Volkswagen Appoints Porsche's Mueller CEO

Volkswagen AG’s new chief executive officer, Matthias Mueller, said he’ll do what it takes to overcome the worst crisis engulfing the German carmaker after revelations of cheating on emissions tests.

The supervisory board emerged from a seven-hour meeting on Friday to present Mueller as the successor to Martin Winterkorn, who quit on Wednesday as the scandal reverberated around the globe and the company lost more than 20 billion euros ($22.4 billion) in market value in two days. Mueller, who previously led the Porsche sports-car brand, said Volkswagen faces “unprecedented challenges.”

“My most urgent task is to win back trust for the Volkswagen Group - by
leaving no stone unturned and with maximum transparency, as well as drawing the right conclusions from the current situation,” Mueller said in a statement. “Under my leadership, Volkswagen will do everything it can to develop and implement the most stringent compliance and governance standards in our industry.”

The 62-year-old Porsche chief takes charge a week after VW was found to have cheated on diesel-emission tests in the U.S. beginning in 2009, triggering billions in potential fines and a U.S. criminal investigation. The company said irregularities involve a diesel engine installed in 11 million vehicles around the world, and said fixing its tarnished reputation with customers will be a long-term task.

The affected models include about 5 million VW brand vehicles, the unit said in a statement. “We are working at full speed on a technical solution that we will present to partners, to our customers and to the public as swiftly as possible,” VW brand CEO Herbert Diess said in the statement.

Signalling its commitment to a fresh start, Volkswagen signed off on a new structure, with more power moving to the regions and brands such as Audi, Skoda and Seat. Some employees have already been suspended with immediate effect, said interim Chairman Berthold Huber, calling the crisis a “political and moral catastrophe.”

New Structure

VW shares closed down 4.85 euros on Friday, bringing their loss for the week to 34 percent.

The new structure includes creating a North American group under Winfried Vahland, the head of the Skoda brand. The Bentley and Bugatti brands will be grouped with Porsche, while Audi continues to manage the Lamborghini super-car unit and Ducati motorcycles. The VW brand will have four regional chiefs that will report to Diess, the head of the automaker’s largest unit.

Sales chief Christian Klingler will leave the company because of strategic
differences. He will be replaced by Juergen Stackmann, the head of the SEAT
brand. Luca de Meo, the sales chief at Audi, will succeed Stackmann at the mass-market Spanish brand.

“Matthias Mueller is one of the few people who knows the company and who
probably isn’t entangled in the scandal,” Ingo Speich, fund manager at
Volkswagen shareholder Union Investment, said in an e-mail. “There mustn’t be
any taboos,” as the new CEO tries to “get to the bottom of this disastrous
episode and to finally modernize Volkswagen’s outdated structures.”

Deep Involvement

Under Winterkorn, whom Mueller thanked for his years of service and contribution to the company’s growth, Volkswagen amassed subsidiaries ranging from Scania heavy trucks to Ducati motorbikes to Porsche sports cars. At the same time, key decisions were made at the Wolfsburg headquarters, and Winterkorn was notorious for his involvement in every detail, from design to engineering.

That level of involvement was reflected in the fact that Volkswagen executives in Germany controlled the key aspects of emissions tests whose results the carmaker now admits were faked, according to three people familiar with the company’s U.S. operations. Winterkorn personally denied any knowledge of wrongdoing.

“We need a climate where problems aren’t hidden,” Bernd Osterloh, VW’s top labor leader said at a press conference in Wolfsburg, Germany, flanked by Mueller, Huber, and other key members of the supervisory board. “Volkswagen needs a fundamental cultural change.”

New Chairman

Volkswagen plans to abolish a production department at the group level, leaving manufacturing in the hands of the brands. Meanwhile, a new chief technology officer will steer technical developments across its brands and speed up the rollout of new features.

Audi development chief Ulrich Hackenberg and his counterpart, Wolfgang Hatz, are among those who will depart, people familiar with the matter said. The two previously ran units at the heart of the affair -- Hackenberg, a Winterkorn confidante, was responsible for VW brand development from 2007 to 2013, while Hatz ran the group’s powertrain development from 2007 to 2011. The company didn’t identify any of the executives who had already left.

The supervisory board also announced that Hans Dieter Poetsch, who is currently the finance chief, will -- as previously planned -- become chairman of the supervisory board following an extraordinary shareholders meeting in November to elect him to the board.

Mueller, whose contract as VW CEO runs until 2020, had run the maker of the 911 sports car since October 2010. He studied information technology and joined the Audi division as a toolmaking apprentice in the early 1970s, making him the first non-engineer since Carl Hahn to run VW since 1992.

Mueller -- who has a cool, cosmopolitan demeanor -- boosted Porsche profit 62 percent over four years. Deliveries are on track to surpass 200,000 vehicles for the first time in 2015, with the addition of new models such as the Macan compact SUV.

“It is crucial that something like this never happens again,” Mueller said at the press conference in Wolfsburg. By using the crisis to reform decision-making and accountability, Volkswagen “has the opportunity to emerge from this crisis stronger than before.”

— With assistance by Alexander Kell, Hans Nichols, David Welch, Elisabeth Behrmann, and Alex Webb