`Four Years Ago, Volkswagen Woke Up'

CEO Piech talks about global plans and the recent scandals

As chief executive of Volkswagen since 1993, Ferdinand Piech has struggled hard to make the German auto maker more competitive. He also has had to deal with scandals involving purchasing whiz Jose Ignacio Lopez de Arriortua and alleged bribes solicited from ABB Asea Brown Boveri Ltd. in return for a contract to supply VW affiliate Skoda with a new paint shop in the Czech Republic. At the Geneva auto show in early March, Piech spoke about his goals and the scandals with BUSINESS WEEK Bonn Correspondent David Woodruff.

Q: Volkswagen's earnings doubled last year, but your return on sales was less than 1%. Are you happy with the progress you're making?

A: It's within our plans. We're still planning on getting much better by 2000. At the moment, we have 16 old platforms and are adding three new ones. Most of our volume will be concentrated on the three new ones by the end of next year. Cost-wise, we still have the majority of our products on too many platforms.

Q: Do you have a return-on-sales target?

A: We want to have 6.5% return on sales by the end of the decade. If everything runs on target, like 1996, we can reach that goal.

Q: In emerging markets, what areas are the most attractive?

A: Asia and South America. In Asia, markets are growing faster; in South America, we have better expertise. So we're going for both.

Q: French carmakers are struggling more than others in Europe. What has happened?

A: Four years ago, Volkswagen woke up. In the past, our sensitivity for markets like France, Italy, and Spain was not in focus. Now we have top managers there, aggressive salespeople, and good support from our dealers. We thought that we were weak, and we just wanted to be as good as we are in other markets. The next attractive market is England.

Q: ABB has accused people connected with VW of demanding bribes in return for supplier contracts. Does your internal investigation show that VW employees were involved?

A: The contract given to ABB was different from the one that was approved internally. On the 14th of February, we gave a 286-page written report on the investigation by our internal auditor [to German prosecutors].

Q: The complaint VW also filed on the 14th [about the alleged Skoda bribes] did not name any individuals. Is VW going to file charges against any individuals?

A: We did not name individuals because we don't know in detail what happened.

Q: Has anyone been suspended at this point?

A: Yes. A long-term employee. A purchasing executive at Skoda who was in charge of ordering equipment like the paint shop. I don't know his name by heart.

Q: Are you happy with your settlement with GM in the Lopez case?

A: Yes, I'm happy because both companies are better off. Share prices of both companies have increased since we made peace. This shows how the public reacts to what we did. For both parties, it's right to go back to business and compete for customers. That's our profession.