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Audi CEO's Dieselgate arrest threatens fragile truce among VW stakeholders

FRANKFURT — The arrest and detention of Audi's chief executive forces Volkswagen Group's competing stakeholders to renegotiate the delicate balance of power that has helped keep Audi CEO Rupert Stadler in office. Volkswagen's directors are discussing how to run Audi, its most profitable division, following the arrest of the brand's long-time boss on Monday as part of Germany's investigations into the carmaker's emissions cheating scandal. The supervisory board of Audi, meanwhile, has suspended Stadler and appointed Dutchman Bram Schot as an interim replacement, a source familiar with the matter said on Tuesday. Schot joined the Volkswagen Group in 2011 after having worked as president and CEO of Mercedes-Benz Italia. He has been Audi's board member for sales and marketing since last September. The discussions risk reigniting tensions among VW's controlling Piech and Porsche families, its powerful labor representatives and its home region of Lower Saxony. VW has insisted the development of illegal software, also known as "defeat devices," installed in millions of cars was the work of low-level employees, and that no management board members were involved. U.S. prosecutors have challenged this by indicting VW's former chief executive Martin Winterkorn. Stadler's arrest raises further questions. Audi and VW said on Monday that Stadler was presumed innocent unless proved otherwise. Munich prosecutors detained Stadler to prevent him from obstructing a probe into Audi's emissions cheating, they said on Monday. Stadler is being investigated for suspected fraud and false advertising. Here are the main factors deciding the fate of Audi. Background: Audi's role in Dieselgate Volkswagen Group was plunged into crisis in 2015 after U.S. regulators found Europe's biggest carmaker had equipped cars with software to cheat emissions tests on diesel engines. The technique of using software to detect a pollution test procedure, and to increase the effectiveness of emissions filters to mask pollution levels only during tests, was first developed at Audi. "In designing the defeat device, VW engineers borrowed the original concept of the dual-mode, emissions cycle-beating software from Audi," VW said in its plea agreement with U.S. authorities in January 2017, in which the company agreed to pay a $4.3 billion fine to reach a settlement with U.S. regulators.

VW's Winterkorn tells 20,000 staffers of big cost-cutting plans

During a gathering of 20,000 Volkswagen Group employees at company headquarters in Wolfsburg, Germany on Wednesday, CEO Martin Winterkorn dropped a bombshell. The boss stated that the automaker isn't operating efficiently enough and admitted the company needs to radically start cutting back to raise its profit margins. To right the ship, Winterkorn has proposed killing off less profitable models and spending less on research and development.
According to Reuters, Winterkorn wants to raise the VW brand's profit margin from about 2.9 percent in 2013 to a target of 6 percent. To make that possible, his plan amounts to increasing cost cutting until Volkswagen reaches about 5 billion euros ($6.7 billion) per year to get things back in order. "Over the short-term, we urgently need more efficiency and higher profit," the CEO said during his speech, according to Reuters.
However, Winterkorn can't make these decisions unilaterally. Volkswagen's works council also has a seat on the supervisory board to represent laborers, and it isn't likely to take the proposed cuts sitting down.

2015 will be the biggest year ever for cars at CES

Like the SEMA Show, major automakers are paying increasing attention to the CES, with 2015 expected to be one of the most auto focused yet. Ford, Volkswagen, Toyota, General Motors, Hyundai, Mazda, Audi, BMW and Fiat Chrysler Automobiles will all be in attendance when CES 2015 kicks off next week, taking up a record-breaking 165,000 square feet of space at the Las Vegas Convention Center. "We've come a long way from a single car on a carpet," Ford's Alan Hall told Bloomberg. Unlike SEMA, or a more traditional auto show, like the upcoming festivities in Detroit, CES doesn't necessarily focus on entire cars or the way they perform, but on the way our technology will interact with vehicles, and in how those vehicles will deliver information to drivers. "CES has become a major launch point for a lot of the big automakers," IHS tech analyst Mark Boyadjis told Bloomberg. "CES is a way for them to get on a global stage for technology." As for what kind of wares automakers will trot out in Las Vegas, we already know that BMW will show off an autonomous i3 electric car that can navigate its way through a multistory car park and can be hailed via a smartwatch app. According to Bloomberg, Hyundai will show off its own smartwatch app for the Genesis sedan, while Audi and Mercedes-Benz will show off autonomous vehicles next week. Automakers won't be the only companies looking to capitalize on CES. Tech firms, like chipmaker Nvidia, are becoming increasingly involved in the automotive game and will be in town showing their wares off to OEMs. "Two years ago, our booth would have been filled with PCs and people playing video games," Danny Shapiro, Nvidia's senior director for automotive business, told Bloomberg. "This year we made a strategic decision to shift the focus of the booth on automotive and de-prioritize some of the other things." Needless to say, you can expect to see a lot of news out of Las Vegas come next week. Stay tuned. News Source: BloombergImage Credit: Julie Jacobson / AP CES Audi BMW Chrysler Fiat Ford GM Hyundai Mazda Toyota Volkswagen Technology CES 2015