With the backing of key investors, including the Porsche and Piech families, Volkswagen Chief Executive Officer Herbert Diess appears to have survived the latest threat to his control of Europe’s largest automaker — at least for the moment.
The CEO has been battling with the VW Group’s powerful union about plans to shift from internal combustion to battery power. That move was already expected to result in job cuts, but Diess last month warned workers the company faces “a new phase of competition” as Tesla prepares to open a plant in Berlin. That triggered a sharp pushback from labor representatives on the automaker’s supervisory board that could have led to Diess’s ouster.
But members of the Porsche and Piech families, who collectively control 90% of the company’s voting rights, spoke out on Friday, saying through a spokesman, “The families continue to back Mr. Diess. There has been no change in their position.”
Pressure eases — just barely
That should take some pressure off of the CEO, but it neither guarantees his job security, nor ensures VW’s aggressive electrification program will move forward as Diess wants. A “mediation committee” of the board is set to meet and discuss the executive’s future.
In recent years, Volkswagen has climbed to the top of the global sales charts, annually battling for supremacy with Toyota and the Renault-Nissan-Mitsubishi Alliance. But Diess fears VW can’t continue down the business-as-usual path as more and more competitors shift from internal combustion engines to electric motors.
“In the world of combustion engines we are leading. We’re good at that, maybe better than everyone else,” Diess told workers last week. “But in the new world … we are facing competition Volkswagen has never seen before.”
The 800-pound electric gorilla
The CEO specifically pointed to Tesla, the automaker dominating the global battery-electric vehicle market. Tesla posted both record deliveries and earnings during the third quarter and is pushing for even more rapid growth as it prepares to open new plants in Germany and the U.S.
“We have to prepare for a new phase of competition,” Diess said.
As production scales up, BEVs are expected to require less labor than comparable gas and diesel models. Volkswagen’s powerful German union has been reluctant to accept cuts. And the fragile relationship between Diess and labor representatives on the board flared up when he warned that 30,000 jobs could be lost if the shift to battery power doesn’t accelerate.
“We have to prepare manufacturing for much reduced labor in some of the lines. We have to prepare for less complexity, for more speed, line speed,” the 63-year-old Diess said.
Labor representatives responded angrily to the CEO’s comments. Daniela Cavallo, chairwoman of the General and Group Works Council, called Diess’s assertion “a provocation (and) shows that Dr. Diess continues to have no interest in constructive cooperation.”
Cavallo noted workers put in place “safeguard agreements” extending through 2029 that already made concessions for VW’s ongoing electrification program. “Additional measures,” she declared, “will not be negotiated.”
The Volkswagen Group’s electrification effort already ramping up. The carmaker has introduced several long-range battery-cars under the flagship VW brand, including the ID.4 model sold in the U.S., Europe and China.
The Audi and Porsche brands have begun expanding their range of offerings and ultra-premium Bentley recently laid out a plan to go 100% BEV by the end of the decade. By just mid-decade, Diess promises, the various Group brands will offer around 50 all-electric models.
Investors remain onboard
Investors have so far backed Diess’s strategy, VW’s common stock jumping 68% since he took over as CEO in April 2018.
“His consistent EV (electric vehicle) strategy makes sense. He has a stronger focus on capital markets than his predecessors, which is benefiting the Volkswagen share,” Stifel auto analyst Daniel Schwarz told Reuters.
But others question whether the former BMW executive can survive, considering the fact that VW’s unions hold half the seats on the company’s supervisory board. The guessing game as to who might replace Diess has already begun, with Audi CEO Markus Duesmann, Porsche AG boss Oliver Blume and Volkswagen brand CEO Ralf Brandstaetter among those most commonly named. Ironically, all three appear to support the basic goal of shifting to battery power laid out by Diess.