‘Flying feathers’: How VW fell out of love with Herbert Deiss

When Volkswagen’s chief rival, Elon Musk, parked his electric cars in the German group’s park by building a plant just 200 kilometers from its historic headquarters in Wolfsburg, the Bavarian CEO’s response was warmer than many expected.

Publicly, Des told anyone who would listen that Tesla was “paving the way” and “good for the industry.” He was so lavish in his praise of Musk’s accomplishments, he even invited the world’s richest man to give a lecture in a hall full of Volkswagen executives and try to imitate his use of social media. Speaking privately, Dess joked that he wished Musk had moved his factory “100 kilometers closer to Volkswagen’s home,” so workers could see the American company on the horizon.

Although Dis has earned a reputation for gaffes, these provocations were intentional. “He felt that if he was ripping the feathers, he was going in the right direction,” Bernstein analyst Daniel Ruska says of the director’s attempt to turn a company polluted by the diesel emissions scandal into a leading electric company. “It was kind of an all-or-nothing strategy.”

Those efforts were blatantly halted on Friday when the company’s Supervisory Board convened an extraordinary meeting at the behest of the Porsche Beech clan that remains Volkswagen’s largest shareholder, and agreed to revoke DIS with almost immediate effect, hours after the executive suspended DIS. Left for summer vacation.

Outside the motoring world, Deiss has been notorious for a string of generic mistakes. He told the BBC in 2019 he was “not aware” of the internment camps in China’s Xinjiang region, and continued to defend Volkswagen’s presence there. He was forced to apologize for using the phrase “EBIT macht frei” at a company event, referring to profit incentives but echoing a Nazi slogan.

Earlier this year, he sparked outrage in Ukraine by suggesting that Europe should seek to negotiate with Russia, a view not uncommon in German companies but rarely expressed on the international stage.

Back home, Diess gained notoriety over more domestic issues – notably his skirmishes with Volkswagen’s powerful Business Council, which accounts for 60,000 employees in Wolfsburg and most of the additional 230,000 in wider Germany. He has angered the organization – which has effective control of the supervisory board through a loose alliance with Lower Saxony, Volkswagen’s second-largest shareholder – by suggesting that the group has 30,000 surplus employees in the country.

Diess selfie posted on Twitter, with Tesla’s Elon Musk and VW’s iD3 electric vehicle © Herbert Diess/Twitter

Last year, he also noted that while it took Volkswagen nearly 30 hours to produce an electric car, Tesla employees managed the same in just 10 hours.

As a result of such encounters, Diess has had many bruises during his four-year tenure, including being relieved of direct responsibility for the group’s largest brand, the Volkswagen brand, in 2020, and from his role as head of the Volkswagen business in China last year.

“He made decisions without being influenced by the feelings of his colleagues,” said one close to the executive branch. The person added that Dess believes a combative approach is the “only way to get VW moving” and secure the group’s future.

Dess’ accomplishments, which included introducing Volkswagen’s first purpose-built electric cars as part of a €52 billion push into the technology, earned him an early contract extension from the supervisory board just last year.

“The picture has always been mixed,” said one person familiar with the oversight board’s decisions. Until very recently, the person added, Des’ management skills were “more strengths than weaknesses”.

But on Friday, all members of the 20-seat board of directors voted to impeach Des, and the 63-year-old was not given a chance to plead his case. He was only informed of the impending decision two days ago, according to a person familiar with the events.

Neither the company, unions nor shareholders have publicly confirmed why Dis’s position was suddenly considered unacceptable. But Daniela Cavallo, head of the work council, complained that Volkswagen’s software arm, for which Diess is personally responsible, was not doing well, forcing VW’s premium brands Audi and Porsche to rely on their own systems while waiting for group-level technology to be right.

More importantly, Cavallo had pointed to Volkswagen’s lackluster performance in China, which for decades has been the engine for the company’s growth and its larger, more profitable market. Cavallo argued that Volkswagen’s new electric cars, the ID range, did not sell as well in Asia as they had hoped, in part, due to a failure to meet local consumer preferences, such as the provision of in-car karaoke machines.

Porsche’s Oliver Blum will take over from Dies as CEO of Volkswagen © REUTERS

In recent weeks, the Porsche-Piëch family has come to believe that the Diess contract extension was a “mistake,” according to a person close to the shareholders.

The auto chief struck a more conciliatory tone when he spoke to workers last month, telling employees he believes Volkswagen will overtake Tesla in global electric sales by 2025, and noting Musk’s recent difficulties in operating factories at full capacity. “But we’re starting to realize it hasn’t really changed,” the person added.

The Board of Directors came to the conclusion that Dees’ successor, CEO of Porsche, Oliver Blume, “was perhaps the most complete director, [able to look] On the operational side of the business,” added the person close to the supervisory board. The 54-year-old has the added advantage of being born near Wolfsburg and has spent his career at the VW Group, unlike Dies, who joined from BMW in 2015.

Wolfgang Porsche and Hans-Michel Beech, who speak on behalf of the Porsche Beech family, said Blohm enjoyed their “candid confidence for many years”. They added that he oversaw the introduction of Porsche’s electric Taycan, which is now more popular than the 911.

However, Blume’s appointment threatens to derail the long-awaited flotation of the Porsche brand – the most profitable in the Volkswagen stable – later this year. Blume, who will retain his position at Porsche in Stuttgart even as he takes the top job at Wolfsburg from September, will have to split his time between running the world’s second-largest automaker and preparing for what is likely to be Germany’s biggest public roster. in decades.

Bernstein’s Roska argued that this arrangement went against Volkswagen’s stated goal of partial flotation, to give Porsche more “entrepreneurial freedom”.

“If you are trying to give Porsche AG more autonomy… this move does just the opposite,” Roska said, adding to concerns about the labyrinthine corporate governance structure of the Volkswagen Group.

Nor will there be a completely fresh start in Wolfsburg, where the day-to-day operation of VW will be the responsibility of CFO Arno Antlitz, a former McKinsey consultant who was promoted to COO and has been collaborating with Dess on the need for significant cost cuts at the group’s German locations. .

Late Friday, Dess posted on Twitter a photo of himself constantly smiling next to a Volkswagen electric pickup truck. Earlier, in a LinkedIn post, he emphasized that VW’s recent difficulties were due in part to events far beyond Wolfsburg, citing semiconductor shortages, other supply challenges, and rising raw material and energy prices.

But even the most favorable economic conditions did not protect his predecessors from the disparate influencers of VW. Dis is the fourth president in a row to not serve his contract.

“There are many different interests in this company,” said the person close to the departing CEO. “It’s a listed company but it’s largely in private hands.”

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