Bernd Pischetsrieder
1948–

Chief executive officer, Volkswagen

Nationality: German.

Born: February 15, 1948, in Munich, Germany.

Education: Technical University of Munich, diplomingenieur, 1972.

Family: Son of an insurance executive.

Career: Bayerische Motoren Werke (BMW), 1973–1975, production planning engineer; 1975–1977, head of operations control department; 1978–1981, head of work preparation division of the Dingolfing factory; BMW South Africa, 1982–1985, director of production, development, purchasing, and logistics; 1985–1987, head of quality assurance; 1987–1990, head of technical planning; 1990–1993, department member, board of management and production; 1993–1999, chairman of the board and CEO; Rover Group Holdings, 1994–1995, chairman of the board; Volkswagen, 2000–2003, chairman-elect; 2003–, chief executive officer.

Awards: Man of the Year, Automobile Industries , 1995.

Address: Volkswagen Aktiengesellschaft, P.O. Box 1864/1, 38436 Wolfsburg, Germany; http://www.volkswagenag.de.

■ Bernd Pischetsrieder, the only person ever to head two separate major car-manufacturing companies, became head of Volkswagen (VW) through a series of unexpected turns of events. He began his career with the luxury car maker Bayerische Motoren Werke (BMW) and spent the first 20 years of his career designing, building, and assuring the quality of premium automobiles aimed at a wealthy public. Pischetsrieder lost his position with BMW in 1999, after his attempt to acquire another automaker backfired. After he joined Volkswagen in 2000, the engineer-turned-manager began to change the image cultivated by decades of lowest-common-denominator "people's car" advertising. Pischetsrieder pushed for the introduction of luxury lines into a company that had made its reputation

building small cars for ordinary people. His new car models, some inherited from his predecessor Ferdinand Piech, included the Phaeton, which ranged in price up to $95,000.

Pischetsrieder's management style proved to be a marked contrast to that cultivated by his former boss—and the man who had hired him after BMW terminated his contract—the legendary Ferdinand Piech. Industry analysts were surprised by Pischetsrieder's early assertion of his independence from Piech. They had expected him to follow Piech's orders even after his predecessor had been moved up to chairman of the supervisory board of VW. Piech had been described as "autocratic," a man whom it was not wise to cross. Under Piech, VW had been a corporation driven from the top down. Executives who argued with Piech ended up in dead-end jobs or (in some cases) were summarily dismissed. Pischetsrieder, however, had "an almost zen like calming effect" on VW, according to Herbert Shuldiner in Chief Executive (March 2004). He tended to delegate assignments much more frequently than Piech, while freeing up his time to concentrate on major decisions.

START IN LUXURY CARS

Although his early education had emphasized modern languages, Pischetsrieder began his career as a mechanical engineer at BMW in 1973. He had family connections with the automotive industry—his grandfather had designed cars for the British automaker Austin, including the famous Mini—but his rapid rise at the German luxury car maker had little to do with his family's reputation. Only 20 years after he entered the company, he became chief executive officer. Soon, according to Christine Tierney and Katharine Schmidt, writing in BusinessWeek (February 19, 2001), "he helped turn the small Bavarian luxury car maker into one of the world's most advanced and flexible auto manufacturers."

Under Pischetsrieder, BMW expanded in many ways, most notably, through acquisitions. Early in 1994, less than a year after he became head of the luxury car maker, Pischetsrieder launched a takeover bid of the British manufacturer Rover Group for $1.3 billion. Rover, best known for its line of SUVs, seemed an attractive partner for BMW, since the German automaker had no SUVs in its catalogue. Although BMW successfully bought the British company, the acquisition was not a happy one. Rover marketed its cars to a lowest-commondenominator market, very different from the elite auto buyers cultivated by BMW. The two companies did not share a common culture, and their products used very different parts, meaning that manufacturing for the two brands had to be kept separate as well. The difficulties involved in trying to merge the two companies cost BMW huge amounts of money—$1 billion in 1998 alone—and in 1999 the BMW board asked Pischetsrieder to step down as CEO.

A GOOD FIT WITH VOLKSWAGEN

Enter Ferdinand Piech, chairman of Volkswagen, one of most established and best-known European automakers. Piech had earned a reputation as a hard taskmaster and a successful businessman soon after being appointed head of VW. He brought the German automaker out of a severe sales slump in the 1990s by introducing an updated version of VW's most famous car: the New Beetle. He also launched VW on a course that would lead the company to compete with luxury cars made by companies like Mercedes-Benz and Pischetsrieder's own BMW. Piech introduced luxury models into VW's catalogue, including the Phaeton, priced between $60,000 and $90,000, and the company's first SUV, the Touareg.

