New CEOs for two carmakers
Volkswagen and PSA Peugeot Citroen, Europe’s two biggest automakers, named new chief executives Tuesday as they seek to defend their home markets against rising Japanese rivals.
Volkswagen of Germany unexpectedly named Martin Winterkorn, head of Audi, the company’s most profitable division, to replace Bernd Pischetsrieder. Peugeot of France chose Christian Streiff, who last month resigned as head of plane maker Airbus, to succeed the retiring Jean-Martin Folz.
Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. of Japan highlighted diesel models at the Paris Motor Show in September as they aim to snatch a greater share of a segment that accounts for half of all car sales in Europe. The new models will add to pressure on Volkswagen and Peugeot, both of which are cutting jobs to shore up earnings.
Toyota, citing the need to bolster its diesel capabilities, announced Tuesday that it had taken a 5.9% stake in Isuzu Motors Ltd.
“The auto world is highly unstable right now,” said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. “It’s changing its basic business model, so naturally you would expect to see changes in the head offices as well.”
Shares of Volkswagen have risen 82% this year on investor optimism that Pischetsrieder’s cost cutting will boost profit at the namesake brand.
Nonetheless, Pischetsrieder, 58, will step down Dec. 31, Volkswagen said in a statement. Winterkorn, 59, has been head of the Audi luxury car unit since March 2002.
VW did not give a reason for the change, but Chairman Ferdinand Piech, who hired Pischetsrieder in 2000, this year raised questions about whether Pischetsrieder should be reappointed as CEO because of his clashes with labor unions over cutting as many as 20,000 jobs in Germany. The company’s supervisory board this year had unanimously extended Pischetsrieder’s contract through 2012.
“When Pischetsrieder’s contract came up for renewal in May, there was a feeling that there were a lot of camps, including the works council backed by Piech, that were trying to undermine him,” said Mark Fulthorpe, an analyst at CSM Worldwide in Byfleet, England.
At Peugeot, Europe’s No. 2 automaker, Streiff, 52, will inherit a company that is expected to report its fourth straight year of declining profit for 2006. He will take over in February after Folz turns 60 and retires.
Peugeot is reducing spending and cutting jobs as European sales slump. Its stock is down 4.2% this year.
Profit has fallen since 2002 as Folz has failed to reduce costs fast enough to counter falling demand. Third-quarter sales in Western Europe fell 11% from a year earlier. Folz announced a plan in September to cut 10,000 jobs and reduce capital spending by about 500 million euros ($639 million) annually.
“There are 80 million units of global automotive production capacity, versus only about 60 million units of demand from customers,” analyst Cole said. “That’s a huge imbalance that means the consumer is in charge and means the low-cost manufacturers have an advantage, especially Toyota.”
