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Opinion: Infineon needs a leader to survive

Posted: 30 May 2008 ?? ?Print Version ?Bookmark and Share

Keywords:Infineon CEO? management structure? semiconductor market?

Infineon Technologies AG's decision to replace the office of president and CEO with the ambiguous title, "Spokesman of the Management Board," is not only puzzling but is also symptomatic of deeper problems at company.

The German semiconductor company's public image had already taken a beating as it struggles to stem losses while scrambling to find a buyer for its controlling stake in loss-ridden memory vendor Qimonda.

In recent weeks, doubts have grown about the company's ability to survive as a standalone entity. Many industry observers have suggested it merge with another European IC maker to improve its competitive position in the worldwide IC market.

New management system
Infineon announced May 26 it dismissed president and CEO Wolfgang Ziebart and announced a complex executive management system that in many ways looked like a corporate version of the communist political system.

However, even Communist China has a party leader and president. Even at the height of its power, the former Soviet Union had a clear leader at the apex of the socialist government structure.

What Infineon, a capitalist business at the heart of Europe's biggest economy, has offered in terms of its new executive structure is Peter Bauer, who heads the company's automotive, industrial and multimarket business. Bauer will serve as spokesman for the management board.

In other words, 47-year-old Bauer would not be the leader, but would act as mouthpiece for a group of four men, including CFO Marco Schroter, communication solutions division head Hermann Eul and Reinhard Ploss, chief of operations.

Infineon's supervisory boardwhich includes such heavyweights as Martin Winterkorn, chairman of Volkswagen AG's management board, Eckard Sunner of BASF SE and attorney Max Dietrich Kleymust believe Infineon's problems could be more easily solved if executive powers were not concentrated in the hands of a single person.

That obviously was the reason behind the removal of Ziebart, who resigned because of "different opinions on the future strategic orientation of the company," according to Infineon.

In forcing out Ziebart, the supervisory board took a firm position that it sought a unanimous view regarding the company's future direction, whatever that might be. Still, it's unlikely that Volkswagen's Winterkorn would have agreed to such a clearly confusing system at the German automaker. It's even more doubtful that management consultant Klaus Wucherer, another member of Infineon's supervisory board, would have many corporate clients if he advocated such an executive structure in his consulting business.

Recent speculation indicates that Infineon's supervisory board wanted to explore a closer relationship with the Netherlands-based NXP Semiconductor, a position allegedly opposed by Ziebart.

Need for a leader
A statement from Infineon announcing Ziebart's departure offers hints of a slightly different reason for his dismissal. The company said it will begin implementing what it termed the "IFX Plus-10" program, a strategic initiative that involves additional cost cutting, portfolio rationalization and other productivity improvements.

The implication is that Infineon wants to maintain its independence and perhaps adopt the fabless or asset-light manufacturing strategy that many rival semiconductor vendors are implementing to reduce production costs while improving competitiveness.

A second possible conclusion is that Infineon wants to reduce its cost structure, streamline its product offerings and increase productivity ahead of merger talks with a potential partner.

The company expects to offer additional details of its IFX Plus-10 program in coming weeks. What's clear, however, is that the newly introduced management structure puts no particular individual at the top of the executive pyramid.

A committee, it seems, will manage the company, and Bauer will be the public face of the management team. Under this scenario, it is unclear whom investors, customers, suppliers and other interested observers should hold responsible for the company's actions.

It's also not clear how the company's employees should respond to such a management team.

Infineon's supervisory board needs to rethink this new structure. If Bauer is as capable a manager as the board believes he is, then the 22-year semiconductor industry veteran should be confirmed as president and CEO.

If the supervisory board does not believe he is capable of filling the roles of president and CEO, then it shouldn't appoint him spokesman either. It should simply look for a competent CEO.

A corporation needs a clearly identifiable leader. Especially at this critical juncture, Infineon especially needs one as it struggles with multi-year losses and a draining DRAM unit.

-Bolaji Ojo
EE Times

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