June 15, 2015 / 2:53 PM / 2 years ago

Volkswagen to be revamped into four holding companies: sources

BERLIN/FRANKFURT (Reuters) - Volkswagen’s (VOWG_p.DE) corporate structure will be overhauled into a decentralized system with four holding companies in a bid to boost profits at Europe’s largest carmarker, three VW sources said on Monday.

A Volkswagen GTI car is seen during a presentation at the 16th Shanghai International Automobile Industry Exhibition in Shanghai, April 21, 2015. REUTERS/Aly Song

VW’s top management may cede power by setting up the holding companies: one for mass market car brands, one for trucks and two divisions for premium brands, with one to be headed by Audi and other by Porsche, three company sources told Reuters.

Former BMW (BMWG.DE) manager Herbert Diess may run the holding company for mass market brands, which will include VW, Skoda and Seat passenger cars, when he takes office on July 1, the sources said.

The decentralized structure was outlined by newspaper Handelsblatt on Monday, citing company sources.

VW declined to comment.

The new company structure, to be drawn up by top players at VW over the summer, may spark a wider reshuffle of managers that could cause sales chief Christian Klingler to lose his job, sources said last week.

The Wolfsburg-based automaker wants to boost regional sales operations and become more nimble.

The company’s trouble spots were laid bare by the April showdown between former chairman Ferdinand Piech and Chief Executive Martin Winterkorn which led to the surprise exit of VW’s patriarch.

VW’s overall sales fell for a second month in row for the first time in about five and a half years in May, reinforcing the need for structural changes at the German behemoth.

Some analysts said splitting the structure into four holding companies would have little impact while others said it could make the manufacturing giant more nimble.

“Reorganizing brands doesn’t sell a single additional product or generate any value per se,” Evercore ISI analyst Arndt Ellinghorst said.

VW brand deliveries have started to shrink in China after years of steady growth in the world’s largest auto market and analysts believe VW has failed to address product gaps there, as it has failed to do in the United States and Brazil as well.

“VW has in the past often responded slowly to market parameters which are changing quickly,” M.M. Warburg analyst Marc-Rene Tonn said.

“Realigning brands in that way makes good sense, it would clarify responsibilities and speed up decision-making.”

Winterkorn met with senior members of the supervisory board last Friday to discuss the development of the new structure. The CEO is seeking to make progress on the matter before top management’s Aug. 3-21 summer break, one source said.

Reporting by Andreas Cremer, Jan Schwartz and Edward Taylor; editing by David Clarke

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