Autos

Chris Bryant is a Bloomberg Gadfly columnist covering industrial companies. He previously worked for the Financial Times.

There's something otherworldly about the problems engulfing Volkswagen, a carmaker nominally from Germany but increasingly divorced from reality.

Take the row that's broken out about whether or not VW executives should get bonuses for last year. For any right-thinking resident of planet earth, the answer is quite straightforward: nein, not a nickel.

Whether or not VW's management board at the time had any knowledge of a diesel emissions scandal that might end up costing the company tens of billions of euros, the board must accept collective responsibility.

Any bonus would send a message that the company doesn't recognize what it did was fundamentally wrong. Given that VW has hardly endeared itself to U.S. officials and has yet to reach agreement on how it should pay for its malfeasance, that would be unwise -- to say the least.  

News agency DPA reported Tuesday that executives were prepared to forgo part of their bonus, but they must go the whole way. The debate is a reminder of VW's odd culture and entrenched interests: made up of the Porsche and Piech families, powerful trade unions and the State of Lower Saxony (owner of 20 percent of voting shares).

Investors who think the diesel emission scandal means the miasma will clear are kidding themselves. Consider the gulf between the unions and Herbert Diess, the former BMW executive now in charge of the VW brand.

Bernd Osterloh, the works council chief, says Diess "lacks reliability" and accuses him of using the scandal to force through cuts. Osterloh wants job guarantees but he seems to have forgotten the company's facing its biggest crisis.

Footing the bill requires hefty profits, something the core VW brand fails to deliver. The VW unit managed only a 2.8 percent profit margin in first nine months of last year. Long-struggling French rival Peugeot achieved 5 percent.

Miserable Margins
The core VW brand's margins lag behind rivals but cost-cutting will be tough with the unions in charge
Source: Company reports
* VW margins are for first nine months. Excludes special items related to diesel scandal.

A root and branch restructuring is long overdue and the crisis presents a golden opportunity, one VW seems determined to waste. One could hardly blame Diess were he to quit. But that would send a signal that VW has no intention of dealing with chronic productivity problems. 

VW needs to get a grip but absent Diess it lacks the leadership to make workers see sense. CEO Matthias Mueller, previously in a cushy job running Porsche, has promised to overhaul the culture but the bonus commotion undermines that. He gives little impression of relishing his task of steering VW through the crisis.

Falling to Earth
Volkswagen's shares have shed about half their value in the past year. The emissions scandal isn't helping
Source: Bloomberg

Wolfgang Porsche -- the senior family representative on the supervisory board -- seems shy and indecisive (unlike cousin Ferdinand Piech, who resigned as chairman last year). Qatar Holdings, with its 17 percent voting stake and two board seats, is reported to be unhappy but keeps its cards close to its chest.

Given this leadership void and the bonus debate, it's little wonder workers feel emboldened to dictate terms. Ordinary investors should fear their interests will continue to suffer amid VW's carnival of the absurd.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Chris Bryant in Frankfurt at cbryant32@bloomberg.net

To contact the editor responsible for this story:
James Boxell at jboxell@bloomberg.net