Diess departs VW cars – Brandstätter to take over

After news broke last night, that the VW Supervisory Board had withdrawn the leadership of the VW Passenger Cars brand from Group CEO Herbert Diess, more details behind the reasoning have come to light and not all of them look very pretty.

As reported, the former COO Ralf Brandstätter is taking over, so that Diess will have “greater leeway for his tasks as Group CEO,” according to the first statement by the Supervisory Board that followed an extraordinary meeting on Monday. The new responsibilities for the management of the brand and the Group will take effect on 1 July. Within the Group Board of Management, however, Diess will retain overall responsibility for the Volkswagen Passenger Cars division and the Volume brand group. According to the announcement, the aim is “to focus more strongly on the respective tasks at the top of the Group and brand in the current transformation phase of the automotive industry”.

Diess praised Brandstätter as one of the most experienced managers in the company. “He has already successfully led Volkswagen as COO over the past two years and played a key role in shaping the transformation of the brand,” said Diess. “I am therefore delighted that Ralf Brandstätter, following the far-reaching strategic decisions of recent years, will now continue to drive forward the development of the brand as CEO with renewed vigour.”

However, what sounds like a comprehensible and logical decision given the major challenges facing VW and other established carmakers is also a certain loss of confidence in Diess on the part of the Supervisory Board. The Austrian-born executive is under increasing pressure to ensure that the transformation he has initiated also produces results. The problems with the market launch of the Golf 8, the software problems with ID.3 and also management errors had recently led to sharp internal criticism of Diess.

Last week, the German newspaper Handelsblatt reported that the Supervisory Board considered Diess to be in good stead, that it had initiated the changeover from combustion vehicles to electric cars and invested in digitalisation – both of which are urgently needed measures in Wolfsburg. However, the report does not portray Brandstätter as an ally of Diess. At a meeting of the Supervisory Board in May, the Group’s CEO is even said to have named Brandstätter as responsible for the problems with the new models as Diess considered the then COO Brandstätter in charge of the operative business in the VW brand board of directors. Instead, the paper lists Audi CFO Arno Antlitz and VW Development Director Frank Welsch as allies of the Austrian.

Recently, there were even rumours that Diess wanted to bring Porsche CEO Oliver Blume to Wolfsburg as Volkswagen brand chairman. However, the publication Auto, Motor und Sport, referring to company circles, reported that Blume was to become Chairman of the VW brand board of directors. This position has now been filled.

For Diess, the new management constellation means not only that he should concentrate on his role as Group CEO – but that, according to the Supervisory Board, he must now do so.

In a further announcement, the Group announced that Stefan Sommer would leave Volkswagen at his request on 30 June 2020. The former ZF Board of Management member had been in charge of the purchasing department and the components, and CFO Frank Witter is now temporarily assuming these tasks.

Internal Rift

Handelsblatt provided further information regarding the power shift: they claim the real reason why Diess had to relinquish the management of the brand was not his duties as Group CEO. Instead, Diess had accused the members of the executive committee of leaking internal company information to the media. “These are crimes that happen in the Presidium of the Supervisory Board and can obviously be attributed there,” Diess is said to have said last Thursday in front of 3,400 Group executives. Diess was very angry about the resulting reports on problems with the critical Golf 8 and ID.3 models.

In addition to the Chairman of the Supervisory Board, Hans Dieter Pötsch, the Executive Committee consists of Wolfgang Porsche, Stephan Weil, Jörg Hofmann, Bernd Osterloh and Peter Mosch, i.e. representatives of the two largest individual shareholders with the Porsche/Piech family and the State of Lower Saxony, as well as essential trade unionists and employee representatives with Hofmann, Osterloh and Mosch.

Diess’ accusation of the breach of law was of course not well received by the Supervisory Board. At a meeting convened on the same day, the Board even allegedly discussed Diess dismissal, but this was rejected “because of formal concerns” given the unscheduled meeting held at short notice. At a further meeting on Monday, it was agreed that Diess would have to give up the management of the VW trademark.

It did not take long for an official apology to be issued by Diess, who said his previous statements were “inappropriate and wrong”. The Supervisory Board summarily accepted the apology, and “will continue to support him in his work”.

With reporting by Sebastian Schaal, Germany.

volkswagen-newsroom.com (Diess/Brandstätter), volkswagen-newsroom.com (Sommer), handelsblatt.com (in German), volkswagen-newsroom.com (apology)