Can Volkswagen AG’s New CEO Change Its Culture?

Volkswagen AG’s (ETR:VOW) new CEO outlined an extensive reorganisation plan.

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WASHINGTON, DC — At a press conference held on Thursday to give an update on the company’s emissions scandal, Volkswagen‘s new CEO outlined an extensive reorganization plan that will seek to make the company more agile and collaborative.

But, he said, the reorganization won’t work without a new mind-set on the part of VW’s employees. It’s strongly reminiscent of a major shift undertaken by one of VW’s rivals, the Ford Motor Company, not long ago.

Mueller: VW needs a dramatic shift in culture
“We can have the best people, and a great organization, but we can do nothing without the right attitude and mentality,” Mueller said on Thursday.

What does that mean? It means more open discussions, closer cooperation, and a willingness to allow mistakes, he said. And it also means giving more authority to people at lower levels of the organization.

These are all seismic changes for Volkswagen, which for years was run under the autocratic, detail-obsessed leadership of now-retired chairman Ferdinand Piech. Piech, a member of the Porsche family that owns a controlling stake in VW, was credited with building the company into one of the world’s largest automakers. But at the same time, he apparently fostered a corporate culture that did not tolerate mistakes or failures.

That may have been a factor in the emissions scandal. It’s easy to imagine a group of engineers, under intense pressure to deliver a “clean” diesel at a certain cost but unable to find a way to meet all of the program’s goals, deciding to embed a cheat deep in the engine’s software. Perhaps that decision saved their jobs at the time, but at a steep cost to the company.

Mueller wants to change VW’s culture so a situation like that can’t happen again. It’s a shift that’s strongly reminiscent of one initiated by another newly appointed automotive CEO back in 2006, Ford’s Alan Mulally.

Such a shift is possible: Ford did it
Ford was a notoriously difficult place to work when Mulally arrived in 2006. Executives were in fierce competition with one another, and any admission of a problem was seen as career suicide. It wasn’t quite the same as VW’s culture, but it was similar in this sense: Everyone was under pressure to succeed, or else.

That changed, famously, when a Ford executive admitted in a big meeting that a new-vehicle program wasn’t on track and that he needed help. Instead of chewing him out, Mulally applauded. (By the way, it was hardly career suicide for the executive in question: Mark Fields succeeded Mullally as CEO).

Fostering a collaborative, mistake-tolerant approach was one part of “One Ford,” the comprehensive plan created by Mulally and Fields to transform the company. It’s credited with not just rescuing Ford from dire straits, but with making the Blue Oval a solidly profitable and competitive company. (It’s also considered a pretty nice place to work these days — an important factor in attracting top talent.)

Unlike Ford in 2006, VW isn’t on the brink of financial ruin. But it’s facing a big crisis, and Mueller apparently sees it as an opportunity to transform the company for the better.

Can Mueller be VW’s Mulally?
VW’s problems are different from what Mulally faced when he arrived at Ford. But the challenge is similar: How does a CEO go about transforming a company’s culture?

Mulally did it by consistently setting a good example and by making a point of praising and rewarding others’ efforts to get with the program. Executives who didn’t buy into the new collaborative approach were dismissed; those who did now play key roles on Ford’s leadership team. In time, the approach became the standard throughout the company.

Thursday’s press conference was our first look at Mueller since he became VW’s CEO. He was impressive: Unlike past VW leaders (and unlike VW chairman Hans Dieter Poetsch, who opened the press conference), who were imposing and brusque, Mueller gives the impression of being informal, collaborative, approachable.

He’ll need to lead VW by example to achieve the cultural change that he wants to see. It remains to be seen whether the powers that really control VW — the unions on one hand, the Porsche family on the other — will give him room to drive these changes.

But he seems like he might be the kind of leader who could pull this off. If so, VW’s future could look very bright. We’ll be watching.

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The original author of this article, John Rosevear owns shares of Ford. The Motley Fool UK has no position in any of the shares mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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