VW: This compromise formula holds the company together

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Hans Dieter Pötsch did it again.

Shortly before the fourth Advent, the chairman of the Volkswagen supervisory board pacified the public conflict over the composition of the board of directors.

Group boss Herbert Diess gets his preferred candidates into the management team, works council boss Bernd Osterloh a new innovation project for the Wolfsburg location, the shareholders are promised an “increase in efficiency and profitability”.

Has Osterloh now won because Diess did not get away with the previously rumored demand for an early contract extension?

The conditions in Wolfsburg are not that banal.

Germany's largest company cannot be reduced to a power struggle between two leaders.

If that were the case, 69-year-old Pötsch would have an easy job.

In reality, however, the chairman of the supervisory board plays the decisive role in a complex system of different interests.

The level-headed and outwardly inconspicuous Pötsch manages, like a top diplomat, to balance the powers in and around Volkswagen.

The "Metternich vom Mittellandkanal" called it the "Manager Magazin" a year ago, after the Imperial Foreign Minister who created a new balance between the states of Europe at the Congress of Vienna in 1815.

The fact that Pötsch lives up to this title - even if he does not like the comparison - is exemplified by the current resolutions of the supervisory board.

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Each party involved can read the document as an achievement for their own cause.

In addition to the CEO and the works council, the Piëch and Porsche families, the State of Lower Saxony, the Emirate of Qatar and IG Metall play key roles at Volkswagen.

Unlike in normal stock corporations, the works council in Wolfsburg has extensive veto rights, which are anchored in the company's articles of association.

In addition, there is the VW law, which gives the country a blocking minority in important decisions.

Because of these constructions, the employee representatives call VW a “democratic company”.

From this perspective, Pötsch is something of a parliamentary president - and the statements made by his supervisory board are highly political.

Diess' contract will not be negotiated again until 2022

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In fact, it is noticeable in the committee's written commitment to the Chairman of the Management Board that no annual figures are included.

"In the coming years, the Board of Management of Volkswagen AG will implement the strategy with Herbert Diess at the helm," it says.

"The CEO and his new Executive Board team have the full support of the Supervisory Board when it comes to realigning electromobility and digitization, but also to increasing efficiency and profitability in all brands and parts of the group."

Herbert Diess' contract runs until 2023.

According to the rules of the group, an extension in 2022 can be negotiated.

The overseers have deliberately left open whether the “coming years” will go beyond this point in time.

Even the Diess friends on the supervisory board wanted to avoid such a large leap of faith.

Even if the commitment to the current course comes from all sides.

“There is absolute agreement between the supervisory board, management board and employee representatives on the consistent alignment of the group with our strategic goals of transformation,” said Osterloh after the meeting.

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Wolfgang Porsche and Hans Michel Piëch said that it was “of decisive importance for them that Herbert Diess and his new Executive Board team will continue to shape this important phase of the Volkswagen Group.

He has our full support in implementing the 2025+ strategy with a focus on electromobility and digitization, as well as in implementing measures that increase profitability. "

The decisions were very well received by the capital market.

The price of the VW share rose at times by over five percent.

"Although he has not received a contract extension, we think the overall package is good news that will enable Mr. Diess to deliver," wrote UBS analyst Patrick Hummel.

He also rates the personal details as positive, especially the appointment of Arno Antlitz as future CFO.

The current Audi CFO previously held the same position on the VW brand board.

He is well known and recognized in the financial community, writes Hummel, and he emphasizes that face has improved profitability at VW.

The works council had probably tried to prevent this change.

Diess gets its preferred candidates

The other two future board members, Murat Aksel (for purchasing) and Thomas Schmall (for technology), are also Diess' preferred candidates.

With Schmall, the head of the internal supplier "Components", the group's most difficult transformation case gets a vote on the board.

A study by the Fraunhofer-Gesellschaft based on internal VW planning figures shows that the switch to electromobility will eliminate the greatest amount of work there.

"In component manufacturing, the manpower required to manufacture a conventional drive train (..) is 70 percent higher than that required to manufacture a drive train for an electric vehicle," says the study.

“The significantly lower workload for the electric drivetrain will result in a high level of pressure to transform at Volkswagen Group Components.” On a positive note, the scientists note that extensive measures have already been introduced to keep jobs or to cut jobs in a socially acceptable manner.

In addition, foreseeable negative employment effects could be cushioned by increasing the number of units and shifting to the production of new components such as battery cells.

That is also Schmall's mandate on the board: he should market Volkswagen's construction kits to other manufacturers, be responsible for the business with battery cells, charging systems and the corresponding joint ventures.

The solution to eliminating the combustion engine jobs in the component is therefore: new tasks, more growth.

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This is a formula that employees are also happy to support.

For them and the state of Lower Saxony, Pötsch has also negotiated a promise in the past few days that they can attach themselves to as a success: "The Wolfsburg headquarters are to become the trend-setting factory for the highly automated production of electric vehicles in the medium term," the resolution says.

The "future leading electric vehicle of the Volkswagen Passenger Cars brand" should be manufactured there.

To this end, a project is being set up in Wolfsburg, as it is currently running under the name "Artemis" at the Audi subsidiary in Ingolstadt.

VW must also make more profit again

The Audi project is intended to advance the entire group in terms of IT with a leap in innovation - in a kind of start-up outside of the cumbersome corporate structures.

For the time after the Gulf, the importance of Wolfsburg as the core of the company is manifested - in the spirit of the state co-owner of Lower Saxony.

For the next steps, the Supervisory Board Diess and Osterloh has sworn to a procedure typical for VW.

The CEO and the shareholders want to trim the company for more profit.

Investments of 150 billion euros are due for the coming years.

VW not only has to generate this money, but also a return for the investors.

Now Pötsch's supervisor colleagues have agreed that fixed costs in the group should be reduced by five percent by 2023 and material costs by seven percent.

In addition, “the group management board and group works council should agree on a plan by the end of the first quarter,” the resolution says.

Osterloh calls such an approach "cooperative conflict avoidance".

Diess and his new colleagues will have to take part.