Volkswagen Group in a blandly worded press release on July 22 announced that Herbert Diess, who has been the CEO of the Group since 2015, will step down and leave the company on September 1. He will be succeeded by Oliver Blume, the current CEO of Porsche AG.
Hans Dieter Pötsch, chairman of the Supervisory Board, gave Diess a glowing testimonial while pushing him overboard. “During his tenure as chairman of the Board of Management of the Volkswagen Passenger Cars Brand and as Chairman of the Group Board of Management, Herbert Diess played a key role in advancing the transformation of the company. The Group and its brands are viable for the future; its innovative capabilities and earning power are strengthened. Mr. Diess impressively demonstrated the speed at which and consistency with which he was able to carry out far-reaching transformation processes. Not only did he steer the company through extremely turbulent waters, but he also implemented a fundamentally new strategy.”
Diess was hired to pull Volkswagen’s chestnuts out of the fire after it got caught red handed rigging its diesel-powered cars to evade emissions regulations, and he did an admirable job. But sources with knowledge of the matter tell Reuters the Porsche and Piech families, who own over half the voting rights and a 31.4% equity stake in Volkswagen, pressed for a change at the top. “Diess was incorrigible. He significantly changed Volkswagen for the better. But his communication was miserable,” one source who asked not to be identified told Reuters.
Blume will take over from September 1 and will continue in his position as CEO of Porsche AG as that company moves forward with a planned IPO later this year. Blume has held numerous roles within Volkswagen Group, starting as a trainee at Audi in 1994, where he rose to head of production. He also worked at SEAT and Volkswagen before moving to Porsche. He became chairman of the Board of Management at Porsche in 2015 and a member of the Volkswagen Group Board of Management since 2018.
“Oliver Blume has proven his operational and strategic skills in various positions within the Group and in several brands and has managed Porsche AG from a financial, technological and cultural standpoint with great success for seven years running. From the Supervisory Board’s point of view, he is now the right person to lead the Group and to further enhance its customer focus and the positioning of its brands and products,” says Pötsch.
“Oliver Blume, together with the entire Board of Management, will continue to press ahead with the transformation of the company started by Diess with a leadership culture that makes teamwork a top priority,” the press release said.
Not everyone is sure this is a wise move by Volkswagen. Analyst Daniel Roeska of Bernstein Research tells Reuters leading both companies could “make a bad governance situation worse. We do not think investors will like the CEO-dilution … especially if the IPO was supposed to create greater independence from the Volkswagen Group.”
What Went Wrong?
While Diess was taking an investor friendly approach, cutting costs and promoting electrification, Reuters says the instability created by his leadership style weighed on the company’s market value, which has been on a downward spiral since early 2021. (It’s entirely possible that the global pandemic may have had a hand in that as well.)
Daniela Cavallo, Chairperson of the General and Group Works Council of Volkswagen AG, had warned that support for the extension of Diess’ contract would depend on whether he could keep Volkswagen at the forefront of Europe’s car industry. Joerg Hofmann, president of Germany’s most powerful union, IG Metall, and deputy chairman of Volkswagen’s supervisory board, said, “The dynamics of change in the automotive industry are enormous. The decisions taken today will allow us to keep up the pace and exploit the lead we have carved out.”
Diess was clearly not perceived as a friend of the workers who assemble all the cars for Volkswagen Group. Also, the Porsche and Piech families can’t have been happy to see the value of their holdings decline, even if Diess ultimately had little control over computer chip and supply chain issues.
In Europe, Volkswagen is ahead on electric vehicle (EV) sales, with roughly 25% market share compared with Tesla’s 13%, but with Giga Berlin starting to ramp up production, some within the company are nervous that the company won’t be able to continue leading in market share under Diess.
Reuters also says Diess ran into trouble with Cariad, the software unit created on his watch. It has consistently exceeded its its budget and is reportedly years behind with its goal to launch a new unified software platform that would be incorporated into most of the vehicles produced by Volkswagen Group.
But what is left unsaid is that Diess has always been looked upon as an outsider at Volkswagen, someone who didn’t come up through the ranks at Volkswagen. Clearly, there are people like Blume and Ralf Brandstätter who are regarded as “company men” and who may have been a little miffed when Diess was brought in and installed over them.
What’s Next For Diess?
Diess seemingly did not see this coming. Just a week ago, he posted on LinkedIn, “After a really stressful first half of 2022, many of us are looking forward to a well deserved summer break.” It looks now as though Diess’ summer break will be considerably longer than he expected.
So, where does Herbert Diess go from here? Clearly, he is a person with enormous energy and great vision. He may have provided the spark that led to the creation of CATL when we was in charge of purchasing at BMW. There will probably be any number of companies who would like to bring him onboard to kickstart their own electric vehicle transformation. Stellantis or Renault Group are two that come to mind.
There is another intriguing possibility. Many people have suggested that Tesla is now ready for an experienced business manager to take over the reins from the Mercurial Mister Musk. That would free Elon to pursue other interests, like building colonies on Mars or being the final arbiter of what everyone in the world can or cannot say online. We don’t know if any of that will happen, but if someone told us Diess was going to take over the reins at Tesla, it’s quite possible a cheer would be heard in some corners of the CleanTechnica executive dining room. When we know more, you’ll know more.
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