Volkswagen (VLKAY, Financial) seems to be running in troubled waters as Porsche and Piech are in talks to oust the current CEO Martin Winterkorn. Trouble started brewing in paradise when Ferdinand Piech, chairman of the supervisory board of Volkswagen Group, said that he no longer had any confidence in the CEO. Though rumors are rife that he is seeking the CEO's ouster, confirmation has not been provided yet.
The issue
This issue is, however, not a family opinion. It is only the personal opinion of Mr. Piech, according to Wolfgang Porsche, one of the board members. He controls around 50.7% of Volkswagen's voting stock in Porsche. It is said that the Porsche & Piech families have decided to make Mr. Winterkorn the chairman of the non-executive supervisory board in 2017. This will be after Mr. Piech retires. Industry analysts have given credit to Mr. Winterkorn. During his reign as the company's CEO, he has overhauled the auto company and has made efforts to convert it into one of the world's most successful carmakers. The company has succeeded in almost taking over the prestige of being the world's largest auto group by sales. In 2014, Toyota Motor Corp Ltd (TM, Financial) was the largest carmaker by sales, followed by Volkswagen. General Motors Company (GM, Financial) was the third largest after Volkswagen.
Mr. Piech seems to have a history for making personal comments. These comments are normally aimed at the top level executives who no longer have favor with the Volkswagen patriarch. People and supporters close to the CEO have been caught unaware by this comment. They are pretty shocked and do not wish to end Mr. Winterkorn's success story. Though the CEO has refused to divulge any details at this moment, people close to this matter say that he does not wish to step down as the CEO until the completion of his contract. “It's usual business for him,” a source was quoted saying. The Labor and the State of Lower Saxony, the main forces on the board, are showing their wholehearted support to Mr. Winterkorn. Bernd Osterloh, deputy chairman of Volkswagen's supervisory board, said that, if it was in their hands, they would have extended the contract beyond the contract period. Yes, we are convinced. But is Mr. Piech?
Impact on the investors
Investors seem to be unfazed by the current management issues at Volkswagen. Supporters rushed to the CEO's defense citing that sales and revenue rose since he became the CEO. Since Mr. Winterkorn joined as the CEO in 2007, revenue increased by a whopping 92%, to $214 billion. So much so, the net profit earned by Volkswagen also tripled to €10.8 billion. Not far behind, the reason for the increase in revenue was the rise of unit sales by almost 77%. The auto giant sold 10.2 million units in 2014. Hence, unless the situation goes out of control, investors need not fret. Lower Saxony state, a minor shareholder backed the CEO. He also is backed by Volkswagen's employee council. The council has a hold on half the seats on the supervisory board. If Mr. Ferdinand Piech is adamant on Mr. Martin Winterkorn stepping down, investors will have to start worrying. After all, the Porsche and Piech families have agreed to vote with one voice. If things turn in their favor, investors may have to worry about the management change. The only thing left to do is to wait and watch.
