The ongoing diesel emissions scandal has prompted huge changes at Volkswagen. The German manufacturer was found to have knowingly published falsified emissions levels for some of its vehicles, prompting an enquiry and legal action. In the latest twist, its management board has been overhauled, in the biggest change to the company’s structure since it was founded in the 1930s.
CEO Martin Winterkorn has stepped down from his role at Volkswagen, and the company moved quickly to appoint Matthias Mueller in his place. Mueller (62) was chairman at sister company Porsche, and has experience in leading a company through tough times. He will continue in that role until a successor can be appointed. It was certainly an appointment that came with a great deal of pressure; Volkswagen have been heavily criticised over the scandal, with sales of new and used cars dropping in its wake.
Mueller hit the nail on the head in his first major announcement, rightly citing the need to regain the confidence both of consumers and within the motor trade itself. After its compliance procedures had shown a worrying flaw, Mueller promised that Volkswagen would aim to develop “the most stringent compliance and governance standards in [the] industry”. His initial appointment, to a contract ending February 2020, was just one of a whole host of changes the manufacturer announced. Other key changes would be the split of the VW group into four separate partners and divisions, covering premium vehicles (Lamborghini, Ducati, Audi), volume sales (Skoda, Seat, VW), sports (Bugatti, Bentley, Porsche) and commercial sales. There was a restructuring of department heads too, with various key figures in the organisation moved into new roles. Executives implicated in the scandal were suspended.
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Clearly the first job for the new CEO would be to address the recall or refit of the near half a million 2 litre diesel cars in the United States affected by the scandal. While some options seemed fairly simple – updates to engine software, for example – the reality was far more complex. Technicians suggested that reprogramming the engines would adversely affect performance, both in terms of economy and speed, while a complete recall and scrapping of the vehicles could cost the company billions, not to mention potential compensation over costs associated with changes to many drivers’ insurance policy, inconvenience, the need for drivers to then go and find a new car etc. It may well be a boost for traders who see consumers visiting forecourts and taking out different cars on trade plates, but the likelihood is that any repurchases would be far less likely to be a VW.
Given pressing concerns over lawsuits and other criminal proceedings, Mueller’s job will be extremely difficult. Calls for individuals involved in the scandal to be fired or prosecuted need to be dealt with; while some of this has been addressed already, plenty remains to be done.
One possible way to restore consumer confidence could be to focus on VW’s hybrid range – with diesel sales and consumer confidence in emissions figures and stated performance numbers potentially tainted long-term by the scandal, the hybrid technology could become a new focus. Sales of diesel cars across Europe have rocketed in the past few years but in the US there’s been a much smaller shift (partly due to pump prices of course, but also a reluctance of the US consumer to move to diesel cars).