New Brooms Sweep Away Old Cultures at Struggling Giants

Strategic Insights -

As the US Environmental Protection Agency caught Volkswagen cheating in emissions tests in September, the German carmaker made sweeping changes to its senior management. Matthias Muller, a 62-year-old former Porsche boss, took over as VW Group Chief Executive, tasked with leading the company out of its biggest scandal in history. Muller, who has been with the VW group for almost 40 years, faces the most challenging job of his career, with billions of dollars in fines and class-action lawsuits hanging over the company.

At Toshiba, Masashi Muromachi, the 65-year-old CEO, is under pressure to deliver a V-shaped recovery after the company inflated $1.3bn in net profits over seven years. Muromachi has vowed to exit the struggling television and laptop businesses, which were at the center of the accounting scandal, and has pledged to cut 10,000 jobs. Analysts say Toshiba must fully exit these businesses to signal a break from the past and restore its reputation among global investors.

In Sweden, a corporate jet scandal at Industrivarden led to a massive shake-up, with former private equity partner Helena Stjernholm appointed as chief executive. Stjernholm faces a daunting task in stabilizing the company's controlling stakes in various businesses, including Handelsbanken, Ericsson, Volvo, and SCA, while dealing with cross-holdings and the power dynamic between the chairman and chief executives of these companies.

Key Takeaways:

  • Matthias Muller, the new VW Group Chief Executive, faces the most challenging job in the company's history, with billions of dollars in fines and class-action lawsuits hanging over the company.
  • Muller must quickly reach agreement with US authorities on how to fix cars affected by the emissions test rigging and restore customer trust in a difficult market for VW.
  • Toshiba CEO Masashi Muromachi pledged to exit the struggling television and laptop businesses, cut 10,000 jobs, and achieve a V-shaped recovery in the next financial year.
  • Muromachi must shed his image as a provisional boss and prove himself as a leader capable of turning around the company's fortunes.
  • Industrivarden CEO Helena Stjernholm faces a daunting task in stabilizing the company's controlling stakes in various businesses while dealing with cross-holdings and the power dynamic between the chairman and chief executives of these companies.
  • Toshiba must fully exit its consumer electronics businesses, including television and laptop manufacturing, to signal a break from the past and restore its reputation among global investors.
  • The future of Industrivarden's stake in Ericsson and potential divestment of these assets are key considerations for Stjernholm.
  • The power dynamic between the chairman and chief executives of Industrivarden's controlled companies will be a key challenge for Stjernholm as she navigates the complex web of relationships between these entities.

Statistics:

  • $1.3bn: The amount of net profits inflated by Toshiba over seven years.
  • 10,000: The number of jobs Toshiba has pledged to cut as part of its restructuring efforts.
  • 3%: The current operating margin of the core VW car marque.
  • 62: The age of Matthias Muller, the new VW Group Chief Executive.
  • 40 years: The amount of time Muller has spent with the VW group.
  • 65: The age of Masashi Muromachi, the Toshiba CEO.
  • $2bn: The amount of restructuring costs Toshiba will shoulder as part of its overhaul.
  • 140: The number of years in Toshiba's history marking the company's biggest crisis.

Sources:

  • FT Reporters (No date)

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  • "Volkswagen group chief executive Matthias Muller has 'the most challenging job any VW CEO could have faced since the creation of the company'". JPMorgan analyst Jose Asumendi

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  • "The test of fire will be in North America". JPMorgan analyst Jose Asumendi

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  • "My biggest responsibility is to achieve a V-shaped recovery in the next financial year." Toshiba CEO Masashi Muromachi

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  • "This should be the priority because this was the epicentre of the improper accounting." JPMorgan analyst Hisashi Moriyama

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  • "If Toshiba can fully exit from these businesses, it will signal the management's break from the past. It's not just about improving its earnings, but it's necessary to restore its reputation so global investors can consider investing again." JPMorgan analyst Hisashi Moriyama

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  • "They could have taken action a long time ago. How can investors believe them now?" Mitsushige Akino, chief fund manager at Tokyo-based Ichiyoshi Investment Management

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  • "The firm would be left with its energy business and flash memory chips - which do not necessarily have a rosy outlook." FT Reporters

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  • "Certain cross-holdings such as Handelsbanken's stake in SCA and SCA's in Industrivarden have been unwound." FT Reporters

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  • "Investors argue the cross-holdings muddy the lines of responsibility between Industrivarden and Handelsbanken." FT Reporters

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  • "Bankers also expect her to look at other parts of Industrivarden's portfolio, with its stake in Ericsson seen as particularly susceptible to being sold." FT Reporters