Volkswagen Learns its Lessons from the Emissions Scandal

In the FT’s Big Read  What went so right with Volkswagen’s restructuring?, Patrick McGee, recalls how ‘some questioned whether VW would be forced to break up after admitting it installed software to cheat emissions tests in up to 11m cars worldwide.’

Under its new chief executive, Matthias Müller, however, the German carmaker has become more profitable and innovative, outselling Toyota and General Motors and even grabbing market share in the US where trust in its brand had plummeted.

So how has the recovery happened? Cost-cutting has played a part. New efficiencies squeezed out of existing operations have helped pay off the emission fines. Rising car sales in China, a major VW market, have also helped.

But more importantly, the scandal forced internal changes long deemed necessary. The appointment of Mr Müller, seen as less dictatorial than his predecessor, was a chance for a new direction. ‘The old, unquestioning, culture was diagnosed as a key factor in the emissions scandal. And Mr Müller claims his greatest achievement to date has been to reform it — by decentralising decision-making,’ writes McGee.

With 620,000 employees in 170 locations worldwide producing 43,000 cars a day, Volkswagen has always been a complex operation to manage. Its ‘completely dysfunctional supervisory board’ dominated by trade unions, government and the Porsche-Piech family, needed to be straightened out.

Hans-Dieter Pötsch, a former finance head, now Chairman, has kept the union and family representatives working together. For example, in late 2016, unions and management agreed a ‘Future Pact’ that will see 30,000 jobs lost through attrition.

Perhaps most crucial, has been Mr Müller staking out a new direction for the company, involving the production of 50 new all-electric car models by 2025, and new technology partnerships, where previously the company was a ‘closed-shop.’