On Monday, it was reported that Volkswagen (DE:VOWG_p) will undergo a major corporate restructuring. In an effort to boost the company’s profits, VW will be changed into a decentralized system with 4 holding companies.
The top management at the largest car maker in Europe will now cede power and will set up these four holding companies. One will be headed by Audi, the second will be headed by Porsche, the third will be for mass market car brands, and the fourth will be for trucks.
Herbert Diess, the former BMW (DE:BMWG) manager, is likely to run the mass markets brands holding company from the 1st of July. Their focus will be on brands such as VW, Seat passenger cars and Skoda.
News and details of the company’s restructuring was released in Handelsblatt newspaper on Monday and VW company sources were cited. To date, VW has declined to comment.
Over the summer, the top players at the car making giant will draw up the new company structure which is also expected to start a reshuffle of management. Added to this, it has been said that Christian Klingler, the sales chief, might lose his job.
This major move by VW is being done in order to boost regional sales operations and to remove any negative elements which have been plaguing in the company in recent times.
In April this year, we saw a showdown between Chief Executive Martin Winterkorn and Ferdinand Piech, the former chairman.
As a result, Piech left VW which was a surprise to all.
In May, the overall sales at VW declined for the 2nd month in a row. This marked the first time this has happened in the last five and a half years and it is believed that these poor numbers were the catalyst behind the restructuring.
Interestingly, analysts have mixed feelings regarding the effectiveness of splitting the company into 4 holding companies.
According to Arndt Ellinghorst, an analyst at Evercore ISI, by simply reorganizing a brand, this will not prompt additional sales nor will it add any value. Meanwhile, Marc-Rene Tonn, an analyst at M.M. Warburg, strongly believes that by realigning the brands at VW, it is likely to speed up decision making and would clarify responsibilities which will enable VW to respond quicker to the every changing market parameters.
According to a source at VW, Winterkorn already met with senior members of the supervisory board on Friday and he is hoping to finalize the matter before the summer break for top management from the 3rd to the 21st of August.
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