VW struggles to use diplomacy to resolve leadership crisis image

Volkswagen AG, the second largest automaker in the world and the biggest in Europe, has met its first leadership crisis in more than a decade and has found itself struggling to resolve the situation using diplomacy.

The problem busted into public attention when Chairman Ferdinand Piech used German magazine Der Spiegel to surprisingly and publicly pan chief executive officer Martin Winterkorn by saying he was distancing itself from the current group leader. Other public declarations followed swiftly, with some investors, shareholders, labor leaders and even VW-ruling family members supporting the CEO, rather than Piech. The latest reports – with the family set to meet and then follow up with a supervisory board panel discussion – now put the issue behind closed doors. Sources have Piech, 77, his cousin Wolfgang Porsche (chairman of Porsche SE, the holding company that has a majority in VW AG) and other founding family members set to meet and try to amend the rift between the leaders. The latest reports have also said a supervisory board meeting might be scheduled for Friday. According to insiders, the mounting tensions have slowly grown before this outburst because the chief executive had became too confident, and now the turmoil reflects the strained relation between Piech and Winterkorn.

The conflict is also turning attention away from the company’s growth targets and on to the mounting problems the carmaker has been having after a successful increase period. The automaker has been facing both governance and performance problems – from issues with the group’s MQB modular platform to falling sales and earnings margins at its core VW brand. All the way, the German company is battling both Japan’s Toyota Motor and America’s General Motors for global sales supremacy.

Via Reuters