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History is often full of paradoxes. At 16:30 local time on July 22, 2022, Germany, a special supervisory board that determined the fate of the career of Herbert Diess, CEO of Volkswagen Group, was quietly held through video link.
The meeting was initiated by key members of the Supervisory Board of the Volkswagen Group and was known only to a very small number of people. It was hidden so successfully that some attendees were notified provisionally that afternoon and learned of the content through attendance. The goal of the meeting was unique and clear: to fire Dees.
Around the same time, Dees wrote on LinkedIn: "After a stressful first half of 2022, many of us are looking forward to a relaxing summer vacation. Next Monday, July 24, the factory holiday will begin, and Dies sends greetings and blessings to all employees, "Let's enjoy the holiday, let's prepare for the second half of the year." ”
More than an hour after the post was posted, at 18:00 on July 22, the Volkswagen Group pushed a heavy message: Dies will step down as chairman of the Volkswagen Group's management supervisory board on August 31, and Oliver Blume will take over on September 1, and the latter will continue to serve as chairman of Porsche's management supervisory board and continue to hold this position after a potential future IPO.
It was a sudden goodbye. There was no warning beforehand. A year ago, Diess had just extended its contract until October 2025. Two weeks ago, when laying the foundation stone for the Salzgitter battery plant, all the members of the Volkswagen Group Presidium were present, and they also talked cordially with Dies, and they could not see the smoke behind the power.
According to Automotive News, The Disay's dramatic end of class took just 7 days.
On July 16-17, volkswagen group supervisory boards began to discuss whether to replace Dies, which was in the United States at the time. On 20 July, key members of the Supervisory Board decided that Dies must leave and Obomu was chosen as his successor. On July 21, Dies was informed of the supervisory board's decision and limited him to a response within 24 hours. On July 22, the Supervisory Board of volkswagen Group voted unanimously to dismiss Dies.
Now, the city head has replaced the king flag, and the Volkswagen era of Dis has come to an abrupt end. The official narrative is that the two sides parted ways on the premise of "consensus-based". But according to foreign media reports, Dis actually has no choice.
Taken together, the reasons for firing Dies include a series of strategic mistakes and delays in key product projects due to software issues. What's worse, his poor communication style and rough management attitude, his leadership and execution flaws – led to the unanimous approval of the Volkswagen Group Supervisory Board to force him to leave class.
According to people familiar with the matter, the Porsche and Pierch families, which own more than half of the Volkswagen Group's voting rights and 31.4 percent stake, have demanded a change of leadership. In previous conflicts, the two families had protected Dis many times, but now, their patience has been exhausted, and they are on the opposite side of Dies together.
The first problem is the slow progress of core software development. Diess directly controls the Volkswagen Group software company Cariad, which is defined as the cornerstone of volkswagen group's next wave of electric vehicles. But in fact, Cariad has been facing problems such as management and employee infighting, and critical operational functions often falling behind schedule.
The Wall Street Journal reported that the delay in software caused the Volkswagen Group to postpone the launch of major Audi and Porsche models, which made the Porsche and Pierch families question Disy's ability to achieve its strategic goals. Among them, the Porsche family is even worse.
"Dees is really incurable, although he has dramatically changed the Volkswagen Group and made it even better. But his communication was terrible. A source who did not want to be named said.
During his 4 years as CEO of volkswagen group, Diess has been questioned many times. The most recent one occurred late last year when he clashed with powerful unions over electrification strategy and management.
Diess will leave with his light and regrets, and the Volkswagen Group will continue its electrification revolution – trying to beat Tesla to become the world's largest electric car manufacturer, catch up on the software side and prepare for porsche IPO.
All of this will be handed over to the newcomer Obomu to lead the team to meet. Can he become the leader of the world's largest automotive group that will win the hearts and minds of Wolfsburg and be more of a team?
01.
Newcomer Obermou
Analysts believe that Obermou's helm of volkswagen group, on the one hand, heralds a change in the group's management style, and on the other hand, it is expected that he will end the erratic and unpredictable attitude of his predecessor and focus on team-based culture.
Obermou, 54, joined the Volkswagen Group in 1994 and held management positions under the Audi, SEAT, Volkswagen and Porsche brands. In almost every interview, he emphasizes the importance of teamwork and involves employees in decision-making. This is in stark contrast to Dies's confrontational attitude.
"Obermu is a team player who doesn't push himself into the spotlight." A source close to Obomu said, "But if there is no agreement, he is not afraid to make a final decision." ”
Obermou has been Chairman of the Porsche Management Board since 2015. According to foreign media reports, he is responsible for the development and listing of the Taycan electric model, and the sales of this model have exceeded 911. Porsche plans a massive IPO later this year, which further elevates Obermou's position.
Through years of successful operation, he has earned the trust of the Porsche and Piëch families. These two families effectively control Porsche Auto Holdings SE, the largest shareholder in the Volkswagen Group, and have more than half of the voting rights in the Volkswagen Group.
Porsche is Germany's most profitable car brand and a cash cow for the Volkswagen Group. Its profit margin is 16%, but they want to go to the next level, planning to increase the profit margin to more than 20% in the next few years.
The two family members and union leaders believe Obomus will reach more consensus between management and Volkswagen Group shareholders. "He was a highly trained engineer, and as Diess's successor, he has always been favored by the leaders of the two major families and unions." A person familiar with the matter revealed. But Obermou has repeatedly said he is happy at Porsche.
According to people familiar with the matter, once the controlling family decided that Dis had to leave, they approached Obomu and urged him to accept the job. "They said, Obomu agreed."
One of the people familiar with the matter said Obomu was seen as someone with a more easy-going personality and management style. "He speaks differently from his colleagues on the Executive Supervisory Board, and he has had success at Porsche."
It is unclear whether Obermou's consensus-oriented approach will succeed in the Volkswagen Group's strong union. Unions have been a source of trouble for Dies as he tries to push for electrification change.
Whether Obermou will become a pure electrificationist, like Dies, remains to be seen. Dies advocated focusing only on pure electric vehicles. Although Obermou oversaw the production of Porsche's first pure electric vehicle, the Taycan, he showed interest in other low-carbon technologies, investing in a wind-powered e-fuel production facility in Patagonia (Chile).
Another source close to Obomu said he was "not a revolutionary who wants to turn things around completely." Obermou's appointment as CEO of Volkswagen Group does not necessarily mean that Porsche's listing plans will be postponed or cancelled, and investor skepticism about Porsche's IPO has begun to spread.
In addition, if the Porsche IPO is planned to materialize, Obermou will manage both the Volkswagen Group and Porsche, which will become two separate listed entities. This approach is not popular with all investors.
"We don't think it's a good idea because in the next few months, both companies need clear and able leadership." Bernstein analyst Daniel Roeska said.
The truth is that Obermou has been identified as a potential successor to Dies for some time, even after Diess' contract was extended until 2025. Album started as an Audi trainee and then rose through the ranks of SEAT and volkswagen brands before joining Porsche in 2013 as Head of Production.
For the most part, he curbed Porsche's involvement in a diesel emissions scandal. The scandal resulted in a loss of more than 30 billion euros ($30.7 billion) to the Volkswagen Group.
02.
Old Man Dis
Diess, 64, became the latest in a long list of leaders destroyed by a hodgepodge of complex power centers in the Volkswagen group. Clashes between the manufacturer's controlling family, the union and the German state of Lower Saxony, which holds large stakes, ended Dies' career.
Dees' feats of leading elephants to turn around and electrify are there for all to see. Wolfgang Porsche and Hans-Michel Piech wrote in a joint statement that It is particularly commendable that Des has directed the Volkswagen Group strategy toward electric vehicles, which is now in a good position for further transformation.
"Mr. Dies has played a key role in advancing the Group's transformation... In driving this far-reaching transformation, Mr. Dies has shown impressive speed. He not only led the company through a challenging period, but also laid an important foundation for the fundamental transformation of the Group. Hans Dieter Pötsch, Chairman of the Supervisory Board of the Volkswagen Group, concluded.
In 2015, Diess jumped from the BMW Group to the Volkswagen Group, and shortly thereafter, the Volkswagen Group broke out with a diesel emissions gate incident. Diess has pushed through the most aggressive and radical electrification changes among traditional automakers, winning praise from tesla CEO Elon Musk and others.
On July 22, 2022, some analysts warned of a change in the management of the Volkswagen Group.
Bernstein analyst Daniel Rothka believes that volkswagen group supervisory boards definitely want Obomu to have more success in terms of software strategy, "However, this will take several months to come up with a new plan to create chaos at a time when 2023 is about to be challenging, which seems to us to be the wrong time." ”
Rothka warned that Obermou's simultaneous leadership of both the Volkswagen Group and the Porsche brand could make an already bad governance situation worse. "We don't think investors would like CEO energy being diluted... In particular, if the Porsche IPO was originally intended to gain greater independence from the Volkswagen Group. ”
In the eyes of Volkswagen Group executives, Porsche's possible IPO is a means of financing the transformation. The brand will transform into an electrified automaker with operations in the areas of software, batteries and cars. Still, the poor market environment means that the revenue from the listing may be a smaller billion dollars than initially hoped.
