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Winds of change at Volkswagen as CEO Herbert Diess departs

Herbert Diess has unexpectedly stepped down as Volkswagen Group chief. Picture: Axel Schmidt/Reuters.

Herbert Diess has unexpectedly stepped down as Volkswagen Group chief. Picture: Axel Schmidt/Reuters.

Published Jul 25, 2022

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Wolfsburg, Germany - Herbert Diess took over at Volkswagen AG four years ago when the German car giant was in crisis, under pressure to make dramatic changes in strategy and culture, and the former BMW executive offered a new vision.

Diess will leave Volkswagen on September 1, three years before his contract was supposed to end, with many of the goals he set as the German automotive giant's disruptor-in-chief unfinished and uncertain.

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He will be replaced by Porsche Chief Oliver Blume, a long-standing VW Group executive who is seen as a car guy.

Diess was not like prior VW chief executives in either his approach to business or his personal style. In 2018, that made him appear to be just the executive to lead Volkswagen out of its Dieselgate scandal.

Diess was focused more on what investors wanted than pleasing Volkswagen's labour unions. He believed in investing heavily in electric vehicles for the future. He cultivated a playful presence on social media, and he set electric vehicle leader Tesla as Volkswagen's benchmark.

Diess took chances, both with product and technology strategy and with his penchant for speaking his mind, rattling VW constituencies.

Picture: Wolfgang Rattay/Reuters.

In the United States, Diess could be remembered as the executive who brought back the beloved VW microbus as a stylish EV, and revived the Scout truck brand.

Diess was open in his admiration for Tesla and its CEO, Elon Musk, who offered Diess the CEO job at Tesla in 2015 before Diess decided to join Volkswagen.

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A car guy steps in

Volkswagen's board has opted to replace Diess with Porsche Chief Oliver Blume, a veteran VW group executive. Some observers expect that choice signals a return to basics, and less ambitious visions about turning the carmaker into a technology company.

Incoming boss Oliver Blume. Picture: Andreas Gebert/Reuters.

"He had a much broader vision about just the car. That obviously created certain friction," Silicon Valley venture capitalist Evangelos Simoudis said of Diess.

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"When I see Blume coming in, I see a car guy coming in again."

Diess took on tough tasks

The 63-year-old Diess took on many tough tasks in his VW career, including slashing costs at the company's high-volume Volkswagen brand. After joining VW in 2015 as Volkswagen brand chief, then-CEO Martin Winterkorn gave Diess the assignment to cut 5 billion euros (R86 billion) a year in costs at the brand within two years - a mission that assured conflict with German labour unions.

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Diess worked out a deal to cut 30 000 jobs through attrition, which left Volkswagen's profitability still lagging competitors.

In the end, Diess appears to have moved too fast for some on the company's supervisory board, and not fast enough for others. He clashed repeatedly with Volkswagen's labour leaders, who have half the votes on the automaker's supervisory board.

But members of the Porsche and Piech families, major shareholders, were concerned that Diess was not delivering results fast enough from his multi-billion euro investments in EVs and software development.

Volkswagen's share price suggests investors had similar concerns. Since Diess took over in 2018, Volkswagen shares have been flat, and are down 24% for this year. Tesla in that same four years has increased its market value by 15 times its 2018 level.

Reuters

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