NEWSMAKER-Herbert Diess, Volkswagen’s chief disruptor, is short of the road

By Joseph White

July 22 (Reuters) – Herbert Diess took over the reins of Volkswagen AG four years ago when the German automaker was in crisis, under pressure to make sweeping changes in strategy and culture, and the former CEO of BMW came up with a new vision.

Diess will leave Volkswagen on September 1, three years before the end of his contract, with many of the goals he set for himself as the German auto giant’s chief troublemaker unfinished and uncertain.

Among them are Diess’ efforts to create a Germany-focused software company, CARIAD, within Volkswagen, and a promised IPO for luxury brand Porsche designed to help fund VW’s electrification investments. .

Diess was unlike former VW CEOs, either in his approach to business or in his personal style. In 2018, that made him emerge as the executive who pulled Volkswagen out of its Dieselgate scandal.

Diess was more focused on what investors wanted than pleasing Volkswagen unions. He believed in investing heavily in electric vehicles for the future. It has cultivated a playful social media presence and made electric vehicle leader Tesla Inc the benchmark for Volkswagen, not traditional rivals such as Toyota Motor Corp or General Motors Co.

Diess took risks, both with product and technology strategy and with his penchant for speaking his mind, rattling VW voters.

He sometimes overshot the mark, too.

In 2019, Diess appeared to allude to a Nazi-era slogan when he attempted to describe the automaker’s revenue potential by saying “EBIT macht Frei”. He later apologized for the comments and explained that he in no way meant to draw a comparison with the Nazi-era slogan “Arbeit Macht Frei”, which appeared on the gates of Auschwitz during the war. ‘Holocaust.

In the United States, Diess might be remembered as the executive who brought back the beloved VW microbus as a sleek electric vehicle and revived the Scout truck brand. But Diess angered American Volkswagen dealerships by talking about selling Scouts directly to consumers.

Diess was open in his admiration for Tesla and its CEO, Elon Musk, who offered Diess the CEO position at Tesla in 2015 before Diess decided to join Volkswagen.

PERFORMED DIFFICULT TASKS

Diess, 63, has taken on many difficult tasks during his career at VW, including cutting costs for the company’s high-volume Volkswagen brand. After joining VW in 2015 as head of the Volkswagen brand, then-CEO Martin Winterkorn gave Diess the mission to reduce the costs of the brand in two years – a mission that ensured a conflict with the German unions.

Diess struck a deal to cut 30,000 jobs through attrition, which left Volkswagen’s profitability still lagging behind its competitors.

In the end, Diess seems to have moved too fast for some on the company’s supervisory board, and not fast enough for others.

He clashed several times with union leaders at Volkswagen, who hold half of the votes on the automaker’s supervisory board.

But members of the Porsche and Piech families, major shareholders, feared that Diess was not delivering results quickly enough from its multibillion-euro investments in electric vehicles and software development.

In May, Volkswagen’s supervisory board asked management to come up with a stronger plan for CARIAD, the software unit. Earlier this month, the head of the unit told Germany’s Frankfurter Allgemeine Zeitung that the operation needed to be streamlined to move faster.

Volkswagen’s share price suggests investors had similar concerns. Since Diess took over in 2018, Volkswagen shares have remained flat and are down 24% for this year.

Tesla in those same four years has increased its market value 15 times its 2018 level and, at a market cap of $844 billion, is worth 10 Volkswagens.

Volkswagen’s board opted to replace Diess with Porsche chief Oliver Blume, a veteran VW Group executive. Some observers expect the move to signal a return to basics and less ambitious visions to transform the automaker into a technology company.

“He had a much broader view of the car. That obviously created some friction,” Silicon Valley venture capitalist Evangelos Simoudis said of Diess.

“When I see Blume come in, I see a car guy come in again.”

(Reporting by Joe White in Detroit, additional reporting by Ben Klayman)

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