VW chief keeps control in family more out of wisdom than nepotism

Usually, being a trained kindergarten teacher would not be a qualification for joining the supervisory board of a company the size of Volkswagen. But Ursula Piëch has had a helping hand in becoming one of the most powerful women in German business, writes David Crossland.

Usually, being a trained kindergarten teacher would not be considered a sufficient qualification for joining the supervisory board of a company the size of Volkswagen, the German car-making giant that employs half a million people.

But Ursula Piëch, 55, has had a helping hand in becoming one of the most powerful women in German business. She is married to Ferdinand Piëch, 74, VW's supervisory board chairman, who secured her nomination to the board last week. Her formal approval at the annual shareholders' meeting on April 19 is a formality.

Given all the controversy over the failure of supervisory boards to do their job properly in the run-up to the global financial crisis of 2008, this blatant act of nepotism would at first sight seem a reckless breach of corporate governance standards.

Mr Piëch, who has chaired VW's supervisory board for the past decade and was its chief executive for seven years before that, is running the global company as if it were a small family-owned business. The move to elevate his wife, in a transparent attempt to cement his legacy at VW, has raised eyebrows in Germany, but there has been scant criticism.

After all, Mr Piëch's business strategy is hard to fault. VW has just reported its highest-ever profit - an operating result of €11.3 billion (Dh54bn) for last year, up by €4.1bn from 2010. Unit sales jumped 14.7 per cent to 8.3 million vehicles, exceeding the 8 million level for the first time. The plan to reach sales of 10 million cars by 2018 could now be fulfilled much earlier.

While most other mass car makers in Europe are struggling, VW is riding high, and much of the credit is due to Mr Piëch. The grandson of Ferdinand Porsche, who founded the luxury car brand Porsche and developed the original VW Beetle, is on course to fulfil his dream of leading VW past General Motors to become the world's largest car maker.

With the help of his wife, he is determined to strengthen his position within the fractious Piëch-Porsche family, which controls 90 per cent of Porsche, which in turns owns just over 50 per cent of VW's voting shares. Ursula started out as a governess in the Piëch household and later became his wife and mother of three of his 12 children.

She has taken on the role of mediator in past family disputes and learnt the business by her husband's side. In 2010, Mr Piëch appointed her as deputy head in two foundations based in Austria that control his Porsche and VW shareholdings. When he dies, she will take over his interest, provided she does not remarry.

The secret of VW's success is that it has remained firmly under the control of an entrepreneur with a passion for cars and for the company he part-owns, whereas many other car industry leaders have focused too strongly on the financial and business sides of their operations.

Despite all the boardroom battles that have dogged VW under his leadership, his constant influence has mostly been stabilising and positive.

So even though VW shareholders may secretly be irked by the way Mr Piëch is turning VW into a hereditary monarchy, they will keep quiet and enjoy the dividends. The car maker is well placed to profit from the surge in global demand for cars in coming decades.

Whether Mrs Piëch will be able to maintain the momentum after Mr Piech passes away remains to be seen. But Germany has a history of widows taking control of companies built up by their husbands, and then doing well.

Friede Springer, who also started out as a nanny, is the widow of Axel Springer, the founder of the publishing company of that name, and is in charge of the flourishing group.

And Liz Mohn, a former dental assistant and telephone operator, is on the supervisory board of the Bertelsmann publishing house run by her late husband, Reinhard Mohn.

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