Volkswagen's Piëch: The Road Not Taken

Volkswagen (VLKAY ) Chief Executive Ferdinand Piëch has turned out some of the most technologically advanced mass market cars in the world, but the man himself is of an earlier vintage. Once almost all German manufacturers were led by Piëch-like figures, passionate and brilliant engineers who believed that, if the product was superb, all else would follow. Thus Piëch, 64, can sketch a new Audi drive system on an envelope, yet seem indifferent to marketing needs or shareholders preferences. Thanks to VW's partial government ownership, Piëch has so far been a CEO who could afford to pay more attention to stakeholders than shareholders.

But Piëch is last of the breed. German corporate peers such as Siemens have since learned the painful downside of his kind of engineers' culture. In the mid-1990s, Siemens fell behind in businesses like mobile communications because it insisted on building state-of-the-art products that nobody was willing to pay for. Siemens and other German behemoths have since learned to let marketing people contribute to the design process. And they learned that shareholder trust comes in handy when you want to raise capital for growth and acquisitions.

Granted, the car business is different. As VW's gains in market share demonstrate, buyers appreciate the quality improvements forced through by Piëch and are willing to pay more for them. Yet he's wrong to put marketing in the back seat and shareholders in the trunk. In the end, there's no conflict between them. They're all part of one team. Just look at rivals BMW and DaimlerChrysler (DCX ), which manage to combine engineering excellence with sublime marketing and at least a degree of common courtesy toward investors.

Piëch deserves tremendous credit for one of the great automotive turnarounds in history. He took over the top job in 1993 and resurrected VW quality while turning the Golf, Passat, and Audi brands into all-time best sellers. Certainly in the big U.S. market, Piëch gave new life to VW and made it into one of the top players in recent years. The relaunch of the new Beetle was a particularly brilliant move and captured the imagination of young American buyers. If the company proceeds with a relaunch of the VW Microbus, it will probably extend its great success in tapping into the nostalgia for the 1960s in America.

The headstrong Piëch may never change his ways. But as he prepares to give up the CEO's job within a year for semiretirement as supervisory board chairman, this much is possible: Piëch could confound expectations and allow his successor (most likely ex-BMW CEO Bernd Pischetsrieder) to lead Volkswagen into a new era. It will be tough for a hands-on guy like Piëch to let go. And he should continue to contribute his engineering talent. But if he really wants to preserve his legacy, Piëch shouldn't impose his legacy on his successor.

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