CB analysis: Are two heads better than one?

TOMORROW, A NEW managing director, Florian Steiner (left), starts work at Volkswagen Group Singapore (VGS). The current managing director, Ricky Tay (right), will stay on as… managing director.

Along with the news that Volkswagen cars will come with a five-year warranty from April 1st onwards, the brand’s local importer and retailer announced at its 10th anniversary party that it is now in the unique position of having two bosses.

Both men have different operating areas to look after. Steiner, who is from Austria, is in charge of such “back end” matters as finance, information technology, human resources and administration. Tay, a Singaporean, will run front-of-the-house areas such as retail, marketing, aftersales service and customer relations. He is, in short, the man with whom customers will interact, and vice versa.

Ostensibly, both men will run the company together. And both men will report to Alain Favey, the chief executive of an Austrian company called Porsche Holdings Salzburg (PHS). That’s significant because from tomorrow, VGS reports to Austria, and not Germany.

PHS was founded by Ferdinand Porsche’s two children, and got its start importing VW Beetles in 1949. One-in-three Austrians who buy a new car get it from the company today. It is Europe’s biggest car retailer and wholesaler, also sells spare parts, and just to leave no stone unturned, markets IT services to car dealerships.

PHS operates in 22 European countries, but recently the company has made an outward push. It has set up shop in South America, China and, since last year, Malaysia.  It is now here, and the fact that VGS now reports to PHS seems to insert an extra layer between the business here and the head office in Germany. Not so, says Favey. PHS is simply another arm of Volkswagen, he points out, and has been a wholly-owned unit since 2011.

Indeed, VGS will continue to buy its cars from Volkswagen, not from PHS, and pay Germany, not Austria. Nor is the twin-MD structure a unique one here. PHS inserts its own man to work alongside a local boss in every country in which it operates, says Favey.

But why operate with this arrangement and more importantly, what’s in it for the customer?

The new structure should speed up decision-making, says Tay. He and Steiner form the board of directors for VGS, which halves the number of directors it used to have. Of the four men who used to be on its board, only Tay lives in Singapore.

Steiner and his family are based here, which means decisions that require board approval can now be taken more or less immediately. Tay expects to deal with less red tape in general, too. Previously, investment in a new showroom would have required the approval of a committee in Germany. That would have taken months, but it is Alain Favey who can now make these decisions. That leaves Tay and Steiner to work like entrepreneurs, they say. Favey jokes, too, that Tay will now have more time to spend with journalists.

This Porsche, the newly-launched Panamera, is built by the sports car brand, which is related to, but not the same thing as Porsche Holding Salzburg. 

He is more likely to devote the extra hours on customer retention. Since arriving at VGS at the start of 2016, Tay has worked fastidiously to improve VW’s battered reputation for servicing and repairs. The company once received no letters of praise from customers, but now has 10 of them for every complaint. VW owners once had to wait at least three weeks for a servicing appointment. That has since been shortened to three days. “Customers are the centre of everything we do,” he told CarBuyer at a launch event in 2016, “It’s our duty to bring them delight.” In this case, he can at least claim to bringing them shorter waiting times and a better ownership experience, which comes pretty close. 

For his part, Steiner has every appearance of a high flyer within PHS. Though not yet 40, he has had working stints with the company in Italy, Croatia, Romania, Bulgaria, and Malaysia. He also spent five years in China, where Tay recently ran VW’s aftersales business, so the two men have worked together. “We will be able to share ideas and initiatives to further improve the customer’s journey with our brand,” says Steiner.

Ultimately, by inserting its own man here, PHS can be reasonably certain that local decisions will be taken in its interest, rather than in the interests of building a fiefdom. But more to the point, if the two men can work well together, they are likely to accomplish more than when VGS had a single chief who had a compliance-driven behemoth to answer to. It is not so much that VGS gains an extra head, in other words, but that its reporting structure loses many. – Leow Ju-Len