Daily Management Review

Volkswagen's New Chief Has a Tough Job at Hand


Even as Volkswagen expectedly named company veteran Matthias Mueller as its chief executive on Friday, Germany's transport minister announced the carmaker had manipulated test results for about 2.8 million vehicles in the country, nearly six times as many as it has admitted to falsifying in the United States.

This presents a very tough challenge to the new boss of the largest car manufacturing company of the world who takes over amidst the worst crisis for the company in its 78 year old history.

The company would also have a tough time regaining lost prestige as well as 40% share value that the company had lost over the last week

The world's biggest automaker said Mueller, the 62-year-old head of its Porsche sports car division, would replace Martin Winterkorn after a marathon board meeting at its headquarters in Wolfsburg on Friday.

Martin Winterkorn, the outgoing CEO had resigned on Wednesday.

"Under my leadership, Volkswagen will do all it can to develop and implement the strictest compliance and governance standards in the whole industry," Mueller said in a statement after his appointment as the chief of the company.

As a fall out of the incident, the company has suspend an unspecified number of staff, adopt a more decentralized structure with a slimmed down management board and announced the appointment of a U.S. law firm to conduct a full investigation.

But the scandal is taking a much bigger format as the German transport minister Alexander Dobrindt said on Thursday Volkswagen had also cheated tests in Europe, where its sales are much higher than in the United States.

The number was put at 2.8 million by Dobrindt on Friday.

While customers and investors are launching lawsuits, regulators and prosecutors across the world are investigating the scandal.

Manufacturers are apprehensive of a drop in sales of diesel cars and tougher testing norms as the wider car market has been rocked too.

On Friday the regulators in Europe and the United States said that they would take a harder line on enforcing compliance with pollution standards and would be less tolerant of gaps between real world emissions and laboratory results.

This came in the wake of Volkswagen announcing that 11 million vehicles worldwide were fitted with the software that allowed it to cheat U.S. tests and claimed that the software was not turned on in the bulk of them.

"His appointment is a step towards cleaning-up," said LBBW analyst Frank Biller about Mueller, a former head of product strategy close to the Piech-Porsche family that controls Volkswagen.

The immediate task at hand at Mueller is to clean up the mess in the United States with a sustained show of contrition in a U.S. advertising campaign, said one VW manager, who asked not to be identified.

"Humility will be the name of the game," he said.

Volkswagen had missed an opportunity with its choice of new CEO, said Henning Gebhardt, global head of equity at Deutsche Asset & Wealth Management.

"He won't be able to lead the company for 10 years due to his age alone. That means there will be discussions about succession in the foreseeable future again," he said.


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