Volkswagen Board to Extend CEO Winterkorn's Contract
Volkswagen AG plans to extend Chief Executive Officer Martin Winterkorn’s contract beyond next year as he aims to complete a merger with Porsche SE and surpass Toyota Motor Corp. as the world’s No. 1.
“The supervisory board wants to prolong Mr. Winterkorn’s contract by several more years,” Bernd Osterloh, the board’s deputy chief, told workers today at the automaker’s headquarters in Wolfsburg, Germany. “Our chief executive officer has advanced the company in every respect.”
Under Winterkorn, 63, Europe’s largest carmaker added Swedish truckmaker Scania AB to its portfolio and is now merging with Porsche, maker of the 911 sports car. The CEO plans to double production capacity in China with two new plants and is building a factory in the U.S. as he seeks to beat Toyota in sales and profitability by 2018.
“Volkswagen today is certainly well-positioned in Europe as well as emerging markets,” said Christian Aust, an analyst with UniCredit in Munich, who has a “hold” rating on the shares. “It wouldn’t be a surprise if Winterkorn’s contract was extended.”
Last quarter, VW posted its biggest profit in two years as sales surge in China, its largest market. The manufacturer increased first-half deliveries by 15 percent to more than 3.5 million cars and sport-utility vehicles. Sales of VW brand vehicles exceeded 2 million in the period.
Volkswagen’s preferred shares, which have replaced its common stock on Germany’s DAX Index since the Porsche deal, have gained 48 percent since the beginning of 2007, when Winterkorn took over. They added 3 cents to 83.33 euros at the 5:30 p.m. close of trading in Frankfurt.
Winterkorn, who previously headed VW’s Audi luxury unit, took the top job from Bernd Pischetsrieder, who was ousted less than a year after receiving a contract extension.
A decision by German supervisory boards on whether to keep their CEOs usually comes about a year before the contract’s end. VW’s supervisory board meets every year in November to decide on its strategy and long-term funding plans. Winterkorn was named CEO in November of 2006.
VW’s capacity use at the main Wolfsburg, Germany, plant is at a 12-year high, said Osterloh, who heads the carmaker’s works council. The CEO is targeting a pretax profit in 2018 that exceeds 8 percent of sales, compared with 4.2 percent in the first half of 2010.
“Winterkorn enjoys the high esteem of the entire Volkswagen workforce and management,” Michael Brendel, a VW spokesman in Wolfsburg, said in a telephone interview. He declined to comment on the possible contract extension.
Winterkorn has the backing of Lower Saxony, the German state with a 20 percent stake in the carmaker and the power to veto major decisions.
“We support Martin Winterkorn’s ambitious goal to make VW No. 1 in the auto market worldwide by 2018,” Prime Minister David McAllister told Bloomberg in a June interview.
Matthias Sickert, a spokesman for Lower Saxony, declined to comment today when reached by Bloomberg.
Volkswagen paid $2.5 billion for a stake in Suzuki Motor Corp. in January to expand in India and is taking over Porsche’s sports-car business, adding a 10th brand to VW marques that include Skoda, Seat and luxury brands Audi, Lamborghini and Bentley.
Second-quarter net income quadrupled to 1.25 billion euros ($1.6 billion) on demand in China for the Audi A6 and the namesake brand’s Jetta and Lavida models. Revenue in the period rose 22 percent to 33.2 billion euros.
Osterloh, who was instrumental in Pischetsrieder’s ouster, said Winterkorn’s achievements include the modernization of plants, the broadening of the product portfolio and the development of top quality cars.