Only a Flawed Genius Builds a Bugatti Veyron


(Bloomberg Opinion) -- How is that the most outstanding corporate leaders are so frequently the most flawed?

Steve Jobs’s fanatical obsession with the user experience turned Apple Inc. into one of the world’s most valuable companies. But there’s no shortage of tales about him being mean and rude.

Former Volkswagen AG Chairman and Chief Executive Officer Ferdinand Piech, who has died aged 82, embodied many of the same contradictions. For better or worse, we are unlikely to see his sort run a public company again. There is no question that the German carmaker wouldn’t be where it is today – an automotive colossus with 235 billion euros ($261 billion) of annual sales, a dozen brands, and more than 600,000 employees – had Piech not willed it so.

But by his own admission, the executive’s “need for harmony” was limited. A man of few words, his icy stare was legendary and managers who failed to live up to his exacting standards were quickly dispatched. Tenets of good corporate governance were also summarily ignored – Piech even saw fit to appoint his wife, a former nanny, to VW’s board.

Corporate textbooks would abhor such an autocratic, impatient style and the same would go for Piech’s love of cash-burning vanity projects. From the 16-cylinder, 1,000 horsepower Bugatti Veyron to the glass-walled, parquet-floored Dresden factory for his beloved (but spectacularly loss-making) VW Phaeton saloon, Piech’s edicts would often make a bean counter or management consultant’s blood run cold.

His compulsions didn’t stop at building the best cars. When he became VW boss in the 1990s, Piech became upset that customers collecting their new vehicle from his headquarters received a lousy experience. And, lo, the Autostadt was born. Each brand was given a pavilion to show off its wares. Two giant towers were constructed to house new cars and ceremonially present them to the customer via a robotic arm.

Piech even persuaded the Ritz Carlton to set up its first German hotel in the drab industrial city of Wolfsburg so customers would have somewhere nice to stay. Today, the Autostadt boasts about two million annual visitors, which suggests it was money well spent. I’d argue the same is true of Bugatti: though the marque is believed to have made copious losses, only a curmudgeon would argue he should never have bought it.

Piech’s singular achievements were, of course, tarnished first by the manner of his departure as chairman. He fell out with CEO Martin Winterkorn in 2015 and quit in a fit of pique.  

Soon afterwards, VW was exposed as having rigged millions of diesel cars so they passed emission tests. It’s difficult to comprehend how such an accomplished engineer could have been ignorant of how the carmaker “solved” the technical challenge of making its engines compliant. But even if we was, Piech must share some of the blame for what transpired and the 30 billion euros the company has been forced to spend on making amends.

If underlings are afraid to question authority or the board lack independent voices, a corporate culture can soon turn rotten.

In part due to VW’s peculiar governance, investors continue to put a discount on the stable of brands Piech painstakingly constructed – if listed separately, the highly profitable Porsche operation might be worth somewhere north of 100 billion euros – more than VW’s entire market capitalization.  

For all his faults, I am inclined to forgive Piech. European politicians complain the continent is failing to develop dominant technology companies like Alphabet Inc. and Inc. But in carmaking, the breadth of VW’s activities are without parallel and its recent bold pivot to electric vehicles suggests it has no intention of giving up that exalted perch.

If Piech’s storied career tells you one thing, it’s that where there’s a will, there’s a way.  

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.

©2019 Bloomberg L.P.

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