Diess on Thin Ice

As much as Volkswagen tried to make Diess’s new role look like “a normal part of the brand’s evolution”, it’s been clear to pretty much everyone watching that there’s a lot of drama going on behind the scenes of Germany’s largest automaker.

Christiaan Hetzner spills the tea for a story in Automotive News titled “Diess survives losing key VW role, for now“. Uh oh.

For those who haven’t been following, Herbert Diess was named the CEO of both the Volkswagen Group Brands (Audi, Porsche, Volkswagen, Skoda, etc) as well as the CEO of the Volkswagen brand based on a bold plan to transition Volkswagen to electric vehicles. Following a series of fuck ups, he’s now been fired as Volkswagen brand CEO, but will remain as Volkswagen Group CEO (confusing, I know). His replacement as Volkswagen brand CEO will be the COO of the Volkswagen brand, Ralf Brandstatter.

Herbert Diess may want to watch his back.

Automotive News

This is predictable, and sad. Diess is the one guy in the German auto industry who truly understands what’s happening. It’s unsurprising that he’s facing resistance from within the company, but if he’s removed Volkswagen might not have much of a future ahead of it.

The Volkswagen CEO, who earned almost €10 million ($11.3 million) last year, no doubt remembers how he came to run the carmaker: The ambitious Austrian went behind his aging predecessor’s back to convince directors he was the best man to lead VW into the future.

Automotive News

I didn’t know that was how Diess became CEO. He may be more ruthless than he looks…

Following a series of blunders by Diess, 61, largely centered around its flagship Golf model, the board may now be getting other ideas.

After finding themselves on the receiving end of a Diess attack, the 20 nonexecutive directors — split equally between shareholders and unions — delivered what can only be seen as a public censure of their CEO: Under pressure, he was forced to cede control over the VW brand to Ralf Brandstätter, 51, the operations chief installed at the behest of labor leaders.

The unions have weakened Diess — he’s wounded,” a source close to the board said. “As long as Lower Saxony doesn’t side with them [to create a majority], they cannot get rid of him, though.”

Automotive News

Ah, so it was the unions that did Diess in. The politics of these German auto bureaucracies is fascinating to me. 10 of 20 non-executive directors on the company’s board are from unions, and only half are from shareholders?! This sounds like a recipe for disaster.

Don’t get me wrong –– I’m not saying workers aren’t important. It’s just that when you’re trying to lead an organization through a revolutionary period, having to convince a board of dozens of people who all have different interests doesn’t exactly speed things up.

Because electric vehicles have fewer parts, and eliminate many classes of parts altogether, lots of jobs will be lost in the transition to EVs. A lot of retraining will need to be done, and many veteran employees will find that much of the knowledge they built across their career is suddenly irrelevant. Diess is pushing to make sure this happens as fast as possible, while labor interests want exactly the opposite: the non-disruptive status quo.

Trade unionists had been furious with what they called “enormous pressure” to meet the car’s launch date in December, when most Germans were planning for Christmas holidays. Not only did Diess dismiss their concerns, he inflamed them by describing it as “one of the best ramp-ups we ever had” in a LinkedIn post.

“In the time frame envisioned, it demanded everyone work at the limits of their capacity,” said a company source. “We brought it a month too early.”

Automotive News

Transitioning to electric vehicles is going to be a lot of work. At Tesla, that’s just what is expected of you on any day that ends in Y. But at Volkswagen it’s “enormous pressure” and could get you fired if union leaders don’t like it.

But delaying it would have been costly, too. Since the hatchback lacked a standard center airbag — required for a five-star safety rating as of January — VW would have fallen short with its signature car, which one official said would have been humiliating.

Automotive News

You’re telling me the reason they rushed the new Golf out was that it would get a lower safety rating if tested this year? Seriously?

They didn’t go back and add the right air bags to get a 5 star rating… they just rushed it through the review process so they could have the appearance of being five star.

This says so much to me about the company’s culture. Do you want to buy your car from a company that’s redefining what it means to be 5 star? Or rushing their product through review so it doesn’t get a 4 star a few months later?

Making matters worse, the subsequent European rollout, already difficult because of the coronavirus outbreak, was marred by a problem with a mandatory eCall safety system. All 30,000-plus Golf 8 models delivered in Europe had to be recalled, and VW stopped delivery of others for three weeks.

