Volkswagen”s bumpy road from “dieselgate” to “new and better” company

Volkswagen is battling for its future.   In essence, Europe’s largest carmaker is still caught in a tightrope act. On the one hand, VW wants to move in the direction of electromobility, digitalization and services.   But, on the other hand, it still must deal with the fallout from its emissions scandal – billions of […]

Volkswagen is battling for its future.

 

In essence, Europe’s largest carmaker is still caught in a tightrope act. On the one hand, VW wants to move in the direction of electromobility, digitalization and services.

 

But, on the other hand, it still must deal with the fallout from its emissions scandal – billions of dollars’ worth of costs, criminal investigations and loss of customer confidence.

 

The latest compromise ruling presented by US judge Charles Breyer in yet a further costly claims settlement pertaining to 3.0-litre engines does nothing to change the situation.

 

But the overall picture does appear to show that the once extremely successful – many critics called it high-handed – automotive empire has now grasped the urgency for a thorough revamping.

 

In its third year of crisis, VW’s management will be pushing its "Strategy Together 2025" campaign. Its goal: "A new and better Volkswagen." There is to be less hierarchy and blind obedience to the top managers. Instead, there will be more self-criticism and transparency.

 

After the resignation of chairman Martin Winterkorn in September 2015, not just a few observers have had the impression that the "change of culture" at VW proclaimed by his successor, Matthias Mueller, has proceeded only very haltingly so far.

 

Awkward performances by the new boss, such as remarks in a US radio interview in early 2016 trying to dismiss the emissions affair as "technical" problem have not exactly boosted hopes about a change in attitudes at VW’s Wolfsburg headquarters.

 

But, compared with the past, this new openness towards self-criticism could make people take notice. Mueller now says this: "As bitter as the crisis has been and remains to be, it has awakened us and sharpened our focus on the demands of the future."

 

What these demands entail will inevitably mean that VW must slim itself down if it is going to be able to afford the billions’ of euros in investments needed in such areas as: electric cars; the development of new batteries; autonomous driving; and new services. In many places, the company structures so far are complex, confusing and expensive. The core brand’s comparatively weak earnings power will need to be raised.

 

None of this will come pain-free.

 

The "package of the future" that works council head Bernd Osterloh agreed to after a long tussle with Herbert Diess, the executive in charge of VW’s passenger cars brand, above all means one thing: cost-cutting. By 2025, job payrolls are to be reduced by as many as 23,000 jobs in Germany, and 30,000 worldwide.

 

This is where "dieselgate" comes into play. Even without the scandal, VW would have had to reform its bloated company structure. But the huge costs – about 16.5 billion dollars alone in the first damage claims settlement in the US – combined with record losses of 1.58 billion euros (1.65 billion dollars) in 2015 – only serve to narrow further its financial room for manoeuvre.

 

As a result, the shadows cast by the emissions scandal will continue into 2017 and beyond. The car recall actions are continuing. The law firm Jones Day, which is investigating VW and questioning employees about the scandal, has still not yet presented its report. Hanging in the balance will be how US authorities – especially under new US president Donald Trump – will deal with Volkswagen in the future.

 

Besides suits filed by investors and damage claims by customers, criminal investigations are also under way on both sides of the Atlantic. In the US, the focus is on suspicions of the destruction of evidence, in Germany on possible fraud and market manipulation. Under investigation are former chief executive Winterkorn and former chief financial officer – and current supervisory board chief – Hans Dieter Poetsch.

 

The question is whether these are the conditions for a successful new start. Doubts remain as to whether a "new, better Volkswagen" can be achieved under Poetsch, of all people, a man who was long closely associated with Winterkorn.

 

On top of everything, electric-powered cars remain a difficult field. Even with the bonus that VW offered customers last summer, demand is still tepid. VW wants to put many electric car models on the market, the question being who in the company will be in charge of what. VW’s ambitious subsidiaries Audi and Porsche are asserting their claims to have a leadership role in future technologies.

 

Entering 2017, it remains to be seen whether VW succeeds in embarking on its new road, or whether it will soon get bogged down by petty jealousies among the managers and engineers.

 

"We know that some of the public is sceptical," the VW company magazine Shift admits. "So there’s a lot of work ahead of us to do in order to convince as many as possible that we at Volkswagen are serious about clearing things up." (DPA)