STUTTGART, Germany -- Volkswagen AG (VLKAY, VOW.XE) Saturday announced a wide-ranging management reshuffle to intensify efforts in China, improve cooperation between its truck brands and revamp the board at the Audi premium brand as part of its wider goal of becoming the world's largest auto maker by 2018.
"This step will give us additional force," Chief Executive Martin Winterkorn told reporters following an extraordinary meeting of Volkswagen's supervisory board.
Last year, the German automotive behemoth posted record vehicles sales and profits, due mainly to its large footprint in emerging markets such as China, superior pricing power in the highly competitive European car market and sales gains in the U.S. But Volkswagen's aggressive expansion along with its growing industrial complexity sparked concerns that the company is becoming increasingly difficult to control. In addition to ambitious plans in the commercial vehicle sector Volkswagen last month entered the motorbike segment through the acquisition of Italy's Ducati Motor Holding SpA.
"With this new positioning we're giving the right answer to master increased requirements [as] our company became much larger and more international in recent years," Winterkorn said.
Europe's largest auto maker by sales volume and the world's No. 2 car maker behind General Motors Co. (GM) said it will add a position to its management board to focus on Volkswagen's Chinese operations. VW's current truck chief, Jochem Heizmann, will take over the new post.
China is Volkswagen's largest sales region and has been a key driver for the company's sales volume and profits in recent quarters. Volkswagen sold 2.26 million vehicles in China alone in 2011, up 17% from 2010. Global sales were up 14% at 8.16 million in 2011, marking a new annual sales record for the Wolfsburg, Germany, firm.
Winterkorn said the company is looking for a new assignment for the current head of VW's Chinese operations, Karl-Thomas Neumann. Neumann had so far been seen as one of the front-runners to succeed 65-year-old Winterkorn as CEO at some point, but this option appears to be off the table now through the decision to install Heizmann as board member responsible for the Chinese operations instead. Winterkorn didn't elaborate on the exact reasons why Neumann didn't get the nod for the new management board position.
The CEO of VW's Swedish truck brand Scania AB (SCV-A.SK), Leif Oestling, will join Volkswagen's management board and replace Heizmann as truck chief. Winterkorn said Oestling's vast experience in the truck industry makes him well suited to lead Volkswagen's entire truck operations and improve cooperation between Scania, MAN SE (MAGOY, MAN.XE) and VW's namesake commercial vehicles division.
Volkswagen bought Scania and MAN in recent years to forge a European truck alliance and take on global market leaders Daimler AG (DDAIY, DAI.XE) and Volvo AB (VOLVY, VOLV-B.SK). But progress has been slow so far as talks between the German and Swedish truck brands proved difficult ever since MAN's hostile takeover attempt of Scania launched in 2006 was shot down by Volkswagen in early 2007. Volkswagen held a minority stake in Scania at the time and started to build its stake in MAN when the Munich firm launched the takeover attempt on its Swedish peer.
Oestling's appointment as new truck chief, however, is a delicate decision. The 66-year-old Oestling initially rejected the idea to reap cost savings through a tie-up with MAN and caused a stir when he described the takeover attempt by its German peer as a "blitzkrieg" at the time.
Winterkorn confirmed that Oestling was initially skeptical about the prospects of a close cooperation with MAN, but became increasingly convinced of the cost savings potential as talks progressed. Scania's head of franchise and factory sales, Martin Lundstedt, will replace Oestling as CEO at the Swedish firm.
Volkswagen Chief Financial Officer Hans Dieter Poetsch noted that the cost savings target of EUR200 million per year through close cooperation at the truck operations could be exceeded. He reiterated that Volkswagen is keeping all options open for the future truck alliance, including a possible so-called domination agreement under German stock market rules at MAN, which would give it access to all of the company's cash flows. VW holds a voting stake of about 74% in MAN. A domination agreement requires a 75% voting majority at shareholder meetings under German stock market rules.
The management board at VW's premium brand and biggest earnings contributor, Audi AG (NSU.XE) will be reshuffled as well as part of the wide-ranging management overhaul, which comprises more than 30 management positions in total throughout the group.
The head of VW's ultra-luxury Bentley brand, Wolfgang Duerheimer, will become Audi's new board member responsible for research and development. VW marketing chief Luca de Meo will replace Peter Schwarzenbauer as Audi's sales chief.
Winterkorn said Schwarzenbauer will leave the company. He didn't elaborate on the exact reasons for Schwarzenbauer's departure. Audi reported record sales and profits in recent years and is on track to reach another new annual sales record in 2012. This suggests that, similar to Neumann's departure from the position as head of VW's highly profitable Chinese operations, operational problems weren't the reason for Schwarzenbauer's departure.
VW's influential supervisory board chairman and former CEO, Ferdinand Piech, attended the press conference in Stuttgart as well, but didn't comment on specific personnel decisions. Piech has a track record of successfully acting behind the scenes at Volkswagen and plays a major role at virtually all important management decisions. He promoted confidants such as CEO Winterkorn and ousted other executives such as Winterkorn's predecessor, Bernd Pischetsrieder.
Copyright © 2012 Dow Jones Newswires
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