Piech had encountered Pischetsrieder while the latter was still heading BMW and the two of them were rivals bidding for control of the British luxury auto maker Rolls-Royce. Pischetsrieder outmaneuvered the VW chair for possession of Rolls-Royce, and he favorably impressed Piech at the same time. Piech ended up with the British Bentley brand name, several Italian luxury sports car builders (Bugatti and Lamborghini), and a desire to bring Pischetsrieder into VW as a coworker. The two were compatible; they both had engineering backgrounds and were interested in creating new models for existing markets.

Piech originally gave Pischetsrieder the assignment to bring VW's brand-name Seat under control. Pischetsrieder quickly came to understand that Seat and VW's other brands—Skoda and Audi, in addition to Bentley, Bugatti, and Lamborghini—needed to appeal to niche markets, in part because many models across the company were built on the same frameworks with the same parts. By allowing customers to distinguish between the different models, niche marketing would improve sales. Pischetsrieder used his position at Seat to show how this could be done. He upgraded Seat's image, changing it from a manufacturer of relatively sedate cars into a company that made primarily sporty, performance-oriented automobiles. When Piech stepped down from the leadership of the company in 2002, Pischetsrieder filled his newly vacated shoes. The former BMW head had thus become the only person to have headed two different German car companies.

The new VW head was faced with a number of difficult decisions that came with Piech's legacy. Piech had been a very top-down manager; Pischetsrieder preferred to delegate and work through subordinates. He also put plans into effect to preserve the automaker from the cyclical market that has plagued the industry for decades. One way of doing this was to expand VW's product line to appeal to other markets. Introducing the Touareg, for example, gave the German company an inroad into the lucrative SUV market in the United States, where the light trucks accounted for more than half of all automotive sales. Other models did not fare as well. A new version of VW's classic Passat, boasting an innovative engine known as the W8, sold well below its expected levels in the United States, despite the fact that industry journals compared its handling to that of the much more expensive Mercedes.

THE PEOPLE'S CARMAKER

By supporting the move into luxury vehicles, Pischetsrieder was fighting VW's long history as a people's car manufacturer. The company was created in 1937 to build a vehicle originally designed by Ferdinand Porsche. That car was, as the company's name implied, a functional car intended for ordinary people. During World War II the company factories worked to produce arms and armor for the German war machine. The Nazis provided VW with slave labor from forced-labor camps, concentration camps, and prisoner-of-war camps. About 20,000 such laborers worked for VW during the war. Late in Piech's term in office, VW dealt with these unsavory aspects of its past by establishing a fund for survivors of the camps. In 1999 the company became a founding member of Germany's national remembrance group that dealt with the problem of forced labor during the war. By 2001, according to the company's Web site, the company's own fund had made payments to more than two thousand people. VW also created a memorial for their unwilling workers at its historic Wolfsburg factory, where many of the abuses had taken place.

The end of the war marked a new era for Volkswagen, changing the way it did business and allowing it to expand its operations beyond Germany and Europe. Exporting Volkswagens took place under Dutch oversight in 1949. That same year the British military government of Germany transferred trusteeship of VW to the federal government of West Germany. The German state of Lower Saxony took over administration of the company at the same time, ending up with 18 percent ownership of VW's shares. That state ownership influenced the development of VW's corporate culture, in part because the government was more interested in protecting jobs than in improving profitability and in part because public ownership prevented a hostile takeover of the company—giving the automaker a security that many other German companies did not have. Volkswagen was partially privatized in 1960, when 60 percent of its shares were offered for sale to the public. The federal and state governments together retained 40 percent ownership in the corporation.

During the 1950s and the 1960s VW began to expand its production overseas, beginning with the creation of Volkswagen of Canada in 1952. In 1955 the corporation added plants in Brazil and the United States; in 1956 it entered South Africa, and in January of 1964 it began making both parts and finished cars in Mexico. Volkswagen also acquired several independent European firms in the 1960s. Audi, formerly part of Daimler-Benz, was purchased in 1965, and VW broke into the Swedish market in 1968 when the subsidiary Svenska Volkswagen AB opened its doors. Early in 1970 Volkswagen entered the rental-car business by purchasing Selbstfahrer Union, the ancestor of the modern Eurocar Group, which became a wholly owned subsidiary of VW in 2000. In 1982 VW entered the Chinese market with a factory in Shanghai. Coowned with the Chinese government, the Shanghai plant became the largest passenger-car factory in China.

VW passed a milestone in 1972 when the legendary Beetle became the most-produced car model of all time, surpassing Henry Ford's Model T. The following year production of the Beetle stopped at most facilities, and the model was replaced by the subcompact hatchback sedan known as the Golf in January 1974. (The Beetle's record was broken by the Golf in June of 2002.) In 1973 Volkswagen also introduced the Passat, the first of the standardized-component cars whose parts could be used in a variety of models. The Jetta was introduced several years later. These three models basically defined VW's car product line for most of the next quarter-century. While changes were made to the cars' power trains and other interior systems in what were known as "generational" upgrades, the basic design of the cars remained the same. It was this cult of sameness that Piech and Pischetsrieder tried to break with the introduction of the New Beetle, the establishment of a luxury-car line, and the acquisition of the Bentley, Lamborghini, and Bugatti model names.

INTO THE 21ST CENTURY

By the time Pischetsrieder took over the reins from Piech at the beginning of the 21st century, Volkswagen had become the fifth-largest automaker in the world. At the same time, VW had become a pioneer in sustainable management and other environmental and worker-friendly practices. It created and enforced common environmental standards on all four continents where its cars were built, set global standards for job security and employee salaries, established flex-time options for all its employees, and changed management standards across continents so that it would not have to fire employees during economic downturns. The company was also listed on three different stock market indexes of sustainable growth, and, according to the company's Web site, it led the entire automotive industry on one of them, the Dow Jones Sustainability Index STOXX.

When he came to lead VW, Pischetsrieder declared that he had several objectives in mind. He wanted to make the company less Eurocentric, to change its corporate culture to make the company more transparent to investors, and to make its product line more appealing to non-Europeans. He also wanted to improve the company's profitability and increase sales worldwide. In meeting these objectives, Pischetsrieder was partly successful. China, which had become VW's largest market outside Germany, saw sales increase by 43 percent in 2003 alone, but sales dropped at the same time in Germany, Brazil, an United States. He regrouped the VW family of models into a traditional model group (VW) and a sporty model group (Audi) and made individual brands responsible for developing marketing strategies to keep from competing with one another. He also introduced fiscal transparency into VW management to make it more attractive to financial markets—a move that Piech and previous heads had not felt pressed to make, because VW was partly owned by the German state and federal governments. "Analysts say VW has become more communicative, holding regular conference calls," said Janet Guyon in Fortune magazine (October 13, 2003), "and its financial statements are less opaque."

Pischetsrieder's future influence on VW's corporate culture, however, remained unclear. Piech had gotten his way, stated Gail Edmondson in BusinessWeek (May 12, 2003), largely through ignoring middle management and bullying anyone who dared to disagree with him. Pischetsrieder's less autocratic management style allowed "VW's traditional civil service "like bureaucracy" to reassert itself. One result was a proliferation of committees to make and review decisions and thereby delay or bury the changes Pischetsrieder needed to make. VW's mixed legacy as a state-owned corporation continued to dog the number-five automaker into the 21st century.

See also entries on Bayerische Motoren Werke A.G. and Volkswagen Aktiengesellschaft in International Directory of Company Histories .

sources for further information

"BMW Ex-Chairman to Join Board of Volkswagen AG," Wall Street Journal , December 16, 1999.

"Business: The Curse of Pischetsrieder; Volkswagen," Economist , February 28, 2004, p. 75.

Edmondson, Gail, "Volkswagen Needs a Jump: Does Its Secretive Boss Have a Strategy up His Sleeve?" BusinessWeek , May 12, 2003, p. 48.

Guyon, Janet, "Getting the Bugs out at Volkswagen," Fortune , October 13, 2003, p. 145.

Kelly, Kevin, "VW's Big Gamble," Ward's Auto World , May 2002, p. 22.

Miller, Scott, "Incoming VW Chief to Lead Revamping on a Broad Scale," Wall Street Journal , November 26, 2001.

——, "New VW Chief Assumes Post at Key Time—Stronger Rivals and Shadow of Piech May Make Life Hard for Pischetsrieder," Wall Street Journal , September 7, 2001.

——, "Volkswagen to Give More Weight to Return-on-Investment Measure," Wall Street Journal , January 28, 2002.

——, "VW's Chairman-Elect Signals New Route—Pischetsrieder Hints Strategy toward Truck Business, Auto Groups May Change," Wall Street Journal , September 11, 2001.

Shuldiner, Herbert, "VW and Luxury?" Chief Executive , March 2004, p. 43.

Tierney, Christine, and Katharine Schmidt, "Will This Man Drive Volkswagen? A Onetime BMW Boss Is Emerging as a Likely Successor to Piech," BusinessWeek , February 19, 2001, p. 53.

—Kenneth R. Shepherd