VW presents brand reorganisation

The Volkswagen (VW) Group has announced that it is implementing a new structure for its brands that will create a more flexible and responsive organisation. While the restructuring may look like it is part of VW's response to the emissions crisis, it has in fact been in process for some months. The company has also announced a new structure for the North American region. Commenting on the changes interim supervisory board chairman Berthold Huber said, "The new structure strengthens the brands and regions, gives the Group Board of Management the necessary leeway for strategy and steering within the company, and lays a focus on the targeted development of future-oriented fields."

The company's brands will be organised into four groups of three, broadly aligned along brands that are complementary in terms of market segments, technology requirements and the firm's existing modular toolkits. These toolkits feature standardised technical components for each automotive vehicle segment with the new groups organised as volume, premium, sport and commercial vehicles. As a result the Porsche brand group with Bentley and Bugatti will be established for the sports car and mid-engine toolkit (although this seems somewhat incongruous as Bentley has no mid-engined models). The Audi brand group with Lamborghini and Ducati will be continued as will the Truck Holding, and the Power Engineering and Financial Services business lines. The volume brands Volkswagen (with principal responsibility for the modular transverse toolkit), SEAT, and Skoda will be represented by one member each in the Group Board of Management.

New organisational units will be established for product strategy, new business fields, co-operations and holdings, connected car activities, and CO2 emissions. Overseeing these units VW will appoint a new role of Chief Technology Officer, overseeing developments throughout the Group as mandated by the Group Board of Management. In addition there will also be a significant internal reorganisation of the main VW passenger car brand which is designed to improve accountability and responsiveness. As a result the VW brand will introduce a management structure with four regions, each led by a local CEO who will report to the brand chairman, Herbert Diess. In North America former Skoda chairman Winfried Vahland will head up the new organisation. The firm's operation in the US, Mexico and Canada will be combined from 1 November. Vahland's successor at Skoda will be Bernhard Maier, who was previously the sales and marketing chief at Porsche. Michael Horn will stay on but will report to Vahland as President and CEO of Volkswagen Group of America.

Outlook and implications

This reorganisation has been in progress since former CEO Martin Winterkorn defeated former supervisory board chairman Ferdinand Piëch in April (see Germany: 11 May 2015: Winterkorn to present new VW management structure by October), with the emphasis on improving efficiency, responsiveness and boosting synergies between brands that operate in similar price segments and markets. However, it should also be noted that one of the core objectives of the reorganisation is to improve the performance of the VW brand, which has deteriorated in terms of profitability and competitiveness in recent years. In a speech yesterday (28 September) new CEO Matthias Mueller said that the VW brand would "in future be just as independent from the central corporation as Audi or Porsche". The brand's operating margin in 2014 was 2.4%, with the long-term target being 6%. By way of contrast, Porsche contributes a larger percentage of the Group's profit despite selling 30 times fewer cars than the VW brand. Although these changes are not in direct response to the emissions debacle, it seems they have been announced as part of the package of management announcements in an effort to show a co-ordinated response to the crisis.