How Two Years of Crisis Has Tested Volkswagen's CEO

By William Boston Features Dow Jones Newswires

WOLFSBURG, Germany -- Almost two years after U.S. authorities said Volkswagen AG had been cheating for a decade on emissions tests, Chief Executive Matthias Müller urges workers at a town-hall meeting to be ready for rapid shifts in the auto industry.

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"But how can you make sure that the leading executives change?" asks one of the 300-odd employees attending the event.

"You're asking the hardest question," Mr. Müller responds.

Since becoming CEO in September 2015, the former Porsche boss estimates he has spent as much time managing the emissions-cheating crisis as managing the business.

In the U.S. alone, the affair has cost the company nearly $25 billion in fines, penalties and compensation, and litigation in other countries is expected to drag on for a decade.

The company pleaded guilty to criminal charges in the matter, and two Volkswagen employees in the U.S. have pleaded guilty to conspiracy to defraud the U.S. government and to violate U.S. environmental law. One has been sentenced to just over three years in prison, and another awaits sentencing.

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In an interview, Mr. Müller, 64 years old, talked about managing the emissions crisis, new competition, and shifting political winds.

Edited excerpts:

The Wall Street Journal: It's been two years since the allegations were made public. How would you grade VW's progress so far?

Mr. Müller: There is still litigation that hasn't been resolved yet. We've reach agreements with the U.S. We have agreements with England, South Korea, the Germans and Europeans. Overall, I think we managed the process well.

WSJ: When it comes to changing VW's corporate culture, how far have you come?

Mr. Müller: That's very hard to quantify. We now have board responsibility for legal [compliance] and integrity. We've changed a lot of processes, not just technical but also organizational. I'd like to see an acceleration of the pace of change because such a large organization is sluggish.

WSJ: Before the scandal, your name was discussed for the CEO's job. What was your thought process as you were asked to leave Porsche and take up the reins at VW during the company's worst crisis?

Mr. Müller: The whole thing happened within 48 hours. But what do you do? You have to decide, and the choice was to remain in my comfort zone at Porsche and enjoy the next five years or try to help this company.

WSJ: Given how many people were involved in the conspiracy, how have you come to a place where you can trust your executives and employees?

Mr. Müller: We could do a better job, but there is really only one answer: We have to engage people more in dialogue. We've made changes. If there is a new board-level position, for example, now there is a compliance check. This way we can be sure that a candidate is above all suspicion.

WSJ: You are a consummate insider, but your job requires that you approach VW as an outsider. How do you do that?

Mr. Müller: I'd like to presume that I am a person of integrity. [From my time at] Porsche, I know the company very well. On the other hand, I have enough distance to resolve problems objectively. Revolution carries the big risk that the company goes to the dogs. Evolutionary change may take longer, but the risk of failure is smaller.

WSJ: How do you ensure that your 150 or so top-level executives aren't constantly suspected of wrongdoing?

Mr. Müller: This atmosphere of suspicion is something we are going to have to live with for a while. As long as these [investigations] haven't been cleared up, then there is a kind of blanket suspicion, and the public thinks the entire company is criminal. The company is not criminal as a whole. Parts of the company engaged in criminal behavior.

WSJ: Volkswagen is now taking on tech giants. Why does a global auto maker have to run ride-hailing or car-sharing businesses?

Mr. Müller: We offer these services to avoid the risk of becoming a Tier 1 supplier for Google and Uber and others. The demand for mobility is changing; many people don't want to buy their own car. We still want them to come to us. If we lose the contact to the customer, that would be the beginning of the end.

WSJ: With Brexit and "America first," is globalization at risk?

Mr. Müller: The prosperity that we enjoy, at least in the developed countries, is a result of globalization. The challenge is to ensure that the less developed countries also benefit. Going backwards into isolation, which is the intention of Brexit, is certainly the wrong way to go.

WSJ: Fast forward to the end of your contract in 2020. If you were to leave then, what's the state of the company your successor would inherit?

Mr. Müller: It should be a company that has largely dealt with the diesel crisis [the scandal involved evasion of emissions requirements for diesel-powered vehicles]. There will still be litigation; that will probably take 10 years or so. The operating issues should be dealt with. It should be a very successful company in a position to secure its core workforce and play a leading role in the new mobility field.

Write to William Boston at william.boston@wsj.com

(END) Dow Jones Newswires

September 12, 2017 05:44 ET (09:44 GMT)