Patience is a virtue, and haste makes waste. Those are probably just a couple cliches for whichchief Bernd Pischetsrieder has a nasty German word.
The CEO’s patience has been more than tried since he took the top job in 2002, and haste is exactly what VW needs.
The auto maker acknowledged its situation was critical a year ago and has been dangling over a precipice ever since.
VW’s once-formidable manufacturing base in Germany has become its Achilles’ heel, as the country is the most expensive place to build vehicles and the most resistant to addressing its high cost and low productivity.
More than half the VW workforce is in German plants, and they are paid even more than their peers who work foror Mercedes-Benz. With a heritage as an affordable brand, dating back to its roots as a 1-vehicle manufacturer of the Beetle, premium prices are not a viable option to recoup VW’s heavy losses.
Add to the mix the devastating effect of a strong euro against the U.S. dollar, and VW says it is losing hundreds of millions on exports to North America.
The once-lucrative China market has taken a hit, as well.
But Pischetsrieder has a plan and a new team to implement it. His deputy in Wolfsburg is Wolfgang Bernhard, the man behind the successful restructuring ofthat included closing plants and eliminating 26,000 jobs, as well as cuts from salaried ranks and suppliers.
There also are new faces leading theand Audi brands in North America, with a renewed emphasis on product better suited to the market. Chinese operations also are under a new guard.
Restructuring plans have been forged amid reports management wants to shed as many as 20,000 manufacturing jobs and convince the powerful IG Metall union that remaining workers put in longer days for less pay if VW is to have any hope of remaining competitive.
Finally, this month, the supervisory board has authorized management to begin negotiations with the union.
The attempt to yank out the existing manufacturing model by the roots and plant new practices is expected to be painful and protracted.
And board support is not a given, with differing interests of major shareholders (Porsche, the state of Lower Saxony and labor), against a backdrop of bribery scandal and controversy following Porsche’s purchase of an 18.6% stake in VW.
Ironically, Pischetsrieder isn’t even sure he will be the one to see the restructuring through. His 5-year contract expires in April 2007. Traditionally, such contracts are renewed a year in advance for a smooth transition –something VW sorely needs.
Whether Pischetsrieder has full board support came into question earlier this year, with labor understandably nervous about the fallout of restructuring on its ranks.
The requisite backing now appears to be there, and confirmation of contract renewal is expected May 2.
Despite the frustrations of the past year, the CEO still wants the job.
Hopefully, his patience has not been overly tried. Strong and daring leadership will prove crucial to VW’s ability to maintain its position on the world stage.