New Volkswagen Chief on Regaining Trust
Matthias Müller, the new chief executive of Volkswagen, promised on Friday that he would work to regain the trust of employees, customers, business partners and the industry.
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FRANKFURT — Volkswagen on Friday tried to come to terms with the emissions cheating scandal that has threatened to cripple one of the global automobile industry's biggest corporations, naming Matthias Müller, the head of the company's Porsche unit, as chief executive.
He replaces Martin Winterkorn, who resigned on Wednesday and took responsibility for the fraud but said he was not personally involved.
"The same thing must never happen again," Mr. Müller told reporters on Friday in the company's headquarters in Wolfsburg, Germany.
He promised to overhaul the company's management structure, which has often been criticized for being unwieldy, which somehow allowed engine software to be designed to deliberately trick diesel air-quality tests and then be installed on 11 million cars worldwide.
The deception enabled Volkswagen diesel cars to pass air-quality tests in a lab setting but emit pollutants up to 40 times the allowable United States limits when actually driven, a ruse that enabled the cars to have more power and better fuel economy than they would have been able to achieve.
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How Volkswagen Got Away With Diesel Deception
Volkswagen could have saved fuel or improved performance by allowing more pollutants to pass through its cars' exhaust systems, researchers said.
"We will overcome this crisis," Mr. Müller said. "We will emerge a stronger company."
Berthold Huber, a labor leader who is the acting chairman of the company's supervisory board, which appointed Mr. Müller, said during the news conference that the scandal was "a moral and political disaster."
Volkswagen said other employees had been suspended in connection with the scandal, but he did not name them. The company said it would hire an American law firm, which it did not identify, to conduct an internal investigation of the emissions deception, which Mr. Huber blamed on "developers and technicians" in the company's motor development operations.
According to numerous news reports, two of those dismissed are Ulrich Hackenberg and Wolfgang Hatz, top executives in the company's research and development operations. Volkswagen declined to comment.
Volkswagen indicated that further dismissals were likely.
Since Mr. Müller, 62, moved into the top job at Porsche in 2010 after its takeover by Volkswagen, he has won plaudits for increasing sales and profits at the sports car maker while preserving its cachet among aficionados. Many had worried that the merger with Volkswagen would dilute the purity of the Porsche brand.
But managing the far-flung Volkswagen empire is a challenge of a different magnitude, even without the emissions scandal. Volkswagen sales in China, the company's biggest single market, have been slowing, and they have been plummeting in Brazil, another important country. The company's market share in the European Union slipped to 26.5 percent in August from 28.1 percent a year earlier, though Volkswagen still has more than twice the share of any competitor.
Analysts and ratings agencies say the emissions scandal is likely to cost Volkswagen much more than the 6.5 billion euros, or $ 7.3 billion, the company has set aside to cover the cost of recalls and other expenses. The company could face billions of dollars in fines in the United States, as well as lawsuits from angry customers.
Volkswagen said on Friday that it would revamp the company to give more independence to individual vehicle brands, addressing criticism that decision-making has been too centralized in Wolfsburg and too slow. It also announced many changes in top management.
Christian Klingler, Volkswagen's top sales and marketing executive, will leave the company. Volkswagen said his departure reflected "differences with regard to business strategy" and was "not related to recent events."
The company said it would create a new organization for North America, combining the Mexican, Canadian and United States markets. Winfried Vahland, who has been in charge of the company's Skoda unit, which is based in the Czech Republic and makes lower-price vehicles, will head the new regional organization.
However, Michael Horn will remain as chief executive of the Volkswagen Group of America, the company said. Despite the emissions scandal, Volkswagen dealers in the United States in recent days expressed strong support for Mr. Horn and urged the company to keep him in place.
In the United States on Friday, where the deceptive software was discovered and where the fraud was announced last week, the Environmental Protection Agency said it had sent a letter to manufacturers of gasoline and diesel cars, saying that regulators would be looking for the so-called defeat devices in all vehicles.
