WORLD / Wall Street Journal Exclusive
VW overhaul draws concern
(WSJ)
Updated: 2006-11-09 15:22
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The exit of Volkswagen AG Chief Executive Bernd Pischetsrieder is raising
worries among investors that the company's vital cost-cutting program
could falter if Wolfgang Bernhard, his deputy in charge of the drive,
goes too.
Volkswagen shares fell 1.5% to ��0 ($102.17) yesterday in Frankfurt
trading. The decline followed Volkswagen's announcement Tuesday that Mr.
Pischetsrieder, who has led the company since 2002 and secured a
five-year contract extension six months ago, would leave at the end of
the year. His successor is Martin Winterkorn, head of Volkswagen's luxury
Audi division and a close ally of Volkswagen Chairman Ferdinand Pi?ch.
The company's move -- announced in a three-sentence statement that
included no thanks to Mr. Pischetsrieder for his service as CEO -- leaves
the status of several of Mr. Pischetsrieder's closest aides unclear. At
the top of investors' concerns is the status of Mr. Bernhard, whom Mr.
Pischetsrieder recruited to the company in late 2004 to turn around its
ailing VW brand, which accounts for more than 60% of the company's
vehicle sales.
A company spokesman said Mr. Bernhard wasn't available to comment
yesterday. The company declined to respond to written questions about Mr.
Bernhard's status.
Mr. Bernhard, 46 years old, has been spearheading Volkswagen's push to
cut as many as 20,000 jobs during the next three years and to raise its
flagging productivity levels. Those changes are being watched closely by
Volkswagen's rivals in Europe, many of which are also struggling with
high labor costs and underutilized plants. They face pressure from
Asia-based car makers such as Toyota Motor Corp., which are gaining
market share in Europe and aren't burdened with the same costs.
"With Dr. Pischetsrieder's resignation, we believe the 'investing in
restructuring' case at VW can't be sustained," John Lawson, an analyst
with Citigroup Research, said in a note yesterday, adding that, "at
worst," the jobs of Mr. Bernhard and VW's chief financial officer, Hans
Dieter P?tsch, could be in jeopardy. The firm said it was cutting its
rating on VW stock to "Hold/Medium Risk" from "Buy/Medium Risk."
A spokesman said Mr. P?tsch wasn't available to comment.
Word of Mr. Pischetsrieder's resignation came as a shock to some members
of Volkswagen's board of directors, according to a person familiar with
the matter. Some members learned the news through a fax sent to them by
Mr. Pi?ch minutes before the official announcement, this person said. A
day earlier, Mr. Pischetsrieder had appeared with Mr. Pi?ch at an event
at the company's headquarters to mark the opening of a vehicle-testing
facility.
The selection of Mr. Winterkorn as Mr. Pischetsrieder's successor is
drawing scrutiny partly because of Mr. Winterkorn's close relationship
with Mr. Pi?ch, a frequent target of criticism from investors, who say
Mr. Pi?ch bears significant responsibility for the company's profit slide
in recent years.
In an interview with The Wall Street Journal earlier this year, Mr.
Pi?ch, who was Volkswagen CEO from 1993 until 2002, when he took the post
of chairman, expressed unhappiness with some cost-cutting efforts made at
the VW brand during the past year. He said he was more satisfied with the
performance of the company's Audi division, which has contributed steady
profits. Through a spokesman, Mr. Pi?ch declined to be interviewed or
respond to written questions.
At 59 years, Mr. Winterkorn is a year older than Mr. Pischetsrieder.
Although he has presided over growing sales at the company's premium Audi
brand, his tenure at the division has also been characterized by a weaker
performance by its Spanish unit, Seat. A spokesman for Mr. Winterkorn
said he wasn't available for interviews yesterday. Among the leading
candidates to succeed him as head of Audi is Jochem Heizmann, currently a
senior Audi executive with responsibility for production, according to
people familiar with the matter.
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