Diess replaced by Brandstatter as CEO of Volkswagen – software problems with ID.3 and Golf 8

VW CEO Herbert Diess hands over the management of the core brand to the previous co-managing director Ralf Brandstätter. The supervisory board of the world’s largest car maker announced on Monday evening after an extraordinary meeting in Wolfsburg.

Ralf Brandstätter, new CEO of Volkswagen Passenger Car Brands posing with VW ID.3 – (photo by VW)

Diess, who, as chairman of the brand board, was also responsible for the division with the VW logo and came under criticism due to technical problems, was to get “more freedom for his duties as CEO”.

As VW brand boss, Diess had been the focus of criticism from the works council. The employee representation, which is particularly powerful at Volkswagen, accused him of management errors and made him responsible for the software problems with the Golf 8 and the new ID.3 electric car. It has long been suspected that Diess should be replaced as the brand boss.

Diess explained that Brandstätter had successfully run the brand as COO in the past two years and had played a key role in shaping its transformation. “I am therefore pleased that Ralf Brandstätter will now continue to vigorously drive the development of the brand as CEO after the profound strategic decisions of the past years.”

Herbert Diess, now ex-Chairman of the Board of Management of the Volkswagen Passenger Cars brand – (photo by VW)

In addition, the group announced another staff on Monday evening: Purchasing director Stefan Sommer is already leaving the company. In September 2018, the former ZF boss succeeded long-time chief buyer Francisco Javier García Sanz. Frank Witter, CFO, will now take over his duties on a provisional basis. According to corporate circles, Sommer goes one year before the end of his contract – and therefore waives an annual salary of around five million euros.

Supervisory Board confidence wanes

The personnel quake in Wolfsburg shows that the confidence of the supervisory board in the group management is fading. In the production of the core brand in particular, there has been a huge problem recently: Due to the software problems with the Golf 8 and the ID.3, dealers and customers are left empty-handed. Last Thursday, VW was able to lift the delivery freeze for the new Golf.

The two new models are decisive for the future of the group. The long-running favorite Golf brings quantities and sales. The ID.3 electric car should be the Golf of the future, it should bring Volkswagen into the digital and electric age. The success of the two models will also determine the future of the group boss, even if he now surrenders the core brand.

He has been in the VW Group for five years, and as CEO for two years. During this time, the 61-year-old has set many course. He initiated the switch from combustion engines to electric cars and invested billions in the digitization of vehicles.

But there is a power struggle between Diess and the workers. The works council has traditionally been very influential in the VW Group. Works council chief Bernd Osterloh himself is said to have insisted when Diess took office that the management of the core brand remains in the hands of the group boss in order to further guarantee VW a special position in the brand empire.

But in the end, the confrontation between the head of the group and the head of the works council paralyzed large parts of the organization – and at a crucial time. Above all, it was heard from the workforce and the works council that this must make the ongoing difficulties in the production of the Golf 8 and the new electric car ID.3 a top priority and show more presence.

In addition, there was criticism of the entire management of the preparation of the fiasco for a racist golf advertising video on the Internet. The influential IG Metall shop stewards said employees were “massively concerned” about the image VW was giving.
This was accused of wanting to change too much too quickly. In this way, problems with the completely new golf electronics could not be completely eliminated, despite numerous task forces. Then there was a delivery freeze – which has since been lifted again – due to disruptions in the emergency aid assistant.

Ralf Brandstätter, new CEO of Volkswagen Passenger Car Brands – (photo by VW)

Works council chief Osterloh had already approached the manager openly in March: “The consequences of this unrealistic planning are completely exerted pressure on the colleagues on the assembly lines.” In 2019, less than ten percent of the originally targeted 100,000 Golf 8s could be built.

There is also a problem with the electric ID.3, with which VW wants to build a Golf successor in the mass market and establish an E series with billions of dollars in investment. The model from the Zwickau plant, which is to be ordered from mid-June, will initially only come with a slimmed-down range of functions. Reason: software delays.

“More and more colleagues are dissatisfied with their employer”

A lot of cars are already in heaps anyway, because sales in the corona crisis have drastically decreased. The manager who came from BMW to VW in 2015 had also played hard in the week-long debate about purchase bonuses to stimulate demand. This called for “powerful measures” even for modern combustion engines – the federal government only decided to increase subsidies for electric and hybrid cars, to the annoyance of many colleagues.

The confidence bodies of the German VW plants, which are a kind of hinge between the works council and the staff members organized at IG Metall, cited the highly controversial Instagram video on the Gulf as another problem. “The measure is now unbearable for us,” they scolded. “In the meantime, a situation has been reached in which more and more colleagues are ashamed of their employer and partially deny it.”

Ralf Brandstätter

The management style of Diess is also causing displeasure on the Supervisory Board, reports the Reuters news agency, citing insiders. This had to apologize for statements made at a management meeting last Thursday in which he had criticized the Supervisory Board “for its integrity and understanding of compliance,” said a person from the Supervisory Board.

At the end of last week, the control committee is said to have given longer advice on the future VW leadership. According to an insider, the future of Diess at Volkswagen was on the button. The background to the dispute is apparently also Diess’ desire for an early contract extension. The “Manager Magazin” had recently reported that Diess, after the termination of the process due to market manipulation in the diesel scandal, presented this idea to IG Metall boss Jörg Hofmann, who was responsible for this in the case as a supervisory board vice. Diess apparently attributes the fact that this would be public to an indiscretion.

Contact the author: marlonschwartz@wheelsjoint.com

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