After Friday's six-hour meeting in Wolfsburg, five members of the 20-person supervisory board took their seats at a table, facing reporters in a cafeteria in the headquarters building. They quickly read prepared statements, insisting they would not take questions.
But Mr. Müller, after speaking of a new beginning for the board, making it more flexible, found one question important enough to merit an answer: Had he been aware of the effort to design and install the manipulative software?
"I definitively knew nothing about it," he said, before rising quickly with the others and leaving the room.
The drain on profits from dealing with regulators, possible criminal prosecutions and plaintiff lawsuits will make it harder for Volkswagen to deliver on a promise — delivered with much fanfare at the Frankfurt auto show last week — to expand its fleet of hybrid and all-electric vehicles. Volkswagen's need for new ways to reduce fuel consumption and greenhouse gases is even more urgent now that its "clean diesel" strategy is in tatters.
The United States market is another huge challenge for the new chief executive. Volkswagen's plans to become a major force there were losing momentum even before the scandal.
Sales of the Passat, a sedan built at a Volkswagen factory in Chattanooga, Tenn., have fallen 16 percent this year in the United States. Sales of all Volkswagen cars in the United States, including the Audi, Bentley and Lamborghini brands, added up to a market share of only 3.2 percent in August, the same as a year earlier.
In addition, the scandal has raised fundamental questions about the way Volkswagen has been managed. Its structure is unlike any other automaker's.
More than half the shares are owned by members of the Porsche family, who have feuded among themselves, resulting in intrigues and power struggles that have haunted the company for decades. Wolfgang Porsche, a member of the Volkswagen supervisory board who represents the interests of the family, was at the cafeteria table on Friday.
"The Porsche and Piëch families stand behind Volkswagen, even in these difficult times," Mr. Porsche said, referring to the branch of the family that includes Ferdinand Piëch, the former Volkswagen chairman.
Mr. Piëch, a dominant figure in Volkswagen for decades, resigned as chairman in April after a power struggle with Mr. Winterkorn. Wolfgang Porsche, Mr. Piëch's cousin, backed Mr. Winterkorn.
An additional 20 percent is owned by the state of Lower Saxony, which has veto power over major decisions. The sovereign wealth fund of Qatar owns 17 percent.
Outside shareholders — the investing public — hold 12 percent and are essentially an afterthought for VW's management.
The state government, along with Volkswagen's powerful worker representatives, has an interest in maximizing employment, sometimes at the expense of profit.
Mr. Müller must cope with the way those factions can sometimes create conflicting interests on the supervisory board, which includes workers as well as representatives of the state government and the Porsche family. That is why he will be under pressure to live up to the commitment he expressed on Friday, to overhaul a management system that critics say was overly centralized in Wolfsburg and too insular, perhaps contributing to the lapses in judgment that led to the emissions scandal.
"Volkswagen has no corporate governance," said Ferdinand Dudenhöffer, a professor at the University of Duisberg-Essen who follows the auto industry. "There is no clear border between oversight and management. It has to be made into a normal company."
Mr. Müller, who studied machine tool making and later information technology, has worked at Volkswagen since 1977, primarily in the company's Audi unit, based in the Bavarian city of Ingolstadt. He has the advantage of understanding the company well, but some corporate governance experts say Volkswagen should hire an outsider with no stake in the existing order.
"The research shows that when there's a perception of a need for change on a large scale, outsiders do better," said Jo-Ellen Pozner, an assistant professor at the Haas School of Business at the University of California, Berkeley. "It just sends a more credible signal."
The scandal, in which selling cars seemed to take precedence over clean air, has made Volkswagen an inviting target for environmental groups.
As the Volkswagen supervisory board met inside the company's vast complex in Wolfsburg on Friday, members of Greenpeace arrived to protest, bringing with them three black Volkswagen Golfs. The cars were adorned with posters and large cutouts of Pinocchio bearing the message "No More Lies."
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