A Q&A with VW CEO Martin Winterkorn

Volkswagen's chief defends the automaker's record on green vehicles and says it will introduce its first hybrid in 2008

Volkswagen is currently under political pressure for not moving faster to develop hybrids and other lower-emissions automobiles. Critics say the German carmaker isn't doing enough to protect the environment. In a SPIEGEL interview, VW CEO Martin Winterkorn defends his company's record and says Volkswagen will bring a hybrid to the market by 2008.

Is Volkswagen doing too much to increase its horsepower but too little for the environment?

SPIEGEL: Mr. Winterkorn, why is the German auto industry currently in such poor standing?

Winterkorn: What makes you think we are in poor standing?

SPIEGEL: Isn't it embarrassing that German carmakers are not achieving the climate protection goals they have set for themselves?

Winterkorn: No, because reaching these goals isn't entirely up to us. The European auto industry made a commitment to reduce carbon dioxide emissions by an average of 140 grams per kilometer. But then there was a significant change in what customers wanted in their vehicles. We couldn't predict that. They want cars with more powerful engines, air-conditioning and all kinds of electronic gadgets to enhance comfort and safety. They are buying high-roof cars with higher air resistance values and SUVs. These segments have experienced the biggest boom in recent years.

SPIEGEL: Has the industry become a slave to its customers?

Winterkorn: No, but it happens to be our job as manufacturers to satisfy our customers' needs. When I became head of Audi five years ago, the business press wanted to know why we hadn't come out with a real SUV yet. Automobile magazines criticized us for having missed out on a trend.

SPIEGEL: And now even the German president is criticizing the German auto industry. According to Horst Köhler, it has "not earned any admiration when it comes to environmental developments on the earth."

Winterkorn: I disagree with such statements. Politicians are fond of criticizing others. But responding just as sharply is generally not an option for us, because politicians are among our best customers. It isn't exactly a secret that they don't usually drive the most efficient cars.

SPIEGEL: But the German auto industry can certainly be criticized for succumbing to a ridiculous competition to deliver the most powerful engines. For example, when BMW came out with eight-cylinder, 300 horsepower diesel engine, Mercedes-Benz introduced a 314 horsepower engine and Audi followed suit by upping the ante to 326.

Winterkorn: The tough competition among German manufacturers makes us fundamentally strong. You have cited what may seem like a negative example of engine performance from today's perspective. But competition has chiefly led to substantial improvements in the efficiency of diesel engines and, as a result, improvements in fuel consumption.

SPIEGEL: But this competition has clearly failed in one area: German carmakers haven't come out with a single hybrid yet. Meanwhile Toyota, with its hybrids, might as well be using Audi's advertising slogan: Vorsprung durch Technik (Innovation through Technology).

Winterkorn: We lived up to the concept of being innovative through technology back in the 1990s, when we unveiled the Audi duo, the world's first hybrid series-production vehicle. But the market apparently wasn't ready for it then, and we sold only a few hundred of the cars. Even today, the big run on hybrids remains a limited phenomenon. Just take a look at registration statistics. Customers figured out long ago that although a hybrid engine is advantageous in city traffic, this isn't the case on the highway. But of course we too will be offering this type of engine. In fact, we have been working on this concept for the past two or three years. It isn't a significant problem from a technical standpoint. The first hybrids are already being tested.

SPIEGEL: Then why is it taking so long for VW or Audi to come out with their first hybrids?

Winterkorn: It won't be much longer. It'll happen in 2008. However, we had not expected this to become such an emotionally charged issue. People act as though the hybrid could solve all of our problems -- which is certainly not the case. And you must not forget that we are a business enterprise. The hybrid engine costs a lot of money, and customers are hardly willing to spend so much more for a car. The Japanese have a huge advantage. The low yen exchange rate reduces the cost of every car they build in Japan by €3,000 to €4,000. This allows them to include many options in their vehicles without increasing the price.

SPIEGEL: Regardless, the general impression is that Toyota offers advanced technology to help reduce environmental problems. Meanwhile, German carmakers are threatening layoffs to prevent more stringent emissions standards from being attached to future models.

Winterkorn: That's nothing but clever marketing on the part of our competitors. It has nothing to do with the facts. For years, we have been investing billions to reduce fuel consumption with direct-injection diesel and gasoline engines. We reduced weight at Audi with aluminum bodies and at VW with lightweight steel, to name only a few examples.

