Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Volkswagen faces leadership crisis as CEO demands confidence vote

Stock Markets Dec 01, 2020 06:31AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. FILE PHOTO: Volkswagen's Spanish brand SEAT announces the appointment of its new president Wayne Griffiths in Barcelona 2/2

By Jan Schwartz and Edward Taylor

FRANKFURT (Reuters) - Volkswagen (DE:VOWG_p), the world's largest vehicle maker by sales, risked a leadership crisis on Tuesday after Chief Executive Herbert Diess forced a vote of confidence in his reform efforts by asking for an early contract extension.

The multi-brand car and truck maker is convening its Executive Committee to discuss Diess's demand for the contract extension, long before his current term comes to an end in 2023, three sources told Reuters on Monday.

Volkswagen Chairman Hans Dieter Poetsch is seeking to avert a clash between labour leaders and Diess by postponing discussions about a contract extension, a person familiar with the matter said.

Diess, who defected from BMW in 2015, and helped Volkswagen to reform after its diesel scandal with a 73 billion euro ($87 billion) electric vehicle investment plan, has grown frustrated with German labour leaders blocking cost cuts.

The supervisory board's Executive Committee, which is headed by Poetsch, and includes Wolfgang Porsche and Hans Michel Piech, members of the carmaker's owning families, as well as labour boss Bernd Osterloh, is due to meet on Tuesday, the three sources told Reuters.

Volkswagen declined to comment.

"The families continue to support Diess," a spokesman for Porsche Automobil Holding SE, the company which holds a majority voting stake in Volkswagen said on Tuesday.

The meeting comes on the day that Tesla (NASDAQ:TSLA)'s CEO Elon Musk is due to receive the Axel Springer award in Berlin for his achievements in engineering, after the electric carmaker decided to build a factory on the outskirts of the German capital.

Analysts said the Volkswagen committee meeting highlighted the difficulties in reforming a carmaker where labour representatives control half the seats on the board of directors and local politicians have a 20% voting stake, allowing them to vote down significant strategic reform proposals.

"The company has some of the most amazing and most global brands, it has the scale to deploy any technology and the innovation power to be an early mover. What it appears to be lacking is the right corporate governance," Bernstein autos analyst Arndt Ellinghorst said in a note late on Monday.

"There should be no illusion, this transformation will always trigger conflicts. Whether there is a new CEO or not, the questions will remain the same, and any VW CEO will need the full backing from VW's largest shareholders, the Porsche families."

Volkswagen is worth 77.2 billion euros ($92.4 billion), far below rival Toyota's market value of $155.7 billion and Tesla's $555 billion.

And that's despite the fact that Volkswagen sold 10.96 million vehicles last year - the most by any carmaker in the world - while Toyota came in second with 10.74 million. Tesla sold only 367,500 cars in the same period.

Analysts say that's because Volkswagen is less efficient and has higher costs. Volkswagen Group had 671,205 employees at the end of 2019, compared with 359,542 at Toyota at the end of its fiscal year, and 48,016 at Tesla last year.

FORCING THE ISSUE

German companies customarily deliberate contract extensions for management board members only a year ahead of expiration. Diess, however, forced the issue after labour leader Bernd Osterloh stifled his reform efforts.

These included Diess's attempts to install allies Arno Antlitz as chief financial officer and Thomas Schmall as chief procurement officer on the management board, the three sources told Reuters.

Rather than approving each individual appointment, the labour leaders insist on approving a "package solution" which is "harmonious", two people familiar with the deliberations said.

Osterloh is also said to oppose an early contract extension for Diess, one of the three sources said.

In a post on LinkedIn (NYSE:LNKD) this week, Osterloh said there was no fight about management appointments because no committee on the supervisory board had been formally consulted about the issue.

Diess, for his part, voiced his frustration in a column in the German daily Handelsblatt published on Friday.

"When I took office in Wolfsburg, I had firmly resolved to change the VW system. This meant breaking up old, encrusted structures and making the company more agile and modern," he said.

"Together with many companions with the same level of motivation, I succeeded in doing this in many places, but not in some, especially not yet at our corporate headquarters in Wolfsburg."

($1 = 0.8368 euros)

Volkswagen faces leadership crisis as CEO demands confidence vote
 

Related Articles

Wall Street extends recent gains, led by megacaps
Wall Street extends recent gains, led by megacaps By Reuters - Aug 15, 2022 45

By Caroline Valetkevitch NEW YORK (Reuters) - U.S. stocks were higher in afternoon trading on Monday, adding to recent strong gains, with megacap growth shares rising as U.S....

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email