Volkswagen Holds Annual Shareholders Meeting
Ferdinand Piech Photograph by Nigel Treblin — Getty Images

The man who created VW’s toxic culture still looms large

Oct 16, 2015

As Volkswagen AG attempts to restructure and regroup amid the biggest debacle of its 78-year history, a major question remains the role of Ferdinand Piech, the automaker’s former chairman, chief executive and a top shareholder.

Piech, born the same year as VW, hasn’t appeared or been interviewed by the media. He was spotted, however, riding “triumphantly” through VW’s gates in a red Bentley convertible with his wife, Ursula, behind the wheel a day after Martin Winterkorn, his onetime protégé, resigned in disgrace. Winterkorn was replaced by Matthias Mueller, who had been Porsche CEO and also is a close confederate of Piech’s.

Winterkorn, so far, has taken the fall for VW’s admitted role rigging diesel emission tests in the U.S. A few months before, he and Piech had a public falling out. Piech resigned as chairman – but insiders didn’t believe he was truly relinquishing power. A member of the Porsche family, which controls a majority of VW’s voting stock, Piech personally is thought to own a 10% stake.

Now the question remains: How involved is Piech -- and how involved should he be -- in the company's affairs?

“It’s impossible to believe that he would lose his ambition to run this company,” said Jim Sanfilippo, an automotive marketing consultant who has met Piech and was a Porsche and Audi marketer in the 1980s. “This is an incredibly driven individual with the gift of vision. He’s undoubtedly assembling information with the intention of leading VW back to what he believes is its destiny, to be No. 1 in the world.”

Piech’s engineering prowess was reflected by the creation of the Audi Quattro, four-wheel-drive sedan and earlier Porsche racing cars. He is father to twelve children from four wives, including his latest, a former nanny. A dyslexic, he reportedly had his mail read to him by subordinates and speaks in a soft, piercing voice that contrasts sharply with the power he wields.

A widely acknowledged engineering genius and notoriously overbearing taskmaster, the Austrian native is credited with leading the elevation of Audi into a competitor of BMW and Mercedes-Benz luxury vehicles, while deftly assembling a stable of VW brands that includes Porsche, Lamborghini, Bugatti, Bentley, Ducati, SEAT and Skoda, among others.

Having summarily fired VW CEO Bernd Pischetsrieder and countless other executives, Piech became famous for banishing subordinates once they’ve made “the same mistake twice.” Automotive journalist Georg Kacher in 2011 recalled Piech’s words on their first meeting at a Frankfurt auto show cocktail reception: "In Japan, writers like you would have long ago been fished dead out of the sea."

Winterkorn, handpicked and groomed by Piech, was a cold, distant figure, not unlike his mentor. Known for obsessive attention to detail, the 68-year-old engineer kept measuring instruments in his pocket, ready to pounce when he spotted a flaw. In a famous YouTube video, recorded surreptitiously during the 2011 Frankfurt show, he berated VW engineers for failing to match a part on a Hyundai i30 from South Korea.

Stories are legion in the industry about Volkswagen engineers and executives shaking in their boots prior to presentations before Piech, knowing that if he was displeased, they might be fired instantly. Bob Lutz, the former General Motors vice chairman and German speaker, often regaled journalists about visits to VW and Piech's boasts how he elicited superior performance: by terrifying his engineers.

For a short time after his power struggle with Piech last spring, Winterkorn may have thought he prevailed since Piech resigned as chairman and the board appeared ready to extend Winterkorn's contract as CEO. How wrong he was.

VW’s blunders and misbehavior pose a dilemma for Germany’s political and economic leaders: Should they intervene – and how forcefully – in a company that’s been a bulwark of prosperity and now fallen victim to dysfunctional governance, perhaps further shaking confidence in VW among consumers, dealers, lenders and partners?

Some financial analysts have said the potential liabilities facing VW could be catastrophic. In that event, it’s possible the automaker might have to be recapitalized with the equity of current shareholders wiped out or severely reduced. Piech has said nothing publicly since the crisis began, though it’s quite plausible that he has conferred privately with government leaders.

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