Strategy & Operations » Governance » VW CFO moves into chairman role during most turbulent period in car maker’s history

VW CFO moves into chairman role during most turbulent period in car maker's history

Pötsch must call on the expertise he gained on his rise to the top of the car industry as VW chair

IT’S probably safe to surmise that Volkswagen’s former CFO Hans Dieter Pötsch had little idea what a storm of corporate woe he would find himself in having moved up to chairman.

The emissions duping scandal has landed Europe’s biggest car manufacturer in its most turbulent period in its 78-year history – a crisis that threatens its very existence, not to mention the collapse of its share price, down a third at the time of writing.

Pötsch’s appointment was welcomed by analysts who recognise the benefits that an internal candidate can bring, in terms of appreciating the nuances that entwine VW’s huge shareholder – the government of the German state of Lower Saxony, which owns a 20% stake in VW – and the unions, as well as Porsche, which controls 51%, and the investor community.

The car giant has admitted it cheated emissions tests in the US by fitting devices to diesel engines that, when tested, manipulated performance to improve results.
But what will be causing the new chairman more executive pain are claims that following a series of internal probes, the first determined forays into the deception could have begun about a decade ago, in 2005/06.

That means they pre-date Martin Winterkorn – the VW chief executive who fell on his sword over the allegations.

The FT posits that such dates could be more important, as the seeds of the scandal could have been sown under his predecessor, Bernd Pischetsrieder, and Wolfgang Bernhard, the former head of VW.

Volkswagen facts - November 2015German governance differs from that of Britain and VW’s 20-member supervisory board is based on the stakeholder model whereby local politicians, investors and staff representatives sit on it. Archie Norman, ITV chairman, wrote in the Telegraph that such a set-up would not have helped as it “is too large, not close enough to the business” and has a “coalition of stakeholders rather than a unitary board working for the well-being of the company”.

The FT suggests it also points to a culture clash bedevilling VW, some ten years after the group was split by a power struggle that still has ramifications.

Both Pischetsrieder and Bernhard have issued statements through lawyers denying any knowledge of software being fitted to cheat on engine tests and have both offered to testify on legally binding statements.

Austrian-born Pötsch will have to exercise all his intellectual muscle and diplomatic skills as chairman and call on the expertise he gained on his rise to the top of the car industry.

Having studied industrial engineering at the Technical University of Darmstadt, he revved up his professional career at BMW in 1979, where he stayed until 1987 and attained the position as head of group control.

He then moved to Trumpf in Ditzingen, Germany, as general manager for finance and administration. For four years from 1991, Pötsch was chairman of the management board of manufacturer Traub. In 1995, he moved to mechanical and plant engineering outfit Dürr, where he was chairman of its management board and responsible for quality management, planning, internal auditing and company communications, before joining VW in 2002.

And as far as management accountability goes, an ex-VW employee told the FT that 2008 was a critical moment, as this was when “the engine was certified and its software, with millions of lines of code, was recognised”.

He suggest that there “would have been several opportunities for executives to spot a problem, including noticing that the software team was doing double the amount of work to programme the engine to run one way in test conditions and another on the road”.

VW has said it will start its recall of cars affected by the emissions cheat in January next year, with all repairs expected to be completed by the end of 2016.

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