Herbert Diess: VW CEO runs out of road

Herbert Diess’s tenure at VW came to a premature end after he fell foul of the group’s powerful owners. Matthew Partridge reports

Herbert Diess and a VW ID Buzz
Herbert Diess committed a series of blunders
(Image credit: ©  JOHN MACDOUGALL/AFP via Getty Images)

Until the end of last week Herbert Diess looked “every inch the modern, global auto titan”, say John Arlidge and Jon Yeomans in The Sunday Times. However, the CEO of Volkswagen was evidently “too brash, too bold and in too much of a hurry for many of the company’s key stakeholders”. VW announced that he had been forced out three years before the end of his contract by a unanimous vote of the carmaker’s supervisory board. The move has upset many institutional shareholders, with analysts calling it “another illustration of dysfunction at VW”.

Diess’s departure was at least partly the result of “a series of public blunders”, says Joe Miller in the Financial Times. These include saying he was “not aware” of detention camps in China’s Xinjiang region and using the insensitive phrase “EBIT macht frei” at a company event. He also gained “notoriety” for his “skirmishes” with VW’s “powerful works council, which controls several seats on the company’s supervisory board”. Unions were particularly “angered” by his suggestion that the group had 30,000 excess staff and his complaints that Tesla employees managed to produce an electric car in just a third of the time it took VW.

Clashes with the workers

Diess’s gaffes and “frequent clashes with powerful worker representatives” may have played a role in his departure, but they were survivable as long as he had “unwavering support” from the billionaire Porsche and Piech family, the majority owners of VW, says Monica Raymunt and Christoph Rauwald on Bloomberg. However, his “key project failures” gradually persuaded the family that “he had to go”. These failures include delays to the “scheduled rollout of important new models, including the electric Porsche Macan SUV” as well as struggles “to muster broader support” to implement a €89bn electric-vehicle (EV) and software strategy.

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Still, even his harshest critics acknowledge Diess’ “strategic vision” and his “achievement in transforming VW’s culture for the [EV] age”, say William Boston and Georgi Kantchev in The Wall Street Journal. His emphasis on moving away from fossil fuels “has seen VW’s brands, including Porsche, Audi, Seat... and Bentley develop core electric models with a plan to shift fully to EVs this decade”.

The change at the top “probably won’t derail Volkswagen’s electric vehicle ambitions”, especially since Porsche – under VW’s new CEO Oliver Blume – “has rolled out the successful Taycan model and expects green vehicles to be as profitable as combustion engine cars in two years”.

A “fresh start” may even help Blume persuade the wider company to raise investment in EVs “while improving lacklustre profitability”. But Blume’s appointment could muddy Volkswagen-Porsche’s already complex governance: he will still be in charge of Porsche even though Volkswagen plans to list the luxury brand. If this set-up produces a “greater muddle”, investors “may start to miss... Diess’s gaffes”.

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri