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Underperforming Volkswagen Plans Major Corporate Shift

June 22, 2015
The plan will give more decision-making authority to individual brands and regional business heads, to position the company to be more nimble and responsive to local demands and trends. 

With operating margins lackluster in the U.S. and sluggish electric car sales in Germany, Volkswagen is looking at making major changes in its corporate structure and considering a plan to install electric car charging stations, the industry analyst group IHS reported on Friday.

Volkswagen’s CEO, Martin Winterkorn, told about 10,000 of his staff at a company meeting at VW’s corporate headquarters in Wolfsburg, Germany, last week, that the company needs to be “faster, more flexible, and more agile.” Volkswagen, he added, “must make its decision-making model fit for the future.”

According to the report, Winterkorn told the group that  the plan, which is expected to be finalized and submitted to VW’s supervisory board for approval by summer’s end, will give more decision-making authority to individual brands and regional business heads, to position the company to be more nimble and responsive to local demands and trends.

Winterkorn also told the group that in Germany, VW plans to install 12,000 electric car charging stations in parking lots and other public spots. By the end of 2014, Germany had about 5,000 charging stations.

German chancellor Angela Merkel said recently that the government would consider financial incentives for electric vehicles, with the goal being to have one million electric vehicles on the road in Germany by 2020.

Last week, the German business publication Handelsblatt reported that VW’s corporate structure would be decentralized and divided into four holding companies: mass market, trucks, and two premium brand divisions. Audi CEO Rupert Stadler will head one premium brand division, grouping Audi, Lamborghini and Ducati. Porsche CEO Matthias Muller will lead the other, grouping together Porsche, Bentley and Bugatti.

The IHS analysis stated that VW’s moves appear “logical and probably necessary given VW’s huge expansion in recent years,” and that the EV charging plan  “is another step toward accelerating the commercial roll-out of EVs in Germany.”

It also opined that Winterkorn “desperately needs to address … the poor performance of the VW passenger car brand, its lack of profitability in the United States, and its unsatisfactory operating margin, which feel from 2.9% in 2013 to 2.4% in 2014.”

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