After the stock market’s closing, Volkswagen announced a complete surprise on Friday evening. CEO Herbert Diess is leaving the company at the end of August. On 1 September, Porsche boss Oliver Blume will take over and lead both companies in parallel. The market reacted negatively on Monday, questions arise everywhere if the new CEO will be able to do what its predecessors couldn’t.
Although there had been repeated reports in recent years about a possible departure or sacking of Diess, the last time the Austrian had to fear for his job was in December 2021 – after a conflict with the mighty works council.
The announcement of his actual departure on Friday evening after the close of the stock exchange nevertheless came as a surprise. Diess sent a holiday greeting to his personnel that afternoon before going on his summer holiday in a LinkedIn post. Apparently, there had been a meeting at the highest level somewhat before, when Diess was on a works visit in the US. It was there and then that his fate was sealed.
There are no official details on the reasons for the departure. However, the company’s announcement states that Diess is leaving as CEO “by mutual agreement”, and there is also talk of a generational change.
“During his tenure as Chairman of the Board of Management of the Volkswagen Passenger Cars Brand and as Chairman of the Group Board of Management, Herbert Diess played a key role in advancing the company’s transformation,” said VW supervisory board chairman Hans Dieter Pötsch. “The Group and its brands are viable for the future; its innovative capabilities and earning power are strengthened. Mr. Diess impressively demonstrated the speed and consistency with which he could carry out far-reaching transformation processes.”
Quarrels with too many players
Diess always had the support of the Porsche-Piech family during this transformation and the numerous quarrels, but this was no longer the case. The German publication Handelsblatt writes concerning corporate circles that the owning families not only approved of the departure, but the initiative to kick him out also seems to come from the Porsches and Piëchs.
The final impetus was probably the dispute over the orientation of the software subsidiary Cariad, where Diess had taken over the chairmanship of the supervisory board from Audi boss Markus Duesmann some time ago. As a result, Diess is now considered partly responsible for the delays impacting important electric vehicle model launches.
The ambitious Diess had once moved from BMW to Volkswagen when he lost out to his former board colleague Harald Krüger in the duel to succeed Norbert Reithofer at the top of the Münchner manufacturer. Diess initially became the brand manager of Volkswagen in the spring of 2015. At BMW he was renowned as the ‘Knochenbrecher’, the ‘bone crusher’ in his negotiations with the suppliers where he saved billions for its Munich employer.
Even though he was regarded as involved in the Dieselgate scandal, Diess was able to remain brand boss. In 2018, he succeeded former Porsche boss Mathias Müller, who had steered VW through the Dieselgate disaster, as brand and group CEO in Wolfsburg.
His task was to reconstruct the whole group and make it number one worldwide. Diess’s fundamental strategy was accelerating the electrification and cutting costs.
Pötsch’s declaration on this is unambiguous: “Not only did he steer the company through extremely turbulent waters, but he also implemented a fundamentally new strategy”.
According to Handelsblatt and other sources, the leadership issue in the group was less about drives and technology strategies but about leading itself. According to an insider, Diess’ unilateral actions – for example, when he surprisingly questioned 30 000 jobs at the main plant in the supervisory board – and his provocative leadership style endangered the cohesion within the group.
Also, the fact that Diess openly confessed its admiration for Tesla’s boss and ‘enfant terrible’ Elon Musk didn’t fall well inside the company. And then, there were constant clashes with the workers’ associations and, indirectly, the unions (via the Saxony state involvement holding 20% of the VW shares).
In 2020, Diess’s position was hanging by a thread when he clashed with the workers and the supervisory board. At that time, he lost the lead of the brand Volkswagen to Ralf Brandstätter and had to concentrate on the Group strategy and the development of Cariad, the software subsidiary. Then, a little later, Daniela Cavallo was named the new president of the Workers’ Council, and here also, the communication was far from optimal.
There was an increasing need for a CEO with whom the other top managers could live. “There was hardly any basis left for proper cooperation,” an insider said. “In reality, it’s an outright sacking so that the group becomes workable again.” It is indeed a fact that top managers recruited from outside the company don’t have eternal life at VW. Another example of this was Bernd Pischetsrieder, also ‘headhunted’ by (then) big boss Ferdinand Piëch after he left BMW, but that didn’t work out either.
In September, Oliver Blume, Porsche’s boss since 2015 after Müller left to save the group, takes over in Wolfsburg. Porsche has one of the sharpest electrification strategies among the premium and sports car brands. In 2030, except for the 911, all of the Zuffenhausen model series will be electric.
The fact that not only SUVs and sedans will be converted to e-drives but also the 718 is a sign of how serious Porsche and Blume are about electromobility. However, unlike Diess, Blume relies on e-fuels to continue the iconic 911 with a combustion engine. Also, the numerous Porsche classic cars still registered can be driven in a CO2-neutral way.
Whether Blume sees e-fuels only in expensive sports cars for the correspondingly affluent clientele or whether combustion engines with synthetic fuels will be kept alive a little longer in the group’s volume models is still open. Not so long ago, the Volkswagen Group was one of the leaders in internal combustion technology.
There are still a lot of people (and many engineers) inside and outside the company who have their doubts about putting all possible resources into electrification. Europe is pressing, and the US seems more hesitating while China doesn’t seem to like the current electric VW products very much. And there’s also the rest of the world, where electrification can still take a while.
A team player comes in
The supervisory board trusts Blume, who was born in Braunschweig and is a ‘real VW man and is considered to be an outstanding team player. The supervisory board more or less communicates this directly about Blume in their statement on the executive change: “Blume is also to continue to drive forward the transformation with the entire executive board – with a leadership culture that places the team concept at the center.”
In a statement from Porsche, the new VW CEO indirectly addresses this issue: “I am very excited to lead both Porsche AG and the Volkswagen Group. My focus will be on the customers, brands, and products.”
“The human component is always at the forefront for me,” Blume stipulates. “The Porsche team can rely on me to lead the company over the long term after a possible IPO. We have put Porsche on a successful footing technologically, financially, and culturally – and see ourselves as a sustainable mobility leader.”
“Oliver Blume has proven his operational and strategic skills in various positions within the Group and several brands and has managed Porsche AG from a financial, technological, and cultural standpoint with great success for seven years running,” said VW Supervisory Board Chairman Pötsch.
“From the Supervisory Board’s point of view, he is now the right person to lead the Group and to enhance further its customer focus and the positioning of its brands and products.” Nevertheless, there are already question marks about Blume not leaving the helm of Porsche to someone else. The very successful luxury sports car maker is going IPO to generate a lot of money for VW’s transformation. Some wonder if one man alone can handle this. Diess, apparently, couldn’t.