Is Volkswagen so complicated only insiders can fix it?

25 Oct 2015 | Author: | No comments yet »

Is Volkswagen so complicated only insiders can fix it?.

Frankfurt/Berlin: Volkswagen will freeze managerial promotions next year at its VW division as part of a savings drive to help meet more than €30 billion (Dh121.4 billion) of costs arising from the diesel emissions tests scandal, a German business magazine said on Saturday.Volkswagen’s massive diesel emissions scandal isn’t just an embarrassment for the company: by many estimates, it’s also going to cost it tens of billions of dollars in fines, lawsuits, and recalls. The German company also plans to reuse as many parts as possible in the next generation of its popular Golf model to save hundreds of millions of euros, according to the Manager Magazin report, which cited Volkswagen sources. Europe’s largest carmaker is battling the biggest business crisis in its 78-year history after admitting last month it installed software in diesel vehicles to deceive US regulators about the true level of their toxic emissions.

The effort to find the guilty and prevent a recurrence is in the hands of new CEO Matthias Mueller, who has been with the group for almost three decades. Analysts expect Volkswagen to report a €3.5 billion operating loss for the third quarter when it publishes its financial results on Wednesday, down from a year-earlier profit of 3.2 billion. Works council chief Bernd Osterloh rejected the idea of a halt to promotions, saying such a move would be “merely symbolic” and at the expense of workers. “We expect to see other symbols first: for instance, clear statements on management’s stance on bonus payments.

But he was a member of the top management team in place when the cheating took place, a group of executives that hasn’t yet been formally cleared of involvement. The billionaire members of the Piech and Porsche families collectively control a majority of the voting rights through their holding company, Porsche Automobil Holding SE. According to Manager Magazin, the VW brand is to bear the brunt of the costs, while more upmarket brands like Audi and Porsche are to be shielded from the current crisis. Lower Saxony, the Germany state where Volkswagen’s Wolfsburg headquarters is located, holds a 20 per cent voting stake, giving it the legal right to block plant closures. Audi told employees it plans to keep hiring and affirmed a jobs guarantee through 2018, a spokesman for Audi said on Saturday, confirming a German media report. “We are sticking with plans for strategic growth and are continuing to hire new employees as planned,” newspaper Heilbronner Stimme had earlier quoted Audi personnel chief Thomas Sigi as saying in an interview published on the carmaker’s Intranet site.

That’s why they need someone that knows the structure.” The management under Winterkorn also has been criticised as overly opaque and hierarchical. Employee representative Bernd Osterloh lamented last month the need for “a culture in which it’s possible and permissible to argue with your superior about the best way to go.” Some question whether pressure to meet Volkswagen’s target of passing Toyota as the world’s largest car maker led people to cut corners.

Toepfer acknowledged that the inside-outside question has two sides: “Before it’s known who was involved and how, there’s the danger that those put in charge of clarifying matters were involved themselves.” Volkswagen has made some effort to reach outside, hiring US law firm Jones Day to find out who knew and did what in the scandal. Volkswagen also sought legal clarification about Poetsch’s move to become chairman, said Hans-Gerde Bode, the company’s director of communications. “Knowing that these questions would come up, we obtained a legal opinion ahead of time, which made this change possible to undertake, because we knew, yes, that will lead to multi-sided discussion.” Bode said the company cannot predict what Jones Day will find but that it’s “relatively sure that the CFO and the very top management was not involved in this decision” to alter engine software so that the cars evaded the US tests. He added: “Naturally, if at one point or another possible conflicts of interest are indicated with anyone whatsoever, these people will surely not be part of any meeting where Jones Day reports something and where decisions are taken.” Carol Adams, a professor at Durham University Business School in Britain, questions the idea that only an insider could fix Volkswagen. She says that may stem from the scarcity of outside directors on its board, which is dominated by the owner families and employee representatives: “If you’ve got a board with independent directors on it, you’re less likely to have that fear of questioning a particular culture.” Stephan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences-Bergisch Gladbach, says the Jones Day probe will likely identify the individuals responsible. The company, he says, should appoint an outside commission put together from experts, researchers and nongovernment organisations to investigate what happened and how to prevent it from happening again.

Toyota recalled millions of cars after a crisis in 2009-10 over unintended acceleration in some cars and GM had to fix vehicles where faulty ignition switches could shut off the engine and disable airbags. But Siemens AG, a German engineering conglomerate, reached outside the company for a new CEO after it was hit with criminal investigations for using widespread bribery to win business in a number of countries. Peter Loescher was brought from pharmaceutical company Merck and streamlined the company’s complex structure and, by his own account, purged 80 per cent of top management.

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