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Piech family tightens control at Volkswagen

By Rashmi Kumar

Germany’s Volkswagen needs to ensure there is enough external influence to steer the family business through tough times, following a move by the Piech family to rein in control of the carmaker.

That’s according to Albrecht Enders, professor of strategy and innovation at Swiss-based business school IMD, who was commenting after Volkswagen proposed Ursula Piech, wife of chairman Ferdinand Piech, join the automaker's board.

“There is nothing wrong with wanting to preserve family continuity, so long as the Piech family also gets non-family members to navigate the business during its difficult periods,” he told CampdenFB.

In a letter dated 11 March, the company invited Ursula to stand for nomination to the supervisory board.

Her addition will increase the number of family members on the board to five – there are currently a total of 20 members on the supervisory board.

Martin Winterkorn, chairman of the management board, reckons Ursula is “very competent and thinks like an entrepreneur”, a spokesman for VW told CampdenFB.

According to Enders, increasing the family's presence at VW sends a message about “who is in charge of the business”.

“What would be interesting to watch out for is the kind of role Ursula would play in the future, and whether she would hold a representative role in running the board.”

Wolfsburg-based VW, which is Europe’s biggest carmaker by sales, also confirmed its results for 2011 this week. Revenues increased by 25.6% to €159.3 billion, while operating profits rose to €11.3 billion, up from €4.1 billion in 2010, the company said in a statement on 12 March.

Despite strong results under Piech’s supervision, his wife's inclusion to the board will cause outsiders to think twice about company decisions, reckons Enders.

"Family businesses have to avoid the impression that they are creating a wall around their businesses, making it impossible for outside perspectives to come in. Otherwise those wanting to invest in the company would have second thoughts before they take a leap into the business," he said.

The Piech family also owns a majority stake in Porsche, which is controlled by a different branch of the same family. Both VW and Porsche are headed by grandsons of Ferdinand Porsche, who founded the eponymous carmaker in the 1930s.

In 2008, Porsche tried to take over VW but its attempt failed, leading to the group accumulating debts of around €10 billion.

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