Volkswagen Now Has a Big Chance to Slash Costs and Sell Stuff
(Bloomberg Gadfly) -- As the boss of Porsche, Matthias Mueller had arguably the best job in carmaking. When he became chief executive of Volkwagen AG in 2015 after the diesel emissions scandal, he inherited what was undoubtedly the worst -- at least at the time.
Now Mueller is poised to be relieved of a post he never seemed to particularly relish, with VW brand head Herbert Diess expected to take over the job following a board meeting on Friday.
While another change so soon after Mueller's predecessor Martin Winterkorn departed is abrupt and unsettling, VW shareholders will no doubt be delighted by the appointment. That’s not because Mueller did a bad job. It's just that Diess is a famed cost-killer, having earned his stripes at BMW AG. And VW, one of the world’s biggest private sector employers and one of its industry’s most carefree spenders, has plenty of fat to cut.
Mueller made several missteps as CEO, including appearing to question in an interview whether VW had lied about emissions cheating. He also annoyed automaker peers by questioning the need for diesel subsidies. A once outspoken executive, he seemed to find the spotlight uncomfortable.
To his credit, VW appears much stronger than two years ago. The company quickly reached a comprehensive agreement with the U.S. authorities and its balance sheet has coped well with billions of dollars of fines and penalties. The share price has recovered and cash flows are buoyant after reining in some unnecessary spending. VW has laid out a convincing strategy to deal with the sunset of the combustion engine and rise of electric vehicles.
So it’s not a shameful moment for Mueller to step aside. This is no longer a company in crisis.
Diess will undoubtedly have plenty of ideas about how to cut more costs. Shareholders will hope he's more aggressive in pushing VW to unlock value from its huge stable of brands by spinning some off.
The big question is whether the new man can work harmoniously with VW’s labor representatives, who wield huge power. Diess and labor chief Bernd Osterloh haven’t always seen eye to eye. If he is appointed, though, VW will want to make sure he sticks around. Quickfire changes during a crisis are one thing. But the epochal changes in the industry need a longer term view at the top.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Chris Bryant is a Bloomberg Gadfly columnist covering industrial companies. He previously worked for the Financial Times.
To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net.
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