By William Boston
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (April 11, 2018).
BERLIN -- Volkswagen AG's supervisory board is expected to vote
on Friday to replace Chief Executive Matthias Müller with VW brand
chief Herbert Diess, according to people familiar with the
situation, a surprising shake-up after the German auto maker
endured a crisis that cost it billions of dollars.
Mr. Müller, who formerly ran Volkswagen's sports-car marque,
Porsche AG, became CEO in September 2015 in the wake of the
disclosure in the U.S. that the company had rigged millions of
diesel-powered cars to cheat on emissions tests.
The appointment of Mr. Diess, a former BMW AG executive, would
mark an unexpected turn of events for Mr. Müller, who has been
credited with steering the world's biggest car maker by sales
through the emissions crisis, accelerating its efforts to develop
electric and self-driving vehicles, and returning it to robust
profits. His contract at Volkswagen, which is listed but partially
state-owned, isn't due to expire until 2020.
Mr. Diess, who is 59 years old, has been running the Volkswagen
brand, the company's biggest business by sales, since 2015, having
been hired shortly before the diesel scandal exploded. Passed over
for the chief executive job at BMW, he was recruited by Ferdinand
Piech, a former Volkswagen CEO and grandson of Beetle inventor
Ferdinand Porsche.
Mr. Müller's departure didn't appear to have been triggered by a
specific incident or deep dissatisfaction with his performance,
according to people familiar with the situation. Indeed, at any
other company, he would likely be celebrated for boosting the
company's share price by more than half since his appointment.
The stock closed 4.5% higher at EUR171.58 ($211.44) in Frankfurt
on Tuesday, outperforming the DAX index of German blue chips.
But Volkswagen isn't just any other company, controlled as it is
by a distinctive trio of stakeholders. The heirs to Ferdinand
Porsche and the German state of Lower Saxony together hold more
than 70% of the company's voting stock, while the IG Metall trade
union has 10 seats on its board of directors.
The ability of management to put its stamp on the company is
limited, given the Porsche clan's drive to maintain control even at
the expense of profits, and the shared interests of Lower Saxony
and IG Metall to protect the nearly 250,000 Volkswagen jobs in
Germany, more than one-third of the auto maker's global
workforce.
Other German industrial groups, including rival auto maker
Daimler AG and electrical-engineering giant Siemens AG, have begun
to overhaul longstanding corporate structures. They are breaking
out individual businesses to give them more autonomy, making them
more flexible and potentially more attractive for investors.
Volkswagen, by contrast, is difficult to streamline because of
the entrenched interests of its controlling stakeholders, said Ingo
Speich, a fund manager at Union Investment, one of Germany largest
investment funds. "Volkswagen needs more flexible structures, but
the family is just interested in maintaining the status quo," he
said.
Volkswagen's board of directors chose the ultimate insider when
it tapped Mr. Müller to lead the company out of the diesel crisis.
At the time he was CEO of Porsche, having risen through the ranks
at Volkswagen and its subsidiaries after starting his automotive
career as an intern at Audi AG.
As part of Volkswagen's recovery, Mr. Müller pushed a radical
move into electric cars. The strategy was opposed by many
long-serving Volkswagen executives and engineers, but appeared to
have the backing of the board of directors.
Over the past few months, however, Mr. Müller appears to have
lost the trust of the controlling Porsche and Piech families,
according to the people familiar with the situation.
In an interview with The Wall Street Journal last year, Mr.
Müller spoke openly about selling the Ducati motorcycle brand
without the blessings of the controlling families, according to one
of the people.
Mr. Müller also said about EUR20 billion ($24.65 billion) of
Volkswagen's EUR231 billion in annual revenue came from businesses
no longer considered essential and up for disposal, upsetting the
company's core stakeholders.
Mr. Müller is known for his strong opinions and candid speech,
which has irritated some members of the controlling families. Last
year, for example, he broke from the German auto industry in
advocating an end to tax subsidies for diesel cars and a shift in
government funding toward development of electric vehicles,
angering the Porsche and Piech clans.
"Let's put it this way, you could say that sparks flew," said
one of the people close to the families.
Mr. Müller, who turns 65 this year, has also grown increasingly
frustrated with the slow progress of change at the company and
being forced to play Whac-A-Mole as new scandals pop up, according
to the people.
One of the people said Mr. Müller was deeply frustrated when it
emerged earlier this year that Volkswagen had been party to
research that involved putting test monkeys in a chamber and
forcing them to inhale diesel fumes.
In the end, Mr. Müller and the powers that be at Volkswagen
might simply have agreed it was time for a change, according to
people familiar with the situation.
Earlier Tuesday, Volkswagen said it was considering changes to
its senior-management structure, including possible changes to Mr.
Müller's position and responsibilities, adding that the chief
executive "showed his general willingness to contribute to the
changes." In its short statement, the German car maker said the
review might not lead to actual changes in management structure or
personnel.
Write to William Boston at william.boston@wsj.com
(END) Dow Jones Newswires
April 11, 2018 02:47 ET (06:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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