Diess gets full backing for Volkswagen transformation
After a few tense weeks of power poker at Volkswagen, it has now been announced that Herbert Diess will remain Group CEO with the Group’s unequivocal backing for his strategy and leadership.
Yesterday’s announcement ends weeks of speculation about Diess’s position and a good deal of wrangling with Volkswagen unions, the works council. Although Diess will not receive an early contract extension beyond April 2023 as he asked for, Diess has received full support for his strategy and desired personnel changes.
Diess summarised: “Together we are rigorously pressing forward with the largest transformation in the history of Volkswagen. In the upcoming years, we will continue to invest in electromobility, digitalisation and battery technology and, at the same time, substantially reduce fixed costs and material costs throughout the Group in all brands and regions in order to ensure Volkswagen’s future viability.” The Supervisory Board has now backed several changes to the company’s structure to further the Group’s electric mobility ambitions.
Firstly, the Supervisory Board has unanimously backed the Together 2025+ strategy – in particular the company’s focus on electromobility and digitization. In a press release today the Group said: “The Board unanimously resolved to give its full support to the strategy, in particular the orientation of the company towards electromobility and digitalisation.”
Secondly, a number of personnel decisions were made in line with Herbert Diess’ wishes. Among others, Thomas Schmall, CEO of Volkswagen Group Components, will take over the newly created Group Board of Management department Technology from the turn of the year and thus be responsible, among other things, for the development and production of battery cells, the associated procurement, the marketing of Volkswagen modular kits to third parties, as well as the topics of charging and charging systems and the corresponding joint ventures worldwide. Schmall will receive a three-year contract.
In order to be able to handle the enormous investments, the Group’s Board of Management and Works Council want to agree on a plan by the end of the first quarter to reduce fixed costs by five per cent. Material costs are to be reduced by an additional seven per cent over the next two years. This is to be managed by means of another of Diess’ requests to split off the automaking giant’s purchasing and components divisions. This will be supported by Diess’ choice of leadership with the advancement of Murat Aksel to take over the purchasing division.
Following its extraordinary meeting, the Supervisory Board also announced that the main plant in Wolfsburg is to become a model factory for the highly automated production of electric vehicles of the VW brand in the medium term. To this end, a project similar to Audi’s Artemis project, (which was first announced in May this year and which became independent just this month), will be set up to bundle all activities from vehicle development to production. The home-base and representative Wolfsburg factory has been earmarked to build Volkswagen’s flagship EV.
That being said, Diess did not get everything he asked for the Supervisory Board rejected the idea of selling off the low-performing brands Lamborghini and Ducati. Both brands are to remain part of the Group. Bentley, however, will become the responsibility of Audi on 1 March in order to leverage synergies as part of the electrification strategy, as was already indicated in October just passed.
All in all, Herbert Diess has now got the backing he was looking for. On this front, the Supervisory Board released the following statement: “Herbert Diess has had a major impact on Volkswagen since 2015. Without his commitment, the transformation of the company would not have been so consistent and successful. The Supervisory Board values the determination and persistence that Herbert Diess has exhibited in pressing forward not only with technological changes and the contribution to the achievement of climate goals, but also with the financial results of the company.”
The Board confirmed Diess’ ability to lead the Group with his strategy: “The Chairman of the Board of Management and his new Board of Management team have the Supervisory Board’s full support not only when it comes to the new orientation towards electromobility and digitalisation, but also the increase of efficiency and profitability in all brands and parts of the Group.”
With particular reference to union issues and the inevitable down-scaling and re-training of workers, the Board says: “It remains our joint objective to combine the transformation with a high level of qualification and future opportunities for the employees of the Group and – taking into account existing programmes – to organise the necessary reduction of staff, including in particular the demographic change, by means of the tried and tested personnel tools.”
While the interests of the employee representatives are already coming through from the latter part of the statement, Group Works Council Chairman Bernd Osterloh separately adds the following to the decision: “There is total agreement between the Supervisory Board, the Board of Management and the employee representatives on the Group’s consistent orientation towards our strategic transformation objectives. In the course of the implementation, everyone involved continues to espouse the equal status of profitability and safeguarding of jobs, as well as the importance of training.”
Perhaps what Diess was most looking for was the support of the necessary changes from the employee union, the works council. Osterloh continued: “This once again proves that we can best meet the great challenges that lie before us only by working together.”
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