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Leadership crisis looms as VW Group CEO demands contract extension

Move forces vote of confidence at VW and puts dint in Diess’ halo

Herbert Diess, Chief Executive Officer of the Volkswagen Group, has reportedly brought a leadership crisis upon the German car manufacturer after he demanded a contract extension as head of the company. Though his contract does not expire until April 2023, Diess has made it clear that he wishes to keep his position well into the future – in a move that has essentially called for a vote of confidence among his senior colleagues.

Diess in 2018. Photo: Matti Blume via Wikimedia Commons

The specific details of Diess’ vote of confidence stem from sources within Volkswagen, who reported to Reuters in early December that key stakeholders within the company had opposed attempts by the CEO to fortify his position beyond 2023. While no official word has been issued by VW themselves, an inside source has been quoted as saying, “The executive committee will not be pressured into a decision, there is no rush.”

The committee responsible for the vote of confidence can certainly put pressure on their Group CEO should they wish to, led by VW chairman Hans Dieter Poetsch and VW labour boss Bernd Osterloh, as well as the manufacturer’s owning families – who control a majority voting right.

While “the families continue to support Diess,” says a spokesperson from Porsche Automobil Holding SE – the company which possesses the largest voting stake in Volkswagen – it is important that the CEO retains what financial analyst Arndt Ellinghorst underlines as “full backing from VW’s largest shareholders, the Porsche families.” He elaborates to suggest that what the company lacks currently is “the right corporate governance.”

It is customary for German companies to negotiate contract extensions for their high-ranking staff only one year ahead of expiration, yet Diess made his demands early in relation to Osterloh’s intrusion of the CEO’s overhaul plans.

This is not the first time this year Diess has been intruded upon by Volkswagen. The Munich-born 62-year-old was removed as CEO of VW automobiles in June, leaving him with “greater leeway for his tasks as group CEO,” running a conglomerate that has twelve brands – including Lamborghini, Audi, Ducati, Bentley and Porsche – under its manufacturing umbrella. While Diess organises the broader corporate strategy of the Group, day-to-day operations of the VW brand fell earlier this year to Ralf Brandstätter, an industrial engineering graduate who had been with the Volkswagen Group since 1993 before rising in the esteem of Diess himself, who called his successor “one of the company’s most experienced managers.”

The largest automotive manufacturer by volume of sales globally – and, according to The Economic Times, worth EUR 77.2 billion – Volkswagen was lifted out of the disgrace of its “Dieselgate” emissions scandal in 2015 by Diess’s leadership. Following his departure from BMW AG, where he had served in various top-end positions from 1996 to 2015, Diess channelled EUR 73 billion into VW’s electric vehicle development and returned the brand to public favour.

A report last month from Financial Times asserts that the company has committed a further EUR 33 billion to its electric division, a pledge that Diess hopes will increase the company’s market capital threefold to a value of EUR 200 billion – and raise its stature against electric vehicle behemoth Tesla.

The hope is that Diess retains his seat as Group CEO beyond 2023, even his Wunderkind halo has been somewhat tarnished by his seemingly snap decision to force a vote of confidence. He has not kept his frustrations to himself, however. Sharing in a LinkedIn post that his determination to “change the ‘Volkswagen system’” and its “antiquated structures,” Diess called out “our corporate headquarters” for neglecting to offer their support.

While this may not yet be a case of ‘the knives are out,’ it’s certainly an instance of fingers being pointed.


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