Do you remember the infamous 2015 diesel-gate?
Intelligence was brought to public eye about how Volkswagen’s diesel vehicles, which notably got insanely good miles per gallon, were programmed to cheat emissions testing.
The U.S. Environmental Protection Agency (EPA) also issued the German automaker a notice saying it had violated the Clean Air Act (CAA).
The agency had found that Volkswagen AG had intentionally programmed its turbocharged direct injection (TDI) diesel engines to activate their emissions controls only during laboratory emissions testing.
During such testing, the “contaminated” vehicles would emit enough nitrogen oxide (NO2) to be within U.S. standards during tests but would actually emit much more NO2 in real-world driving.
Volkswagen deployed this dishonest programming software in about 11 million cars worldwide, 500,00 of which were in the U.S., in model years 2009 through 2015.
In the aftermath of the initial scandal, the automaker issued a vast recall and a generous buyback program for the older affected models and software updates for the newer ones.
I received such a recall and buyback offer for my favorite vehicle: A 2011 VW Jetta SportWagen standard shift, tricked out with all the bells and whistles. Not going to lie, I was a little disappointed that there wasn’t a software update available for my car.
But I opted for the incredibly generous buyback offer. I mean, it was really hard to refuse. My offer didn’t come until about a year ago. And at that point, my car had long since lost its new car luster and had well over 100,000 miles racked up on the odometer.
Volkswagen bought it back for $18,000, on top of a $1,000 visa gift card and a $1,000 VW gift card to be used at any dealership in the country.
The company went above and beyond the call of duty. And for that, my family and I have remained brand-loyal.
My son and I both drive updated Golf TDIs, and my wife drives an updated Touareg TDI.
But now, it looks like things are changing again inside the corporate circles of my favorite German automaker…
Former VW CEO Matthias Müller has, without a doubt, earned the praises he’s received for successfully steering his company through what could have been a deathblow. However, that ultimately wasn’t enough for him to keep his job.
VW’s supervisory board was supposed to vote later today on sweeping changes that would have included replacing Müller with Herbert Diess, the former head of VW’s namesake brand.
But in an announcement yesterday, Müller seemingly took matters into his own hands and voluntarily stepped down from his position.
Müller, who took over in 2015 and has worked inside the Volkswagen structure for his entire adult life, had two years left on his contract.
But his replacement, Herbert Diess, will take command in August 2018.
The news poses more questions than it answers. VW had given no indication, beyond a cryptic regulatory filing early last Tuesday, that it was considering a change in the CEO job.
Last week’s statement didn’t specify whether it meant replacing Müller completely or simply shifting in responsibilities. So, Thursday’s impulsive press release confirming the major corporate shift came as a surprise to many.
The original filing stated that Chairman Hans Dieter Pötsch would spearhead the transition and that Müller was showing “his general willingness to contribute to the changes.” Until now, VW officials had given no other statement beyond the two-paragraph filing.
Diess being chosen as Müller’s replacement means that Volkswagen is handing the reins over to someone who hadn’t been with the company when the diesel cheating began.
Now embarking on a major corporate overhaul aimed at making the company more efficient and focused, the world’s largest automaker believes that Diess is the only man for the job.
The new CEO is expected to bring an outsider’s perspective to the job, having joined Volkswagen in July 2015 after spending nearly two decades at rival German automaker BMW. It was there that Diess reportedly earned his nickname KostenKiller — cost killer — for his ability to slash spending.
The announcement and the timing of the shift caught investors off guard and left analysts scratching their heads. It came just a few weeks after Müller had presided over improved earnings, with operating profit rising to 17 billion euros (around $21 billion).
Volkswagen under Müller, who was promoted to the top in the chaotic days following the public disclosure of the diesel cheating, has weathered blow after blow from the scandal while embarking on an aggressive expansion into electric cars.
VW’s profit margin climbed to 7.4% of sales last year, up from 6% in 2015 when the crisis hit. The German carmaker also managed to fend off Toyota Motor Corp. to retain its status as the world’s largest automaker.
In the aftermath of diesel-gate, Müller sought to deconstruct the company’s rigid top-down management structure, delegating more responsibility to its brand and regional chiefs.
The complexity of the new management structure extends to its main shareholder, Porsche Automobil Holding SE, which serves as “CEO” whereas Müller was more of a “top executive.”
Porsche has stated in a separate release that any future changes at VW would be reflected in its management.
But over the past few months, Müller appeared to have lost the trust of the controlling Porsche family.
In an interview with the Wall Street Journal last year, Müller spoke openly about selling the Ducati motorcycle brand. This sale upset Porsche considerably.
Müller also said that about 20 billion euros ($24.6 billion) of Volkswagen’s 231 billion euros in annual revenue came from businesses that it no longer considers essential and are therefore up for disposal. The IG Metall trade union wasn’t too happy with this, either.
He’s famously known for his strong opinions and candid speeches, which have irritated some members of the controlling families within Volkswagen.
For example, last year, Müller chose to break ranks with the rest of the German auto industry and called on the government to end tax subsidies for diesel cars and instead shift that money toward the development of electric vehicles. Again, Porsche wasn’t too thrilled.
However, people familiar with the situation said Müller’s departure doesn’t appear to have been triggered by a specific incident or deep dissatisfaction with his performance.
On the other hand, since joining Volkswagen, Diess has worked to revive the company’s brand. This included launching a multiyear strategy to restore public trust, restructure the automaker’s namesake division, increase its profitability, and cut emissions.
He’s also set a goal to sell 1 million VW-branded electric cars by 2025 and make Volkswagen “the leading manufacturer of electric cars.”
In the end, Müller, Diess, and the powers at Volkswagen have simply agreed that it’s time for a change.
That’s all for now.
Until next time,
John Peterson
Pro Trader Today