First Airbus, Now Volkswagen

I know it's not just a German or even European thing, but this morning we have yet another example of our friends from across the pond promoting a leader bent on creating excellence and then effectively firing him when his solutions create discomfort.

Last October we told you about Airbus.  Christan Streiff was hired to straighten out the disastrous manufacturing and design processes that had led to costly delays on the A380.  He took the job under the condition that in 100 days he would lay out the plan and the Airbus board could either back it or fire him.  He delivered his plan on schedule, and it included implementing lean and shifting production to plants that demonstrated specific competencies.  That was a bit much for the German and French owners and, you guessed it, he was fired.  Louis Gallois took over, a French civil service bureaucrat whose manufacturing experience consists solely of learning to spell "usine" in grade school. No wonder minority investors are bailing.

The Wall Street Journal this morning has an article titled Volkswagen Restructuring Drive Starts to Sputter telling us that VW chief executive Wolfgang Bernhard is "poised to leave."  Basically the company's largest shareholder, Ferdinand Piech, is planning a management shakeup that will eliminate Mr. Bernhard.  The VW "supervisory board" will be reorganized the into direct functional oversight positions similar to what exists at Porsche... where Mr. Piech is also a board member and coincidentally the grandson of Ferdinand Porsche himself.  Porsche itself now owns 27% of VW.  It will be a neat trick to try to apply the narrow focus supervisory oversight structure of a company with a single brand making only 100,000 cars a year to a company with brands ranging from VW to Lamborghini and Bentley with 340,000 people making five million vehicles a year.

What evils of Mr. Berhand prompted this massive disruption and the probable loss of an experienced exec with guts?  He decided to pull the underwhelming high-end Phaeton from the U.S. market, coincidentally the vehicle championed by Mr. Piech when he was CEO during the 1990's.  He has worked to break down the barriers between the various VW brands to improve design commonality and consistency, thereby reducing procurement and supply chain costs. 

"The most critical thing in this company is to develop vehicles across the functional borders," a person familiar with Mr. Bernhard's thinking said.  "The teams are now working and functioning.  If you tear these teams apart, the restructuring process will slow down and come to a crunching halt."

He has done the same between functional silos in single brands, such as

He shaved one new model's cost by more than $2,000 per vehicle by ordering hundreds of engineers, production experts, designers and sales-and-marketing employees to report to an auditorium a few miles from Volkswagen headquarters.  They were ordered to stay there until they had figured out how to develop the vehicle on time and within budget.  He has since expanded the practice to cover all new models in development.

Call is a "monster kaizen."  With that number of people and a rather dictatorial approach, it probably wasn't optimal from a lean standpoint.  But it rapidly broke down functional barriers and has sparked a culture change.

Mr. Bernhard has overwhelming confidence by the minority shareholders, to the extent that VW's market value rose $1.25 billion the day he was recruited.  Many investors consider him critical to the company's attempts to improve profitability.

But once again, when the going looks tough, the tough get thrown out the window.