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Howes: Ouster of VW's Piëch marks end of era, maybe

Daniel Howes
The Detroit News

Volkswagen AG's legendary boss, Ferdinand Piëch, apparently is a quitter.

Who knew? The 78-year-old scion of the founding Porsche family, an indomitable technocrat who imposed his vision on what became the world's largest automaker, is out as chairman of VW's governing supervisory board.

His crime: publicly pushing for the ouster of CEO Martin Winterkorn. He's the former Audi AG chief whom Piëch promoted to the job he occupied for the decade between 1993 and 2002, a job he decided Winterkorn no longer deserved.

His punishment: a boardroom revolt over the weekend that managed instead to oust Piëch, particularly once it became clear the board's labor representatives and the minister-president of Lower Saxony were prepared to protect their investment and back Winterkorn — not cede, again, to the demands of their mercurial chairman.

This just doesn't happen to Piëch. He wins. He always wins. He wins even when he loses. He wins when he assembles the largest brand portfolio in the industry; when VW's profit margins are a fraction of his global rivals; when the company's big bet on the United States fails to materialize.

In an industry accustomed to giants, he's about as big as they come. Rarely do today's heirs to founding auto families possess the combination of lineage, wealth, technical brilliance, autocratic management and unmistakable hubris.

Piëch does, in ways people named Ford and Agnelli and Toyoda and Honda do not. For more than 20 years, he's dominated the sprawling German automaker founded by his grandfather, Ferdinand Porsche, in the pre-war years of Hitler's Third Reich.

He's credited with saving VW from bankruptcy after becoming CEO in 1993; with helping make Audi, once a lackluster also-ran among German luxury marques, the exemplar of Teutonic automotive precision; with pushing VW to global sales leadership skeptics, including me, considered a long shot.

But that's only the half of it. Piëch's legacy at VW also is one of miscalculation and failure, of product-development strategies that backfired or under-performed expectations, of spending shareholder capital in ways his rivals mostly could not.

His "platform" strategy of the 1990s, implemented fully once the company had acquired the Seat and Skoda brands of Spain and the Czech Republic, beggared the flagship VW brand because savvy European customers quickly learned they could get VW-level vehicles at Skoda prices.

His wooing of General Motors Corp.'s top purchasing executive, Inaki Lopez, in the early '90s shocked Detroit and the global industry when the Spaniard showed up in Wolfsburg with GM's master price lists. The scandal unspooled for years.

He pushed development of a Phaeton supercar in the late '90s, then an $80,000-something luxury VW sedan-turned-automotive oxymoron that impressed critics, VW insiders and Piëch more than would-be customers. His successor, former BMW boss Bernd Pischetsrieder, killed it.

His accumulation of brands, ranging from Seat, Skoda and VW at the lower end to Audi, Porsche, Bentley, Bugatti and Lamborghini at the high end, represents the most complex agglomeration of hardware in the industry. At a time when industry leaders are pushing to simplify and focus to boost margins, Piëch's penchant is to push for more.

VW's doubling-down on the rich U.S. market, a cornerstone of Winterkorn's management under Piëch's chairmanship, is a major disappointment and reportedly a source of friction between the two.

A Passat sedan reputedly redesigned for American tastes is proving an underwhelming middle-of-the-packer, partly explaining why the VW brand lags even Subaru in U.S. sales. Yes, it's that bad.

His domineering management style that ruined more than a few VW careers, combined with personal quirks that included a strong dislike of air conditioning, are the stuff of legend.

He forced VW engineers to develop an indirect AC system for the Phaeton, lest he (and, presumably, customers) get blown on. And he was known to order AC switched off and windows closed before he would lead summer meetings in Wolfsburg headquarters.

Lesser mortals backed by less patient capital would not survive such a mixed record. But VW benefits from an ownership structure that includes a 20 percent stake held by the state of Lower Saxony, a 17 percent stake held by Qatar Holding LLC and a 50.3 percent stake of the family-controlled Porsche Automobil Holding SE, whose shareholders include Piëch.

The government stake alone, combined with the labor members of the supervisory board, are as much a bulwark against restructuring and change as they proved to be the alliance that ousted Piëch.

A byproduct of the VW coup is that labor and the politicians now wield more influence inside the boardroom, not less, a sign that restructuring to make VW more profitable and more efficient is likely to prove harder.

Piëch embodies an audacity seldom seen today in the executive managers who run sprawling companies for shareholders. His ouster marks the end of an era in German business and the global auto industry — should it last.

(313) 222-2106

Daniel Howes' column runs Tuesdays, Thursdays and Fridays and can be found at