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How VW's Drive To Be No. 1 May Have Put It In Reverse

Then-CEO Martin Winterkorn poses at Volkswagen's annual press conference in Wolfsburg, Germany, in 2012. He resigned his post last month following revelations that VW cheated on emissions tests.
Michael Sohn
Then-CEO Martin Winterkorn poses at Volkswagen's annual press conference in Wolfsburg, Germany, in 2012. He resigned his post last month following revelations that VW cheated on emissions tests.

Volkswagen has for decades been one of the most recognizable brands in the world. Only recently, it outsold Toyota and General Motors to become the No. 1 car company globally.

After admitting it cheated on emissions testing, VW is virtually certain to lose that top spot. VW top managers, in their single-minded quest to be the leader, very likely sowed the seeds of the company's downfall, analysts say.

Its so-called clean diesel engine helped propel VW to the top. Now, because of the revelation that it's not as clean as advertised, it is driving the giant carmaker into the ditch.

This particular engine also powers a taxicab owned by a man named Karl through the streets of Wolfsburg, Germany. Like most people in Wolfsburg, he doesn't want his last name used for fear of alienating Volkswagen. The company employs 60,000 people at its headquarters and huge production plant here. Karl, who once worked on VW's production line, was shocked by the revelations the company had been cheating.

"Yes, I'm very surprised about [this kind of] criminal act. It's incredible. What they have done I can't understand," he says.

Lots of people, especially Germans, are asking why VW management would risk everything in this way.

Uwe Jean Heuser, the economics editor of the German weekly Die Zeit, has a theory: "VW wanted to become the biggest carmaker in the world very quickly, and there were a couple of dominant people at the top. And this created this deceitful endeavor."

He says those two men were Ferdinand Piech and Martin Winterkorn.

"Ferdinand Piech had been the CEO for a long time and then his guy, Martin Winterkorn, became the CEO right before this happened," Heuser says. "So these two, and the engineers around them, were the ones who wanted to change VW's path, who wanted to be the No. 1 carmaker in the world and they did everything for that to happen."

Some analysts have suggested Winterkorn created a culture of fear and bullied his engineers, who finally resorted to cheating to retain their jobs and bonuses. Heuser is not convinced.

"There were people there who wanted to grow at all costs and very quickly so, and I think that that alone already creates a lot of pressure on the people who rose with them and wanted to make them happy and ... were very much motivated by the applause of Piech and Winterkorn," Heuser says.

Ferdinand Dudenhoeffer, of Germany's Center for Automotive Research, says the top executives faced a huge problem because at the same time as they were spending massive amounts of money to develop their "clean diesel," the company was in a cost-cutting mode trying to make the VW brand profitable.

"All the time the profitability of the center group of VW was very lousy and Winterkorn was responsible for that center part of VW," Dudenhoeffer says. "Therefore, possibly he tried to become better by breaking laws."

When he resigned after the scandal broke, Winterkorn said he didn't know about the software installed in 11 million cars that allowed VW to cheat. Dudenhoeffer says it's hard to imagine that's true.

He points out Winterkorn was a member of the management board that approved all important products that required large investments. "Especially Winterkorn, he's very detailed in all things as regards technique and therefore nobody, I think, can understand that he was not aware of it," Dudenhoeffer says.

Government investigators, looking for answers, scoured VW headquarters late last week for evidence.

The question now is whether the company can overcome its dysfunctional management and regain the trust of consumers. Heuser, the Die Zeiteditor, says that will require real change in the ranks of upper management. With that in mind, he thinks the decision last week by VW's board of directors to promote the company's top financial officer to board chairman is not a good sign.

"That's not a solution. That's a problem," Heuser says. "And if they continue in that way — in that they're trying to solve the old problems with the old people, then people are not going to trust them anymore."

Ultimately, Heuser believes the company will find the right path and regain its footing. How long that takes is an open question, he says. But he says it starts with transparency and an honest fix for VW owners who've been deceived.

Copyright 2020 NPR. To see more, visit https://www.npr.org.

John Ydstie
John Ydstie has covered the economy, Wall Street, and the Federal Reserve at NPR for nearly three decades. Over the years, NPR has also employed Ydstie's reporting skills to cover major stories like the aftermath of Sept. 11, Hurricane Katrina, the Jack Abramoff lobbying scandal, and the implementation of the Affordable Care Act. He was a lead reporter in NPR's coverage of the global financial crisis and the Great Recession, as well as the network's coverage of President Trump's economic policies. Ydstie has also been a guest host on the NPR news programs Morning Edition, All Things Considered, and Weekend Edition. Ydstie stepped back from full-time reporting in late 2018, but plans to continue to contribute to NPR through part-time assignments and work on special projects.