Volkswagen Group Chief Executive Officer Herbert Diess will face the moment of truth on Tuesday, the automaker’s executive committee having to decide whether to approve a contract extension or send the 62-year-old CEO packing.
Diess has had a rough go of it during the past six months, forced to give up his second role as head of the flagship VW brand. He has been locking horns with factions of top management who Diess last week openly accused of blocking efforts to overhaul the company. And he is now appealing to the two families that have an outsized say in what happens at Volkswagen.
“By appealing to the Piech and Porsche family shareholders, it seems he is bringing matters to a head in a ‘back me or sack me’ moment,” Timm Schulze-Melander, an industry specialist at Redburn, told the Bloomberg news service Monday.
A long-time BMW executive, Diess joined Volkswagen in December 2014 and became head of the VW brand the following October. In 2018, he took on a dual role as CEO of the umbrella Volkswagen Group, which is comprised of more than a dozen different car, truck and motorcycle brands.
His tenure has been a rocky one, overlapping the diesel emissions scandal that has so far cost the company more than $30 billion in fines, penalties, repairs and buybacks.
Then, last June, Diess got caught up in corporate infighting between management and the VW brand’s powerful labor union about his push to cut costs in order to fund electric and autonomous vehicle development.
Diess was pressed to relinquish his title as VW brand CEO, turning the reins over to Chief Operating Officer Ralf Brandstaetter. But it was less of a defeat than it might first have seemed, Diess remaining the Group’s head of passenger car operations. And that has allowed him to move forward with his embrace of electrification.
The automaker recently launched sales of its first long-range battery-electric vehicle, the ID.3, while unveiling the bigger ID.4 SUV that will be its first long-range BEV targeting the key North American market. Sales of that model have been pushed back, however, and won’t begin until early 2021.
If anything, Diess has doubled down on his demand for cost-cutting and other reforms at the world’s largest
automaker, installing key allies as chief financial officer and chief procurement officer on the Group’s management board. But he continues to face strong headwinds.
In a highly unusual move, Diess went public with his frustrations last week in a column he wrote for the German daily, Handelsblatt. When he joined the company nearly six years ago, Diess said he had “firmly resolved to change the VW system (by) breaking up old, encrusted structures and making the company more agile and modern.”
“I succeeded in doing this in many places,” he added, “but not in some, especially not yet at our corporate headquarters in Wolfsburg.”
To press his point, Diess demanded that his contract – which currently runs through to 2023 – be extended, a clear sign that he has the support of the Volkswagen executive committee.
“The options will be put on the table,” one source told the Reuters news service.
It is not yet clear whether Diess can count on the support of the Piech and Porsche families. They trace their roots back to automotive pioneer Ferdinand Piech, who founded both Volkswagen and Porsche.
Should management back Diess he is expected to redouble efforts to streamline the company, even closing plants in Germany, a move strongly resisted by the automaker’s powerful labor union which holds nine of the 20 seats on VW’s supervisory committee – the equivalent of an American board of directors.
Whatever happens on Tuesday, few expect to see any major changes to Diess’s pet project. The VW Group has laid out plans to launch 50 all-electric models by 2025, and more will follow. Earlier this month, the high-line Bentley brand announced it will go entirely electric by 2026, and other VW brands may soon follow.