VW shrugs off leadership shifts but fails to convince its environmental critics

Update October 24th, 2007

With the demise of the so-called VW law, The future of VW seems increasingly connected with that of Porsche. Porsche has strengthened its share-ownership of VW and appears to be following a strategy of creating wriggle-room for a takeover bid at a time that is most advantageous to itself.

[Original report follows]

The VW motor giant has shrugged off its leadership shifts of the last year. New chief executive Martin Winterkorn seems to have re-assured financial analysts of the company’s future and of the successful implementation of its restructuring plans. An environmental perspective, however, indicates further challenges ahead.

In an earlier post, I pointed to the organizational instability that accompanies leadership shifts such as those that had befallen auto-giant Volkswagen. The background was the scandal concluding with a criminal conviction for Peter Hartz, formerly head of personnel at the VW corporation, and an influential figure in labour policy changes introduced by the former German chancellor, Gerhard Schröder.

Volkswagen chief executive Bernd Pischetsrieder had stepped down under unclear circumstances, followed by the departure of Wolfgang Bernhard. Mr. Bernhard pushed through plans to cut 20,000 jobs and extend the workweek during the course of 2006. But in the process, he alienated the powerful Volkswagen union, IG Metall, which is also closely allied with Volkswagen’s chairman, Ferdinand Piëch.

The VW preservation society

Meanwhile a long-rumbling legal progress was grinding its way through the German courts. Last month, The advocate general ruled that the so-called “Volkswagen Law” wrongly prevented the free flow of capital. If this is ratified, the company becomes more vulnerable to takeover.

Two stories are emerging

These were the circumstances under which Martin Winterkorn took over in the New Year. Two stories are emerging. The first points to the improved prospects future profits for the company announced this week. The second concerns the wider environmental picture.

A finance success story was more widely reported. In the UK, The BBC, for example, emphasized the good news, in a piece entitled Upbeat forecast lifts VW shares. The piece might have been more credible if it had managed to get the good Dr Winterkorn’s name right.

Meanwhile, Der Spiegel in an extended interview with Dr Winterkorn was addressing a concern that VW was lagging in its efforts to produce its hybrid cars.

A somewhat defensive Dr W denied that the German auto-industry was lagging in applying technology in the interests of the environment, saying it was ‘nothing but clever marketing on the part of our competitors. It has nothing to do with the facts’ .

What sense can we make of the two stories?

First, that the financial markets have absorbed the uncertainties regarding VW’s less secure future when and if the Volkswagen protection laws are removed. They are also unshaken by the leadership scandals, and by the risk that VW is falling behind Toyota in the development of its hybrid car range. (Strictly speaking, that is a wider concern for the future success of the German premium automobile marques, VW’s Audi, but even more so, BMW and Mercedes). At least Martin Winterkorn seems to be enjoying a leadership honeymoon.

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Cameron faces Clones syndrome

Polls remain promising for opposition leader David Cameron. Despite a political wobble this week, he seems to be succeeding in weakening the Conservative reputation as the nasty party. His shifts towards ground previously occupied by New Labour appear to have been shrewdly chosen. But they may yet have the unavoidable consequence of reminding the electorate of Tony Blair and his charismatic early days in power. Cameron may yet become a victim of Clones syndrome.

This week David Cameron acted swiftly to dismiss Shadow homeland security spokesman Patrick Mercer after remarks about ethnic minority soldiers. Patrick Mercer’s career as a serving officer was put under scrutiny. It was revealed as exemplary. Black soldiers who served under him came forward to reject any accusations of the officer having displayed racist behaviors.

David Cameron came as much under the spotlight as did Patrick Mercer. Political allies insisted that Cameron had no option but (‘regretfully’) to dismiss Mr Mercer. According to the BBC, Mercer had been reported as saying that

he had met “a lot” of “idle and useless” ethnic minority soldiers who used racism as a “cover”. The former officer also told the Times that being called a “black bastard” was a normal part of Army life .. Mr Cameron had made his position clear: “The comments made by Patrick Mercer are completely unacceptable and I regret that they were made … We should not tolerate racism in the Army or in any walk of life …I was completely shocked when I read the remarks of Patrick Mercer.”

The dismissal polarized opinion within the Conservative party. Some echoed the popularist sentiment that it was another example of political correctness gone mad. Others accepted that their leader had no choice. However honorable his record, the remarks, if left uncensored, could too easily suggest to the electorate that the Conservatives remained the nasty party.

This is subtle stuff indeed

This is subtle stuff indeed. I’m not sure that Cameron was forced to act in the way he did. If so, he is already a victim of ‘events, dear boy, events’. More significant is the sense made of the situation among political commentators. By and large they agree that he has to deal with leadership dilemmas by careful attention to their second-level consequences. I have no problem with this line of reasoning.

Another point made this week also seems pertinent to the dilemmas of David Cameron in the specific context of Tony Blair’s departure from power. I have called it Clones syndrome.

Clones syndrome

Among those second-level consequences are some which have been expressed from time to time. That David Cameron has studied, learned from, and rather admired Tony Blair’s transformation of old labour. Just as Blair studied, learned from, and rather admired Margaret Thatcher.

Whenever David Cameron acts in ways similar to those espoused by Tony Blair, he will be open to the accusation of copying him. Opponents will be quick to label him no more than a Blair clone. It will not matter that the actions are similar because there are a limited number of non-stupid actions to take.

Actions that can be interpreted as good for the media will be presumed to be taken for that reason alone. My Cameron appears to be strongly commited to moving the party to a greener position. Demonstrating it through hugging a Husky will never be a complete PR success.

I’m not sure of all the implications of this. It will be interesting to see how they emerge in the months to come.