Volkswagen has grown rapidly since Winterkorn took over as CEO at the start of 2007. During his reign the company has grown to 12 brands from eight, nearly doubled annual revenue to 197 billion euros from 105 billion euros, more than doubled its manufacturing footprint to 106 plants from 46 while boosting its model lineup threefold to about 315 vehicles from more than 100. Currently, nothing seems capable of slowing down the company, which will invest 84.2 billion euros from now through 2018, by which time it aims to supplant Toyota Motor Corp. as industry sales leader, earning a pretax profit margin of more than 8 percent.
Despite such a large commitment of cash to pay for plants, products and technology, the company plans to significantly boost the share of profits it returns to its shareholders in the midterm. By the end of 2018, VW expects to have almost 32 billion euros in surplus cash that it can add to the nearly 18 billion euros already on its books at the end of the first quarter. By comparison, Renault’s last reported automotive net liquidity is only about one-tenth of that.
Because of its solid balance sheet, VW can look beyond 2018 to prepare itself for coming challenges as the industry moves toward self-driving cars and new personal mobility models. It can do this even as many of its cash-strapped competitors in Europe are still busy cutting jobs and downsizing production in response to a six-year slump in new-car sales. With its Future Tracks initiative, Winterkorn aims to accomplish nothing less than answer the challenges that the CEO calls “one of the greatest upheavals since the invention of the automobile.”
Yet history suggests even the strongest empires have an uncanny tendency to crumble, as complacency, bloated bureaucracies and internal power struggles eventually weaken competitiveness. VW’s boardroom has been the stage for so much intrigue that it might even rival popular TV series “Game of Thrones.” A sex scandal centered around union leaders rocked the company in 2005, leading to the resignation of Piech’s boardroom ally, Klaus Volkert. Hoping to clean house, former VW board member and ex-Lower Saxony head Christian Wulff attempted a coup against Piech. The move failed because Wulff failed to secure the support of trade unions.
In the years that followed, former VW board member and Porsche CEO Wendelin Wiedeking tried to acquire VW Group and use its cash reserves to pay for the hostile takeover. This sparked a feud between the Porsche and Piech families over control of VW that lasted until Wolfgang Porsche capitulated unconditionally to Ferdinand Piech, his cousin, in 2009.
Both a gifted engineer and lightning rod for controversy, Piech has devoted his life to VW in a bid to emulate the success of his grandfather, Ferdinand Porsche – the intellectual father of the company and creator of the Beetle. But the indomitable VW chairman, who himself has claimed the scalp of many a manager that crossed him, including Wiedeking, seems to fear his legacy may not be safe. The septuagenarian’s chief lieutenant, Winterkorn, has remained VW Group CEO even though he turned 67 in May (most CEOs in Germany serve until their early 60s). Piech also used his considerable influence to install his own wife, a kindergarten teacher with no discernable experience in the auto industry, onto the VW supervisory board.
John Wormald, managing partner of automotive consultancy firm Autopolis, fears that managing a smooth succession at a company so singularly built around one man’s dream could be extremely tricky given the shifting alliances and feuding interests of the past. “It may be somewhat of an exaggeration but it’s reminiscent of Yugoslavia under Marshall Tito, where all the various factions battling it out internally for control created these centrifugal forces that eventually tore the country apart,” he said. “Who’s there that could really take charge? Is Winterkorn really strong enough? He is not an engineer of the caliber of Piech, who does have elements of genius about him,” Wormald said, adding that he fears Winterkorn does not have his mentor’s same level of authority.