Ferdinand Piech looks to have prevailed in the end. The former Volkswagen patriarch sparked a showdown with CEO Martin Winterkorn in April with the aim of preventing his former protege from succeeding him as chairman.
Instead it was Piech, 78, who resigned and Winterkorn seemed to emerge as the undisputed victor. But now the tables have turned. After Thursday’s decision to nominate Hans Dieter Poetsch, VW’s highly respected finance chief, as the automaker's next chairman, the balance of power has shifted.
“Poetsch does not consider himself to be a transitional candidate,” said a VW source close to the matter, adding that the levelheaded CFO is expected to be professional about transitioning from working alongside his chief executive to overseeing him.
Winterkorn could even end up a "lame duck." Last December, the supervisory board, controlled at the time by Piech, already stripped Winterkorn of his most important operational job as head of the VW brand when it named ex-BMW executive Herbert Diess to the post. As it stands now, Winterkorn, 68, will likely retire no later than the end of 2018 without ever making the jump to the board that is so often considered in Germany to be the reward for a successful captain of industry.
“It appears to me that this is a battle Piech has won,” said Evercore ISI analyst Arndt Ellinghorst, who welcomed the announcement of Poetsch as good news for investors. "Winterkorn gets another two years as CEO but he doesn't get the desired seat as VW Chairman.”
In April, key VW stakeholders backed Winterkorn to continue in his post, including Porsche Automobil Holding SE Chairman Wolfgang Porsche, Lower Saxony premier Stephan Weil and labor leader Bernd Osterloh. The three members of the supervisory board’s powerful steering committee decided on Wednesday to move forward to Sept. 25 the vote for a contract extension for Winterkorn rather than wait until February.
Typically when a CEO’s contract is extended it usually strengthens their position internally. But this time it looks more like Winterkorn is a stopgap solution, receiving only two further years until the end of 2018, by which point he will be 71 years old.
“Winterkorn has limited operational responsibility, so the question is what he has on his agenda for the coming years,” Ellinghorst said.
Poetsch, not Winterkorn, will now assume the huge responsibility of overseeing the transition to a new generation of managers, including appointing a new chief executive.
The elevation of Poetsche, 64, to chairman was proposed by the shareholders of Porsche SE, a holding vehicle of the Porsche and Piech clans, which together own over 50 percent of the VW votes. The company said Poetsch enjoyed the backing of all shareholders – implying that Piech, who still sits on the board of Porsche SE, had also supported the proposal.
In a further sign of his value to the family, Porsche SE explicitly added in its statement that Poetsch would retain his post as CFO of the holding vehicle.
“Poetsch won the trust of the Porsche and Piech families during his tenure. Porsche SE ties up the bulk of their inheritance, and he managed to take a holding that was 12 billion euros in debt in 2009 and turn it cash positive to the tune of over 2 billion euros today,” said a second source. “He also played the decisive role in organizing the transaction that saw Porsche sell its sports car brand to Volkswagen – entirely tax-free.”
The families escaped paying an estimated 1 billion euros resulting from the disposal through a simple loophole in the German tax code. In the end all it took was selling one VW voting share and the German finance ministry came out of the deal dry with no capital gains tax in a landmark 2012 case.
Corporate governance concern
However, Poetsch’s nomination has also met with criticism, in particular due to concerns over corporate governance.
Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisberg-Essen, argued that VW’s CFO was partly responsible for VW's current problems and was neither likely to steer the carmaker on a new strategic path nor properly provide the necessary oversight.
“They could have had Poetsch immediately, instead the fact that they took so long to pick him creates the impression as if they failed to find someone like [Continental Chairman Wolfgang] Reitzle,” he said. “But a strong external candidate would have had little internal support on the supervisory board, if he were to yank the wheel around. He would have worn himself out, so now you have an internal solution.”
Winterkorn by comparison looks as if his influence is waning now that he relinquished in July his most important operational role as head of the VW brand in charge of day-to-day business.
Only 24 hours earlier, interim chairman Berthold Huber gave the impression in a statement that the VW CEO would still have a firm hand on the tiller. “Together with Professor Martin Winterkorn at the helm we will continue on our successful path of recent years and systematically implement the goals of Strategy 2018.”
Yet to ensure continued influence within a company in Germany, a CEO typically must be on a designated track to joining the supervisory board.
Once Poetsch joins the supervisory board, however, there is only one seat left that doesn’t belong to core shareholders -- and that is occupied by a woman, Annika Falkengren. Along with Piech's niece, Louise Kiesling, she helps to fulfill the 30 percent share of females on the board, a legal requirement in Germany that takes effect next year. While that doesn’t make Winterkorn's transition to the board impossible, it certainly makes it less likely. Additionally as a 71-year-old former CEO he might be too old and too proud to accept anything less than the chairman’s seat.
Without this option, there is a chance that he could become a “lame duck,” with subordinates jockeying for power more focused on positioning themselves for the time after Winterkorn rather than executing his plans.
“That isn’t entirely inaccurate,” the second source said.