Automotive News

A problem with the emergency call system, eh? It would be great if there was some kind of magical technology that could send software updates through the air, so you wouldn’t have to bring 30,000 cars back and fix them manually. Maybe some day!

Tempers rose further after a controversial 10-second Golf ad was posted on Instagram that critics argued hid a racist message. An internal investigation found no racist intent, but VW apologized for the video, calling it “inappropriate and tasteless.”

Automotive News

Yeah, guess you should probably be careful of that when your company was founded by Hitler.

Finally, Diess was furious over a media report that published an internal VW document revealing that as much as 60 percent of the Golf production on a single day could somehow be flawed. 

Personally embarrassing for him was another that aired his demand for an early contract extension — possibly hoping for an outward expression of confidence in the midst of all these difficulties.

Automotive News

60% of production is flawed? Guess he didn’t get that early contract renewal he wanted…

During an internal conference with more than 3,000 managers, he accused directors of being the source of the leaks and hence breaching compliance. 

“It was an unprecedented faux pas,” an insider familiar with the board’s thinking said.

The other source close to the board added: “He effectively accused company directors of acting criminally. It was a serious error.”

Volkswagen’s official position is that the management change coincides with the completion of the first phase of the brand’s transformation plan, allowing Brandstätter to focus on VW’s ambitious electric vehicle rollout. 

Automotive News

Oof. Accusing the directors of the company of leaking information in a plot to have him overthrown. It’s a wonder he still has a job at all.

For now his position is secured by the Porsche and Piech family, fellow Austrians who control a majority of Volkswagen. 

Deeply loyal, having supported ex-Audi CEO Rupert Stadler all the way up to his arrest two years ago, the two clans have virtually all of their wealth tied up in the company founded in 1937 by the German government, which commissioned Ferdinand Porsche for its first designs.

Automotive News

Uh oh. Now might be a good time to diversify.

Should another executive as ambitious as Diess promise to steer the ship to calmer waters, they might dump Diess as quickly as they did his predecessor, Matthias Müller, who was CEO for less than two and a half years. 

It’s considered extremely unlikely Brandstätter could replace his boss as his support among labor leaders could discredit him in the eyes of the family. 

“Look at his CV. He’s from the hometown, starting out doing his apprenticeship as a shopfitter at Volkswagen in Braunschweig. And after getting his degree, he spent his whole career at the company,” the source said, explaining Brandstätter’s appeal to the labor bench. “He has the right background and pedigree for the unions.” 

Automotive News

Spending your entire career at the company discredits you from being CEO? If the CEO is responsible for tearing everything down and starting new, I guess that may be so.

That contrasts with VW Group purchasing and components chief Stefan Sommer. 

Last week, the former ZF Group CEO behind the TRW acquisition elected to leave VW at the end of the month. 

After less than two years in Wolfsburg, sources said, he was fed up with the parochial politics and didn’t even bother to negotiate an exit package

Automotive News

Legacy auto is so weighed down by politics. Running the business involves politics, and since part of the company is owned by the government there’s also actual politics involved as well. Contrast that to Tesla, where there’s very little question about who is in charge.


Software problems dogging the company’s European ID3 model are also not expected to delay the U.S. launch of the key ID4 electric crossover in the spring.

Automotive News

Oh yeah, that’s definitely about to launch.

Diess has bought himself time by humbling himself before the board for his outburst. 

In a statement, Volkswagen said that directors had accepted his formal apology for his “inappropriate and wrong” comments and “will continue to support him in his work.”

Automotive News

Diess is on thin ice.

Still, Diess might want to post lookouts in Austria’s Zell am See, home to the Porsche family farm, to keep tabs on any Volkswagen executives leaving the Schüttgut estate of Wolfgang Porsche.

Word is the family is grooming 52-year-old Oliver Blume to one day take over as group CEO. 

Like Brandstätter, he was born and raised just outside of Wolfsburg and is a career VW executive. 

But he enjoys one major advantage: For more than four years, he’s been successfully running the sports car maker that bears their dynasty’s name.

Blume’s day could come relatively soon, if Diess commits any more blunders. 

Automotive News

This is sad news for the EV revolution. We knew there would be resistance as Diess fought to overturn the status quo, but it appears the resistance forces are winning and the status quo will prevail.

Read the full story at Automotive News

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