SPIEGEL: Nevertheless, you have now pressured the European Union not to set binding CO2 emissions limits of 120 grams per kilometer for all manufacturers. Are German carmakers putting the brakes on environmental protection?

Winterkorn: No, they are not. If the initial idea had prevailed and average carbon dioxide emissions were to be at 120 grams beginning in 2012, large cars would be practically nonexistent. We would no longer have the Audi A8, the Mercedes S Class or BMW's 7 Series, nor would we have any larger family cars. Or they would become expensive enough to drastically reduce sales of these cars. If that happened, it would no longer be worthwhile to even develop such vehicles. This would benefit Italian and French manufacturers, who have gone to selling small cars almost exclusively. A few people are pursuing two-fisted industrial policies to the detriment of German manufacturers. Shouldn't we defend ourselves against this?

SPIEGEL: But, please, spare us the argument that there is a threat that thousands of jobs are at risk. German producers were already saying the same thing 20 years ago, when the catalytic converter was introduced. And, as we all know, that wasn't true.

Winterkorn: The emissions caps initially envisioned would most certainly have threatened jobs, especially in Germany. The European Commission was on the verge of jeopardizing the future of an entire industry. The new proposal is an improvement in that regard, because it would no longer set CO2 emissions limits for each manufacturer, but rather for each class of vehicle. We could live with that. It fosters competition to come up with the best technical solution.

SPIEGEL: Does this eliminate the the problem for you?

Winterkorn: No. Reducing emissions and fuel consumption remains a central challenge, one that we are confronting with our full efforts.

SPIEGEL: What, in your view, are the consequences for the VW Group's model strategy?

Winterkorn: Initially there will be an eco version of each of Volkswagen's models. We call it Blue Motion. We started with the Passat and Polo and we plan to continue with the Golf. These models feature highly efficient engines, low-resistance tires and a different type of transmission. They will be designed to be the leading vehicles in their class when it comes to reducing fuel consumption.

SPIEGEL: The VW Group has been moving in the opposite direction in recent years. It spent billions for Bentley, Bugatti and Lamborghini, the kinds of cars with CO2 emissions that are off the charts.

Do these makes even have a future, or will you have to shed these brands?

Winterkorn: Bentley and Lamborghini have been achieving record sales for years. This doesn't support the notion that these models are suddenly social pariahs. There will always be a place for these kinds of cars. They're not exactly meant for the mass market. And we will also manage to continue reducing their emissions even further.

SPIEGEL: But you plan to develop even more mega gas-guzzlers, including a second Bugatti to add to the current 1,001 horsepower model. Your engineers are developing a 12-cylinder diesel engine. And there will also be a 265-horsepower, high-performance version of VW's Tiguan SUV.

Winterkorn: Who says that we are developing a second Bugatti?

SPIEGEL: The head of Bugatti has said as much.

Winterkorn: Perhaps that's his wish. But some wishes remain nothing but dreams.

SPIEGEL: And why should there be a 12-cylinder diesel?

Winterkorn: This is a sensitive issue for me, because it's one of my favorite projects and is meant to showcase our technological proficiency. We won the Le Mans race with the 12-cylinder diesel because it gets, on average, two rounds per tank more than comparable gasoline engines.

SPIEGEL: This may be progress for Le Mans, but not for city traffic in Munich or Berlin.

Winterkorn: If we introduce this engine in one of our production models, it will consume an average of 11.9 liters per 100 kilometers (19.8 miles per gallon). Is that a catastrophe? Should everyone drive tiny cars in the future? Then we would be talking about something entirely different. For the vast majority of buyers, a sense of responsibility and driving pleasure go hand-in-hand. You ought to try driving the 12-cylinder diesel. You'd be impressed. Who wouldn't have fun driving fast and responsibly at the same time?

SPIEGEL: It is fun for a lot of people. That's the problem.

Winterkorn: It's important to see things in perspective. Automobile traffic is responsible for only 12 percent of total CO2 emissions. One should be able to point this out without being accused of changing the subject. All 18,000 engineers and designers within our group are devoting their best efforts to reducing consumption and emissions of CO2 and other exhaust gases. We invest in the development of alternative fuels. Volkswagen's Polo Blue Motion has the lowest CO2 emissions of all small cars, and that includes your highly touted Japanese...

SPIEGEL: ... but not the Smart.

Winterkorn: Which only has two seats. The Polo is a normal-sized Volkswagen with four seats. And other Blue Motion models will soon follow.

