VW Seen Taking First Steps Towards Radical Restructuring | Business| Economy and finance news from a German perspective | DW | 26.11.2001
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VW Seen Taking First Steps Towards Radical Restructuring

The VW supervisory board approved a new brand strategy – a move that company insiders described as heralding a fundamental overhaul of the group's management structure.


Bernd Pischetsrieder, the VW group's incoming chairman, has plans to restructure

The Volkswagen AG group on Friday announced a new brand strategy – a move described by company insiders as heralding a fundamental overhaul of its management structure.

Following approval by the supervisory board on Friday, the VW stable of brands will be divided into two main groups and this will already involve a reshuffle of board members' responsibilities.

The division into two branches, headed respectively by the VW and Audi marques, is the brainchild of Bernd Pischetsrieder, the VW group's incoming chairman. Pischetsrieder himself, who officially takes over as group chairman in April, will head the VW branch, while the Audi branch will be led by Martin Winterkorn, currently board member with responsibility for research and development.

The VW-led branch will also include the group's more traditional marques – Skoda, Bentley and Bugatti. The Audi-led branch will include the sportier marques – Seat and Lamborghini. Audi's current chief, Franz-Josef Paefgen, was widely expected to leave the VW group. In fact, he will be staying on as chairman of the Audi supervisory board, head of Rolls-Royce and Bentley and head of the motor sports division.

The latter position also brings with it responsibility for research, and here Paefgen will be directly below Pischetsrieder, who is to take over responsibility for R&D from Winterkom. VW's commercial vehicles business will continue to remain independent of the rest of the group and will continue to be headed by Bernd Wiedemann.

The financial services business and the Europcar car-hire unit will start to collaborate more, and in Jens Neumann, they will share a supervisory board chief. But they will continue as separate units with separate management. VW's current chief, Ferdinand Piech, has always been content to give considerable freedom to individual units within the the VW group provided that they can achieve the right results. But with the new brand strategy, Pischetsrieder is clearly aiming to keep the units on a tighter leash – something he said he intended to do in a Handelsblatt interview in September.

The new brand strategy is also aimed at boosting the identity of individual brands and to address deficits Pischetsrieder has identified in the group's branding portfolio, where there is overlap between the group's offer in some market segments while the group is completely absent from other market segments. Within the new set-up, the position of board member with responsibility for an individual marque becomes downgraded – particularly in the case of Seat and Skoda.

In the past, the responsible board member has exerted control over all aspects of the marque's business, from development up to finances. According to VW group insiders, further changes can be expected within the management board structure. The latest moves, it is argued, have created the preconditions for an expansion of the board. Pischetsrieder is currently in charge of Seat. Responsibility for the Spanish arm will pass to Andreas Schleef, who will also continue for now to be responsible within the management board for personnel issues at Audi.

The news of the new branding strategy was welcomed by investors, and the VW share on Friday closed up 3.23% at 52.70 euros. Analysts were similarly enthusiastic, saying though they didn't expect the latest moves to provide any further impetus for the share price in the short term, the division into two would pay off in the longer term.

"This is a move in the right direction," said Lars Ziehn of Deutsche Bank. The supervisory board on Friday also approved the company's five-year budget for capital expenditure. The group plans investments of 31 billion euros between 2002 and 2006, unchanged from the level of the previous five years.