even though I am not aware of any wrong doing on my part.
VW needs a fresh start – also in terms of personnel. I am clearing the way for this fresh start with my resignation.
I have always been driven by my desire to serve this company, especially our customers and employees. VW has been, is and will always be my life.
The process of clarification and transparency must continue. This is the only way to win back trust. I am convinced that the VW Group and its team will overcome this grave crisis.”
What makes matters worse is that, back in April earlier this year, VW of America told customers of diesel VW and Audi models to visit dealers in order to install a new software for emission efficiency. This meant that the German automakers failed to mention that the recall was due to government regulations, after authorities first identified a difference between laboratory emissions and ‘real life’ emisions of the vehicles. The recall, which began last year, started after the California Air Resources Board (CARB) and the EPA allowed VW the voluntary fixing of the ‘technical malfunction,’ which has recently become clear to be the same issue found in this latest sacndal.
Dave Clegern, a CARB spokesman confirmed that the letters were part of the previous recall: “this is one of the fixes they presented to us as a potential solution. It didn’t work.”
This has left VW in the rubble, with this scandal handing opportunities to the likes of Ford and GM in Europe, whilst destroying the German automaker’s US hopes in crisis. The group may now have to conduct an accelerated cost-cutting programme to compensate for its losses, now tipped to lose the top spot in global sales after a strong first half, leapfrogging Toyota.
“The crisis lays bare the need to rethink whether the company really has to own noncore businesses like Bugatti and Ducati, and most importantly whether the VW brand would be better advised exiting the US market where it’s lost billions,” said NordLB Auto Analyst Frank Schwope.
Consumers may now stop buying VW vehicles in the future, turning to other automakers such as Opel/Vauxhall, which is grasping its european opportunities with the arrival of the new Astra.
However, VW has gone the right way about this, quickly accepting the blame and removing executives linked to the scandal, a much more positive relpy than other OEMs in simular situations.
“Toyota was much slower to react to allegations of unintended-acceleration problems and tell people why things went wrong as well as what they were going to do to fix them,” said Manfred Abraham of UK consultancy BrandCap. “VW has surprised positively with its crisis management.