As Volkswagen Restructures Following Dieselgate, Here’s What’s Next for German Automaker

Just a week after the news broke that Volkswagen was being fined by the U.S. Environmental Protection Agency for purposely programing the engine management software of certain 2.0-liter diesel cars to circumvent emissions control legislation, the German automaker is fighting for its very survival.

Amidst a global restructuring program which will see the brand change forever, Volkswagen’s board appointed a new CEO this morning following the forced resignation of former CEO Martin Winterkorn on Wednesday. It has also reorganized the way in which its key markets are arranged and has announced its intent to focus more on the development of greener, cleaner vehicles. But with consumer confidence in the brand at an all-time low, we wonder what’s next for one of Germany’s most popular brands.

Volkswagen has some very simple choices ahead of it: change or die.

Volkswagen has some very simple choices ahead of it: change or die.

But before we look forward, it’s time for a quick refresher of what happened this week.

On Tuesday, Volkswagen’s then CEO Martin Winterkorn made an official video statement apologizing for the incident and promising that Volkswagen and its board would work hard to try and find answers to the many unanswered questions over how and why the software came into being. At the same time, he pleaded with the public and shareholders not to punish the entire company for the criminal behavior of a few team members of the Volkswagen family.

Then on Wednesday, Winterkorn tendered his resignation. While Volkswagen’s board of directors made it clear that they do not hold Winterkorn personally responsible for dieselgate nor do they believe he was complicit in the deliberate attempts to trick emissions testing regulations, Winterkorn’s departure was controversial in its own right: as Europe’s second highest-paid CEO, Winterkorn still stands to net a $32 million pension. Depending on how his departure is ultimately classified by Volkswagen, he could even net severance pay — a proportion of his yearly $18.5 million salary — as a consequence of stepping down.

This morning, his replacement was announced, along with sweeping changes in the way in which Volkswagen operates on a daily basis.

As expected, the 20-strong board of directors voted one of their own to the position of CEO, crowning Porsche boss Matthias Mueller as Volkswagen’s new leader. With more than four decades of work within the Volkswagen group, it is hoped that Mueller will be the guiding hand that Volkswagen needs to get itself out of this particular rut.

Volkswagens new CEO Matthias Muller, will have a tough task to clear VWs reputation.

Volkswagens new CEO Matthias Muller, will have a tough task to clear VWs reputation.

In its official announcement this morning, Volkswagen AG — which includes the Porsche, Volkswagen, Audi, SEAT, Skoda Bugatti, Bentley, Ducati, Lamborghini and various commercial truck brands  — said that it would wast no time in reorganizing the Volkswagen brand to improve accountability of board members, increase transparency and increase its focus on developing future fuel vehicles.

In North America, where the scandal first began, Volkswagen said it would combine its Canadian, U.S. and Mexican businesses into a single region as of November 1, led by Prof. Dr. Winfried Vahland. Former Chairman of the Board of Directors at Skoda, Vahland’s new position sees him join the Volkswagen brand Board of Management and replaced at Skoda by former Porsche Sales and Marketing chief Bernhard Maier. Michael Horn, President and CEO of Volkswagen Group of America, appears to have survived the scandal in his current job — at least for now.

Less lucky, say some sources is Volkswagen’s chief of Research and Design Heinz-Jakob Neusser as well as his opposite numbers at Audi and Porsche — Ulrich Hackenberg and Wolfgang Hatz respectively. While Volkswagen has yet to confirm these three departures, they do seem to make sense given the challenges facing the Volkswagen group in the aftermath of Dieselgate.

Alongside the North American restructuring, Porsche, Bugatti and Bently brands will be grouped together for the first time under a new performance and luxury-oriented arm of VW. Meanwhile, the entire Volkswagen group will “concentrate more closely on efficiency and future-oriented fields” an official VW press release said earlier today.

The scandal has cost the german automaker dearly.

The scandal has cost the german automaker dearly.

“New, stronger Group functions, such as for standardization and harmonized production processes, will lay the timely foundations for efficient decision-making,” said interim Chairman of Volkswagen AG’s Supervisory Board Berthold Huber. “We will become faster and more agile.”

For a company eager to disassociate itself with the trauma and bad press of the past week, these changes certainly start the healing process for Volkswagen and its associated brands. But while those changes will help the company feel better about itself, they won’t mitigate the damage caused by the hundreds of thousands of non-complaint cars now being driven around the world.

To make amends for that, some within the plug-in world are calling for Volkswagen to dump the diesel engine completely in favor of electric vehicle technology. Others are calling for Volkswagen to built its own nationwide rapid charging network across Europe and the U.S., accelerating the deployment and adoption of plug-in vehicles beyond the urban jungle that Volkswagen and the majority of plug-in automakers have been focusing on thus far.

Here at Transport Evolved, we’re watching Volkswagen’s future take a dramatic turn in real time as the company struggles to come to terms with the impact of billions of dollars of regulatory fines, criminal investigation and a share price that is now 34 percent lower than it was this time last week.

We’re not sure where the answer lies for Volkswagen, but we know this:  it is in the darkest of times when the most resourceful and definitive of actions can turn a company around.

For Volkswagen, it will either succeed or it will fail. It will either change the way it approaches its engineering and environmental practices, or it will become a footnote in the history books. Its previous practices were unhealthy and unsustainable. Now it has to decide if it has what it takes to change its metaphorical diet.

As Master Yoda once told a young Luke Skywalker, “do or do not, there is no try.” Only time will tell which Volkswagen will choose.


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