It is once said that great empires are forged out of brilliant leadership and an empire’s ability to stay relevant during its time in history. In the case of Volkswagen, much of its recent successes can be attributed to the iron fist style rule of Ferdinand Piech who helped transform the company into a formidable powerhouse that aimed to become the world’s biggest automaker. However a key strategical blunder by Piech late last week not only forced him out of his own company, but also caused him to leave before his grand vision was complete ending a historic era of growth and change at the Wolfsburg based automaker.
A grandson of Ferdinand Porsche — the man who founded the company and developed the original Beetle compact car during the dark era of the Nazi regime, Piech devoted every aspect of his life and 51 year career in the auto industry to the goal of making Volkswagen the number one car manufacturer in the world. Piech developed a reputation for not only his strict rule over the company, but also a high level of perfectionism that was evident in some of Volkswagen’s recent models including the technologically advanced but slow selling Volkswagen Phaeton sedan which was rumored to be developed based on several requirements that were passed down by Piech himself to company engineers .
On Saturday, Volkswagen revealed that the 78 year old chairman had resigned which helped end a two week long crisis in the company’s management that began with comments issued by Piech in regards to current Chief Executive Martin Winterkorn. In those fore-mentioned remarks, the VW chairman revealed that he had “distanced” himself from Winterkorn, and many in the industry saw this move as an attempt by Piech to squash any chance that Winterkorn had at succeeding him as chairman when his contract expired in 2017. However unlike other times where Piech deployed this tactic and succeeded with support from his allies, the tables were surprisingly turned when those very allies abandoned him, leaving the embattled patriarch isolated internally which might have played a role in his decision to resign Saturday.
Piech’s stint in the company will certainly be remembered for the rapid level of growth that Volkswagen experienced in recent years. In fact during his nine year reign as CEO and 13 years as chairman of the supervisory board, the strong willed Austrian spearheaded an ambitious expansion campaign that eventually allowed the company to transform into a 12 brand automotive giant that has over 118 plants in 31 countries, and boasts a formidable workforce of over 600,000 employees. Piech’s rise to the top of Volkswagen’s hierarchy began in 1988 when he took the helm at Audi, and helped the Ingolstadt-based manufacturer ditch its reputation for producing bland and uninspired vehicles such as the 100 sedan and the Fox coupe and instead embrace edgy design and state of the art technology. Speaking of technology, Piech also helped create the iconic Quattro all-wheel drive system which allowed Audi to effectively go toe-to-toe with BMW and Mercedes Benz in the luxury sales race.
Later when he was CEO at Volkswagen, Piech led a strong push towards broader sales dominance with an ambitious shopping spree that saw the company snatch up ultra luxury marques such as Bentley and Bugatti as well as Italian sports car manufacturer Lamborghini. In addition, Volkswagen also aimed for the mass market adding Skoda and Seat to its brand lineup while unveiling the New Beetle which was a modern interpretation of his grandfather’s original creation.
However Piech was also responsible for making several questionable decisions during his tenure that would backfire on him in later years. One of these was approving production of the aforementioned Phaeton flagship sedan, a 1 billion Euro investment that aimed at making Volkswagen more upscale to consumers. Piech as well as Volkswagen’s executives predicted that the Phaeton would achieve a solid sales base among wealthy customers, however the Phaeton’s state of the art plant in Dresden Germany operated below full capacity from the very beginning, and Volkswagen was eventually forced to withdraw the model from the U.S. in 2006 after it failed to meet sales projections there.
In addition, Piech’s iron grip on control also allowed him to routinely hand pick and fire executives with Piech pushing out Winterkorn’s predecessor Bernd Pischetsreider half a year after his contract was extended by the company. This was due to Pischetsreider ordering the Phaeton to be pulled from the U.S. as well as a disagreement with Piech over other company matters. Piech would resort to this tried and true method of corporate execution several years later when he fired Porsche CEO Wendelin Wiedeking in the aftermath of Porsche’s ill timed, and ultimately doomed effort to take over Volkswagen by using share options to buy up Volkswagen stock.
While Piech will still undoubtedly be known as one of the best tactical minds in the automotive industry, his attempt to blunt Winterkorn’s momentum may have sped up an event that he tried so hard to avert. According to multiple analysts, Winterkorn (who worked with Piech back in the 1980’s) is a leading candidate for the chairman position and is seen as a favorite among many in Volkswagen’s inner circle. With Piech’s departure from the company, Winterkorn could potentially nab the position earlier, and be given an opportunity to mold the company’s future in his own image.