VW will give more power to brands, regions

[AF News Desk]

Volkswagen Group will give more power to brand managers and regional bosses, its labor leader said, as the company looks to address poor performance in markets such as the U.S. and Brazil.
Bernd Osterloh, head of the German automaker's works council, also said he expected CEO Martin Winterkorn to extend his contract by two years to 2018.
The VW Group, whose brands range from the upmarket Audi and Porsche to the cheaper Seat and Skoda, has expanded rapidly since Winterkorn took the helm in 2007, with profit almost doubling to 11.7 billion euros ($14.4 billion) in 2013.
"I think a company of this size cannot steer everything from Wolfsburg," Osterloh said at the group's headquarters in the German town. "Our approach is: centralize as much as necessary and decentralize as much as possible."
VW aims to overtake Toyota as the world's biggest automaker no later than 2018 but that goal is under threat because of weak performance in markets such as the U.S., where sales of the core VW passenger car brand are down 11 percent this year.
The group has announced plans to cut 5 billion euros of costs at the VW brand in a bid to improve profitability, and now intends to give more power to brand and regional business leaders to better address local markets.
VW Group has 108 factories worldwide and makes annual sales of nearly 200 billion euros -- about the size of Israel's gross domestic product.
In the U.S. it is setting up a planning center and hiring about 200 engineers to monitor the world's No. 2 car market more closely and refresh vehicles more quickly.
"That's not just an issue in North America but will also be a topic in other regions," said Osterloh, who sits on VW's supervisory board, which formally appoints executive board members.
Company sources have said over-centralization in Germany, where a small group of top managers seek involvement on matters such as product strategy and quality control, has delayed models and contributed to underperformance in markets such as the U.S. and Brazil.
Industry's 'best manager'
Separately, Osterloh said he expected Winterkorn to extend his contract to 2018. The 67-year-old boss stoked speculation about his departure in a recent interview, noting he would be 69 when his current contract expires in December 2016.
"We are not interested in letting the best manager in the auto industry go," Osterloh said. "If we would say carry on further, he would not put us on hold."
Winterkorn outlined efficiency measures and investment plans at a staff gathering at the Wolfsburg plant today. The carmaker said last month it would spend 85.6 billion euros at its auto operations through 2019 on foreign expansion, new models and technology.

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