Matthias Müller faces huge challenges restoring VW’s credibility
As chief executive of Porsche, Matthias Müller had one of the nicest jobs in global carmaking, leading a trusted and perennially profitable maker of luxury sports cars.
Following his appointment as chief executive of Volkswagen on Friday, he now has the hardest job in the industry, fronting a brand that in the past week has been tarred by the diesel emissions scandal.
Mr Müller faces a gargantuan challenge to mend VW's broken public image over the coming months and regain the trust of customers, investors and regulators.
VW admitted last week that some 11m vehicles were fitted with so-called defeat devices that understate dangerous nitrogen oxide emissions in laboratory tests.
Investors fear VW could be hit with billions of euros of fines, recall costs and lawsuits, and its shares have fallen 34 per cent since US regulators revealed the cheating 10 days ago.
US regulators are angry that VW took more than a year to admit it had used defeat devices. But now the wrongdoing has been exposed — and conscious that General Motors and Toyota were seen as having moved too slowly to respond to previous scandals — VW is trying to step on the gas.
"The only thing that is going to make traction right now are facts, facts, facts or actions, actions, actions," a person close to VW said.
Martin Winterkorn resigned as chief executive less than a week after US regulators exposed the cheating and VW has since suspended several employees and hired a US law firm to comb through documents and emails.
Stressing that its vehicles are still safe to drive, the German carmaker said it was working full speed on a technical solution for the affected cars and will present this to regulators in the coming days and then begin repairs.
On Friday, Berthold Huber, VW's interim chairman, described the scandal as a "political and moral catastrophe" for VW and said the company could not simply carry on as before.
Mr Müller, 62, has spent his whole career at VW subsidiaries and he is close to the Porsche and Piech families that own a majority of VW voting shares.
However, a person close to VW said Mr Müller was "very different to Winterkorn, he has a certain critical distance, he is more nonconformist and more international. At the same time he knows how VW works."
Arndt Ellinghorst, analyst at Evercore ISI, said the former Porsche chief executive was "the right guy for the job . . . The most important thing will be to transform VW into an accountable and performance-oriented business. This is big and good news in all the darkness these days."
In contrast to Mr Winterkorn, who was a poor public speaker, Mr Müller is confident and direct. These are qualities that will be tested repeatedly in the coming weeks as he is grilled by politicians, regulators and the media.
Max Warburton, analyst at Bernstein Research, said VW needed to "move very fast and very dramatically if it is to stop the spiral and save its reputation with regulators and consumers".
VW requires "a massive public relations campaign on the ground in the US," he said and should send the new chief executive there "right away".
Following a management reshuffle approved by VW directors on Friday, Mr Müller will be assisted in rehabilitating VW's US image by Winfried Vahland, the former Skoda boss, who will now lead VW's North American operations.
Under predecessor Martin Winterkorn, decision-making at VW was highly centralised and more junior managers were frightened to speak their mind. In contrast, Mr Müller is considered more of a team player.
"In the future we need a culture in which problems are not concealed but are openly communicated to superiors. We need a culture in which [employees] are able and permitted to argue with managers about the best path," said Bernd Osterloh, VW's chief labour representative and an influential supervisory board member.
Underscoring the gravity of the situation, Mr Osterloh has already warned that in addition to a €5bn efficiency programme at the core VW brand, employees will now have to find further cost savings to help pay for the financial damage caused by the scandal. VW has set aside €6.5bn to cover the cost of potential fines and repairs, but some analysts fear the final costs will be higher.
The big unknown for Mr Müller is how far the scandal will impact consumer demand for its diesel cars, which make up more than half of VW vehicle sales in Europe. Even before the scandal, VW's sales had already begun to slow in China, its biggest market and a big source of profits.
“Given the ongoing investigation, consumers could say, ‘Well, why should I still pay a premium for a VW?’,” said Horst Schneider, an analyst at HSBC.