SPIEGEL: If we were malicious, we would say that all you want to do is continue the status quo, only adding more horsepower and cylinders. The environmentally friendly Blue Motion version in each model series is nothing but a front, and you leave it up to the customer to make the decision.

Winterkorn: That would be malicious indeed. We didn't exactly discover the issue of fuel consumption today. We were the first to come out with three-liter cars, but unfortunately they didn't sell the way we had expected. We invest billions in reducing fuel consumption. And it is by no means the case that we always introduce bigger vehicles. When I took this position here in Wolfsburg in January, the first thing I did was to launch the development of a very small model, smaller than the Fox. It will be economical, suitable for daily use and affordable. And it will also make do with smaller engines. Two-cylinder engines with turbochargers could be an option.

SPIEGEL: When might such a Volkswagen become available?

Winterkorn: We are thinking about 2009. The sooner the better. There is great demand for this type of car in Western Europe, where it can provide mobility in big cities. But there is also considerable demand for a small Volkswagen in the emerging markets. In Russia, India and China, for example, we need cars that sell for €5,000 or €6,000.

SPIEGEL: Your predecessor as head of the Volkswagen brand group, Wolfgang Bernhard, also developed plans for this type of small car, but as part of a joint venture with Ford and Fiat. Why did you cancel the project?

Winterkorn: The issue here is not simply to develop another model. That could be achieved in a joint venture with others. This small car should address a fundamental question: How should we, as a corporation involved in mobility, prepare for the future? Now that's an issue we clearly prefer to tackle on our own.

SPIEGEL: Porsche, which recently became a major shareholder in the VW Group, has given you an objective: to make the VW Group as good as Toyota. This certainly doesn't apply strictly to small cars and hybrids but -- more importantly -- also to profitability. How do you intend to surpass Toyota?

Winterkorn: We were running close behind Toyota in the 1990s. We were fifth and Toyota was fourth among the world's largest automobile manufacturers. We lost ground after the turn of the millennium. Toyota was incredibly focused. We wasted our efforts to some extent -- with duplicate developments for individual models, for example. We must put an end to this, and we will also have to significantly increase productivity in our plants.

SPIEGEL: Even more jobs will be made redundant if you succeed. Will the current plan to cut 20,000 jobs be enough?

Winterkorn: My goal is not to eliminate jobs but to secure jobs by increasing production volume. That will depend on how quickly we manage to develop new models. At Audi, for example, the same number of employees who used to produce 650,000 vehicles a year now produces 930,000. We have introduced new models, the Q7, the A5 and the R8 sports car. An A1, an A3 convertible and two other SUVs are in the works. This is the only way to increase productivity and maintain employment at the same time.

SPIEGEL: How free are you in making your decisions? You have Ferdinand Piëch and Porsche Chairman Wendelin Wiedeking, two strong-willed automobile experts, to contend with on the VW Group's supervisory board.

Winterkorn: I cannot complain about having any lack of freedom. There is no question that we discuss strategy and new products. That's why we have the board. But our ideas on how to build cars are essentially the same. Mr. Wiedeking is certainly more market-oriented and I am more technology-oriented. We complement each other very well.

SPIEGEL: You are often referred to as Ferdinand Piëch's vicarious agent or even his vassal. How do you view your relationship with the chairman of the supervisory board?

Winterkorn: What you sometimes read in newspapers speaks for their lack of understanding of the real situation. I have been working with Ferdinand Piëch for 25 years, ever since he brought me to Audi from Bosch. I believe that our relationship is characterized by mutual respect. I must admit that I have learned a lot about automobiles from him. But that isn't exactly a bad thing.

SPIEGEL: You don't feel spoon-fed?

Winterkorn: No. I was head of Audi for five years, and there was no evidence of anything of this nature during that period. Mr. Piëch is, as you know, a co-owner of Porsche. He could have told us not to build more sporty cars at Audi, because it hurts Porsche. Instead he encouraged us to develop the R8 sports car, for example. No, I really have no complaints about the makeup of the supervisory board.

SPIEGEL: But he didn't encourage you to develop low fuel-consumption cars.

Winterkorn: Now you are really doing him an injustice. The group introduced the first three-liter car into the market under his leadership. That was in 1999. The VW Group has always been a pioneer when it comes to environmental protection, and it will continue to be.

SPIEGEL: Mr. Winterkorn, we thank you for this interview.

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