Volkswagen's Dual Leadership Crisis and Strategic Rebalancing: Governance Risks, Operational Gaps, and the Path to Value Creation

The automotive industry's most enduring paradox is now at a crossroads. Volkswagen AG and Porsche AG, two pillars of German engineering, are governed by a single executive: Oliver Blume. Since 2022, Blume has simultaneously led Volkswagen and Porsche, a dual role that has drawn sharp criticism from shareholders, analysts, and even within the company itself. As the automotive sector grapples with the seismic shift to electrification and digital transformation, the governance risks and operational inefficiencies of this arrangement are becoming impossible to ignore. For investors, the question is no longer whether Blume's dual leadership is sustainable—it's whether Volkswagen can afford to delay a strategic pivot any longer.

Governance Risks: A Structural Weakness in the Boardroom

Blume's dual role has created a governance quagmire. Shareholders, including Deka Investment's Ingo Speich, have openly criticized the lack of clear boundaries between Volkswagen and Porsche. The overlap in leadership blurs accountability, particularly in critical areas like R&D allocation, capital deployment, and brand strategy. For example, Porsche's aggressive pivot to electric vehicles (EVs) and its planned IPO—set to raise billions for Volkswagen's transformation—risk being overshadowed by the parent company's broader restructuring efforts under the TOGETHER 2025+ strategy.

The financial toll is evident. Volkswagen's stock price has plummeted nearly 25% in the past year, underperforming both the European automotive index and the DAX. A P/E ratio of 3.57, far below its five-year average, reflects investor skepticism about the company's ability to navigate its dual governance challenges. Meanwhile, Porsche's operating profit in the first half of 2025 fell to €1.01 billion, a 67% drop from the same period in 2024, as U.S. tariffs and production delays for the ID.7 Tourer compounded existing inefficiencies.

The root of the problem lies in the concentration of power. The Porsche and Piëch families, which control Volkswagen through Porsche SE, hold 53% of voting rights. This entrenches a governance structure where family interests may override shareholder value, particularly as legal liabilities from the 2015 dieselgate scandal linger. Legal costs alone are projected to exceed €50 million in 2025, while labor disputes over planned job cuts (35,000 by 2030) threaten production timelines for key EVs.

Operational Inefficiencies: A Missed Opportunity in Electrification

Operational gaps have further eroded confidence. Volkswagen's decentralized structure, while designed to leverage synergies, has led to fragmented decision-making. For instance, the ID.7 Tourer's production delays—attributed to labor unrest and capacity constraints—highlight the company's inability to scale EV production quickly. In contrast, rivals like BYD and Tesla are accelerating their EV rollouts, capturing market share in a sector projected to grow by 15% annually through 2030.

Porsche's own strategic realignment underscores the urgency. The brand's 36.1% electrification rate in the first half of 2025 (23.5% all-electric, 12.6% plug-in hybrids) is a step forward, but it lags behind competitors like BMW and Mercedes-Benz. Porsche's battery subsidiary, Cellforce, is cutting 200–290 jobs as it pivots from high-performance battery production to cell and system development—a move that, while necessary, signals a retreat from its original electrification ambitions.

Unlocking Value: The Case for Leadership Separation

The solution lies in separating Volkswagen and Porsche's leadership. Blume himself has acknowledged the dual role is temporary, but delays in appointing a successor—expected by early 2026—have only deepened uncertainty. A clear separation would address governance risks by creating distinct strategic priorities for each brand. Porsche, with its premium brand equity and focus on EVs, could accelerate its IPO and secure independent capital for innovation. Volkswagen, meanwhile, could streamline its restructuring efforts under a leader focused solely on its core brands and cost-cutting initiatives.

The TOGETHER 2025+ strategy provides a blueprint. Its “Best Governance” module emphasizes transparency and accountability, while “Best Performance” targets operational efficiency. Porsche's recent leadership changes—such as Vera Schalwig's appointment to HR and Joachim Scharnagl's takeover of procurement—signal a shift toward internal succession planning and agility. These moves, if paired with a full leadership separation, could restore investor confidence and unlock value through clearer governance and brand-specific execution.

Strategic Urgency: Navigating Global Headwinds and Internal Resistance

The clock is ticking. Global market headwinds—including U.S. tariffs, supply chain disruptions, and China's slowing luxury car market—demand swift action. Porsche's 2025 special charges of €1.1 billion (including €500 million for battery activities and €400 million for tariffs) highlight the financial strain of delayed decisions. Internally, resistance to job cuts and restructuring measures has led to strikes, further delaying EV production.

For investors, the key is to assess whether Volkswagen can execute its strategic rebalancing before these risks crystallize. The company's dividend yield of 5.49% offers some appeal, but it's a double-edged sword: a high yield often signals financial distress. A buy signal may emerge only when governance stability metrics—reduced legal costs, resolved labor disputes, and improved operating margins—begin to materialize.

Conclusion: A Crossroads for German Engineering

Volkswagen and Porsche stand at a pivotal moment. The dual leadership model, once seen as a cost-saving measure, has become a liability in an era demanding clarity and agility. For investors, the path forward is clear: advocate for leadership separation, monitor the progress of Porsche's IPO, and assess the company's ability to navigate its operational and governance challenges. The automotive industry's next chapter will be written by those who adapt—not those who cling to the past.