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Power Sheet – September 28, 2015

Who’s the leader most worth watching now? The field of candidates is crowded and includes the new Speaker of the House, whoever it might be; Vladimir Putin, craftily widening his influence in the Middle East; and President Obama, negotiating with Putin and others at the U.N. this week while fencing with congressional Republicans over their threatened government shutdown.

But for anyone wanting to learn more about leadership – for better or worse is not yet clear – I don’t see how you can beat the real-time case study being offered by new Volkswagen chief Matthias Mueller, who replaced the fired Martin Winterkorn on Friday. He faces one of the largest leadership challenges in recent business history. It’s even more challenging than it may seem to observers outside of Europe because the emissions-testing scandal that has engulfed VW is a crisis not just for the company but also for Germany.

The country is the world’s No. 3 exporter, behind China and the U.S. (and it’s only barely behind the U.S.). Germany lives and breathes exports, and a scandal at the country’s largest company is seen as a disgrace to the nation. The nature of the scandal makes it even worse. Germany’s pride, its global economic brand, is engineering, and the VW scandal begins with an engineering failure: The company couldn’t get its diesel engine emissions to be acceptably low. So it installed software that cheated on emissions testing in order to conceal its failed engineering. You couldn’t write a scenario to humiliate German business before the world much worse than that.

Mueller must repair relations not just with millions of customers worldwide but also with millions of Germans. He’ll have to do it while government prosecutors are vigorously investigating and quite possibly prosecuting Winterkorn and other VW executives. The country’s transport minister has already said that “Volkswagen tampering was undoubtedly illegal.” The company announced that its initial estimate of 11 million vehicles affected worldwide was too high, and the real number is five million; but the transport minister also announced that 2.8 million vehicles in Germany were rigged for emissions cheating. Several other countries have begun investigations, including a U.S. criminal inquiry, and Japan, South Korea, India, Brazil, Australia, South Africa, and Norway have also launched investigations.

It gets worse. In addition to the prospect of executives charged with crimes and staggering fines imposed by regulators worldwide, VW faces monumental liability in private actions. A class action suit has already been filed in the U.S. on behalf of customers, and more suits by customers and shareholders are certain.

And then there are the people Mueller is actually leading, VW’s 600,000 employees. They’re feeling personally disgraced. VW was one of the jewels of German industry, and Mueller must find a way to help them feel proud again that they work there.

He’s caught in the classic vice of crisis leadership: He must be highly visible, seen by all to be leading, at just the moment when a hundred urgent priorities demand that he be in conference rooms and on phone calls, invisible to the world. The one advantage he has, and it’s slight comfort, is that he doesn’t have to persuade anyone there’s a crisis.

What We’re Reading Today

Alcoa to split into two

Over the past seven years, CEO Klaus Kleinfeld has built a $14.5-billion business selling advanced metal parts to car, construction, and aircraft companies. It will become a free-standing company while Alcoa will continue as a commodity aluminum maker. Kleinfeld will remain chairman of Alcoa while also becoming CEO and chairman of the new entity. NYT

Shell scraps Arctic oil drilling

The surprising decision from CEO Ben van Beurden comes after Royal Dutch Shell spent $7 billion to test the possibility of drilling off the coast of Alaska. It didn’t find oil pockets large enough to continue investment, so it will cease efforts “for the foreseeable future.” Fortune

John Boehner blasts conservative group leaders

On “Face the Nation” yesterday, the outgoing House Speaker called some within the GOP “false prophets” because they focused on initiatives that couldn’t be accomplished. Boehner pointed to the 2013 government shutdown over Obamacare, led by Texas Senator Ted Cruz, as an example. CNN

German prosecutors begin VW investigation

The German authorities have opened a probe into former CEO Martin Winterkorn in an attempt to find out who was responsible for tricking regulators during emissions tests. On the same day, Volkswagen’s luxury brand, Audi, announced that 2.1 million of its vehicles have been affected by the faulty software as well. Bloomberg

Building a Better Leader

When building multinational teams…

…the parts of the organization that team members come from can create the highest  barriers to communication. Knowledge@Wharton

German’s defense minister faces plagiarism allegations

A  website claims it found plagiarism on 27 of the 62 pages of Ursula von der Leyen‘s doctoral thesis. Plagiarism charges, of all things, have led to the resignation of two other German cabinet heads. BBC

Women only 10% of security-firm workforce

But they outnumber men in the governance, risk, and compliance sector within cybersecurity companies.  DarkReading

On the UN’s Pulpit

Obama will address the world

In President Barack Obama‘s speech to other world leaders, he will promote the Iran nuclear agreement and discuss the fight against the Islamic State.  USA Today

Putin to speak at the UN for the first time…

…in a decade. It comes as Russia surprised the U.S. with news that it would share intelligence about the Islamic State with Iraq, Syria, and Iran. Russia’s growing  presence in the Middle East could be a topic when Vladimir Putin meets with Obama this week.  RT

China’s President has a list of demands

Ahead of Xi Jinping‘s first speech to the UN as president, China published a list of amendments it would like to see passed by the body. It comes as China’s investment in the UN has grown; some of the 12 requests, like one on human rights development, highlight its desire to reshape the organization to benefit itself. Quartz

Up or Out

Comcast’s NBCUniversal has announced it will buy Universal Studios Japan for $1.5 billion. Universal Parks & Resorts CFO Jean-Louis Bonnier will replace outgoing CEO of Universal Studios Japan Glenn Gumpel. The Wrap

Diane Irvine, former CEO of online jeweler Blue Nile, has been named chairwoman of Yelp. USA Today

Former Raytheon CEO Bill Swanson will join the board of cybersecurity firm Resilient Systems.  Fortune

 

Fortune Reads and Videos

Walmart buys wind energy

It will purchase 58% of the energy produced by a new Texas wind facility. It’s an effort by Walmart to eventually run on 100% renewables. Fortune

Uber’s largest competitor in China, Didi Kuaidi…

…has partnered with the largest taxi hailing service in India, Ola.  Fortune

Donald Trump’s unusual Republican tax plan

Trump hinted that he would raise taxes on the wealthy. Fortune

ISIS has a money problem

The income gap between fighters and civilians has caused anger among ISIS followers. Fortune

Today’s Quote

“The strength of social media is it can tell government where they are going wrong. We used to have elections every five years. Now we have them every five minutes.” — Indian Prime Minister Narendra Modi speaking at Facebook headquarters as he tries to court Silicon Valley investment in his country.  NYT

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Produced by Ryan Derousseau
@ryanderous
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