Winterkorn Isn't Completely Out at VW

  • Winterkorn remains CEO of Porsche Holding, top VW shareholder
  • Former VW boss also still has roles at Audi, VW truck unit

Germany Wants VW Clean-Up Plan by October 7

As new Volkswagen AG Chief Executive Officer Matthias Mueller seeks to repair the automaker’s image, his moves will be overseen by none other than his scandal-scarred predecessor, Martin Winterkorn.

While Winterkorn was pressured to step down as VW’s CEO last week, he remains in the top executive job at Porsche Automobil Holding SE, which owns 52.2 percent of the automaker’s voting stock. He’s also still chairman of VW’s publicly traded Audi AG unit as well as the group’s truck holding company, among other positions. His continued role is a contentious issue especially for labor leaders, said people familiar with the issue. It also raises questions about whether VW can truly reform itself with old-guard insiders in key positions.

Matthias Mueller, right, and Martin Winterkorn

Photographer: Guenter Schiffmann/Bloomberg

“It shows that modern corporate governance doesn’t play a role at Volkswagen,” said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen. “They need someone independent at the main shareholder. The VW CEO is going to say the company is doing great.”

VW representatives didn’t respond to e-mails and phone calls requesting comment on the company’s corporate governance. A spokesman for Volkswagen
couldn’t immediately comment on Winterkorn’s other positions within the group. A spokesman for Porsche Holding confirmed that Winterkorn remains CEO and declined to comment on his future in the role.

Beetle Creator

Volkswagen’s unusual structure stems from the partial takeover of the automaker by Porsche last decade. The company, owned by the descendants of VW Beetle creator Ferdinand Porsche, failed to completely acquire Volkswagen and ended up selling the Porsche sports-car brand to the Wolfsburg, Germany-based carmaker after running into financial issues. Winterkorn then became CEO of both Volkswagen and its majority shareholder.

Winterkorn resigned as VW’s CEO on Wednesday. When Porsche Holding’s supervisory board met the next day, he neither stepped down nor was he removed from his positions at that company. That was before Friday’s meeting of Volkswagen’s supervisory board, when documents from four years ago were presented that flagged the illegal software, said one person familiar with the meeting. Those documents were never acted upon at the time.

While Mueller pushed Volkswagen’s supervisory board on Friday to sign off on a reorganization aimed at streamlining decision-making, that plan was put together while Winterkorn was at the helm. More contentious issues including potential criminal prosecution for individual executives remain.

VW’s Scramble

Volkswagen is still scrambling to figure out what to do with 11 million VW, Audi, Skoda and Seat vehicles that have rigged diesel engines. Germany has demanded a solution by Oct. 7 or it might move to take the cars off the roads. U.K. Prime Minister David Cameron refused to rule out the country following Switzerland with banning sales of Volkswagen’s diesel vehicles. In Spain, company officials face fraud allegations.

Prosecutors in Braunschweig, Germany, on Monday opened a criminal investigation of Winterkorn over allegations of fraud related to diesel engines that sought to fool regulators and consumers by turning on full pollution controls only during tests. The company has also filed a complaint with prosecutors to seek their assistance in the probe.

While Volkswagen has already set aside 6.5 billion euros ($7.3 billion) for repairs and other expenses, the full costs are still being tallied. Max Warburton, an analyst with Sanford C. Bernstein Ltd., estimates the fine for from the U.S. Environmental Protection Agency at as much as $7.4 billion, adding that the costs could force VW to sell new shares.

“If the cash costs exceed 10 billion euros, a capital raise is highly likely,” said Warburton in a note. “This is not a normal situation.”