From the NYTimes.com
Wolfgang Bernhard, former chief operating
officer of the Chrysler Group, will take over
Volkswagen no later than Jan. 1, 2006.
October 7, 2004
Volkswagen Hires Ex-Chrysler Officer
By MARK LANDLER
RANKFURT, Oct. 6 - Volkswagen, plucking a fallen star from a rival German carmaker, announced on Wednesday that Wolfgang Bernhard, a former DaimlerChrysler executive known for his cost-cutting skills and new-product flair, will take over its ailing flagship car brand.
Mr. Bernhard, 44, had been abruptly sidelined by DaimlerChrysler's board last April, just as he was scheduled to move from the No. 2 position at Chrysler to the top job at the company's Mercedes-Benz division.
DaimlerChrysler said Mr. Bernhard had antagonized the work force at Mercedes with threats of radical cost-cutting moves. He also crossed swords with the company's chief executive, Jürgen E. Schrempp, over DaimlerChrysler's money-losing investment in Mitsubishi of Japan.
Mr. Bernhard's appointment, which had been rumored for weeks in the industry but denied by Volkswagen, breathes new life into the career of a hard-charging auto executive, who was once viewed as a potential heir to Mr. Schrempp because of his role in the turnaround at Chrysler.
"It is really a crucial move because it shows that they are finally mobilizing to address the cost issue," said Arndt Ellinghorst, an analyst at Dresdner Kleinwort Wasserstein in Frankfurt. "He needs to change the mindset of people at the company when it comes to spending money."
Shares of Volkswagen jumped 7.2 percent as investors reacted to the first bit of good news at the company in many months. Sales of Volkswagen vehicles dropped 13 percent in Europe last month, as compared with a year ago - a dismal showing even by the depressed standards of the European car market.
Faced with high costs and eroding profits, Volkswagen's chief executive, Bernd Pischetsrieder, doubled the company's cost-cutting target to $4.8 billion by 2005. Volkswagen is in the midst of tense labor negotiations over its demands that its German workers accept a two-year wage freeze.
At Chrysler, where he worked as chief operating officer under Dieter Zetsche, Mr. Bernhard pushed through a harsh cost-cutting program that resulted in thousands of job cuts. But he also developed new models, including the popular Chrysler 300C, which has revitalized the company's image.
"He proved he could make the car business less capital-intensive," Mr. Ellinghorst said, noting that Volkswagen would be a stiffer challenge. "Changing things there is a bit like catching an elephant with a lasso," he said.
In keeping with company tradition, Mr. Pischetsrieder has overseen the Volkswagen brand since 2002, when he took the top job at the parent company, which is based in the northern German town of Wolfsburg. Volkswagen also produces the upscale Audi; two mass-market brands, Skoda and Seat; and three rarefied cars, Bentley, Bugatti and Lamborghini.
Dividing the roles of chief executive and Volkswagen boss is a seismic shift in the culture of this slow-moving company, executives said. In a statement announcing Mr. Bernhard's appointment, Mr. Pischetsrieder noted that Mr. Bernhard would "manage the VW brand independently."
The goal, people at the company said, is to give the Volkswagen brand the same freedom as Audi, which has produced consistently better profits than Volkswagen. It is also designed to reduce suspicions in other divisions that the Volkswagen brand is favored in corporate decision-making.
Although Mr. Bernhard will join Volkswagen's management board next February, he will not take over responsibility for Volkswagen immediately. That appointment will come no later than Jan. 1, 2006 - a transitional period, executives said, that will allow him to become familiar with the far-flung company.
Mr. Pischetsrieder, who described Mr. Bernhard as "a respected expert on our industry and experienced automotive manager," may have a special affinity for his new colleague. Like Mr. Bernhard, he was recruited by Volkswagen after being jettisoned by another German carmaker - in his case, BMW, where he had led a disastrous investment in Rover in Britain.
Executives at Volkswagen played down suggestions that Mr. Bernhard might get the same brusque reception from workers in Wolfsburg that he got at Mercedes. They noted that his appointment was supported by two Volkswagen board members who represent the rank and file: Jürgen Peters, chairman of the union IG Metall, and Klaus Volkert, the head of the workers' council.
"Maybe he could have been more diplomatic about how he handled Mercedes," said one executive, who spoke on condition that he not be named. "But at the end of the day, everything turned out the way he said."
Mercedes recently signed a wage agreement with its German workers that cuts labor costs by 500 million euros ($616 million) a year. And DaimlerChrysler refused to bail out Mitsubishi Motors - a decision that Mr. Bernhard advocated in defiance of his boss and mentor, Mr. Schrempp.
Because many people in the industry believe Mr. Bernhard's troubles were as much political as personal, his reputation did not suffer much. German newspapers have reported that he was approached by General Motors, as well as companies outside the auto industry.
Last month, Mr. Bernhard became an executive in residence at the Columbia Business School, from which he earned an M.B.A. in 1988. A call to his office there was not returned.