Obermou has been pushing for IPOs. So don't think they'll overturn their previous decisions. A source close to Porsche's IPO preparations said.
Despite broad support from analysts and investors, Volkswagen Group shares have fallen in recent months, with its preferred shares falling 24 percent, and the company's market capitalization falling below 84 billion euros, well below the 200 billion euro target set in 2019.
Outsiders in the Volkswagen Group are often struggling. The last Volkswagen Group CEO from outside was Bernd Pischetsrieder, who was appointed in 2002 for a term of less than four years.
What exactly do you think of Dies? In summary, he helped the Volkswagen Group regain its reputation after a costly and embarrassing diesel emissions scandal and brought the company into the era of electrification.
In 2015, Diess joined the Volkswagen Group, initially as CEO of the Volkswagen brand. During this time, he laid the foundation for volkswagen group electric vehicle strategy, developing core electric models for brands including Porsche, Audi, SEAT, Skoda, Lamborghini and Bentley, and plans to fully switch to electric vehicles over the next decade.
Under Diess' leadership, the Volkswagen Group plans to establish battery manufacturing companies around the world to power a new generation of electric vehicles. A recent move is the formation of a new Scout brand company in the United States to produce off-road electric pickups and SUVs.
In part, the move is to rebalance the group's heavy reliance on the Chinese market, where 40 percent of volkswagen group sales are shown.
Less than 3 months after Diess joined the Volkswagen Group, the latter was revealed to be operating diesel cars and concealing illegal high emissions.
In October 2015, Diess chaired a meeting where he and other demoralized executives discussed how to restore the Volkswagen Group's reputation. They believe that the best way to get rid of Volkswagen's reputation as a "cynical polluter" is to develop a car without exhaust emissions.
This decision has far-reaching implications. It puts Volkswagen Group ahead of competitors such as Toyota and General Motors in offering battery-powered cars designed from scratch. The Volkswagen Group has outsold Tesla in sales of electric vehicles in Europe, which recently opened an assembly plant outside Berlin.
At this time, other CEOs in the automotive industry are racking their brains about how best to transition to new technologies. Most of these new technologies are not the core of traditional automakers' expertise and require different thinking, cost structures and skill sets.
In Detroit, in recent years, GM and Ford motor leadership outlined a number of bold moves, including building a new battery supply chain and hiring new types of talent.
This year, Ford motor has taken an unusual step, splitting the fuel business and the electric vehicle business into two separate divisions. Its executives said the move helped Ford become more agile as it shifted to new technologies.
But Volkswagen Group's electric models have been plagued by software issues that raise questions about whether it has the ability to compete with Tesla. Diess has been blamed for failing to control software issues.
Ferdinand Dudenhöffer, a longtime observer of the German auto industry, wrote in an email that the software was "too much of a problem"; "So far, only Tesla has successfully developed its own software independently, and all other automakers, including the Volkswagen Group, seem to be having big problems in their transition to software-defined cars."
Four years ago, when the Volkswagen Group was in crisis and Diess was under enormous pressure to change strategically and culturally, the former BMW Group executive came up with a new vision.
Most notably, he worked to create a German-centric software company, Cariad, within the Volkswagen Group, and promised to put the Porsche luxury brand public to finance the Volkswagen Group's electrification investments.
03.
Outsiders and hardliners
Whether it's the way it does business or its personal style, Diess is unlike the previous CEOs of the Volkswagen Group. In 2018, he became the executive who led the Volkswagen Group out of the diesel emissions scandal.
Diess is more focused on the needs of investors than on pleasing the Volkswagen Group's unions. He believes that in the future, there should be heavy investment in electric vehicles. He has cultivated a playful image on social media, using Tesla, the leader in the electric vehicle industry, rather than traditional competitors like Toyota or General Motors, as the benchmark for the Volkswagen Group.
Diess's adventurous spirit, both in terms of product and technology strategy and outspoken penchant, has unnerved supporters of the Volkswagen Group.
Sometimes, he goes overboard.
In 2019, Diess tried to describe the automaker's earning potential with "EBIT macht Frei," seemingly alluding to Nazi-era slogans. He later apologized for his remarks, explaining that he never wanted to make an analogy with Nazi slogans.
In the United States, Dies may be remembered for reinventing the beloved minibus of Americans into a stylish electric car, ID Buzz, and reinvigorating the Scout pickup brand. But when Diess said it wanted to sell Scout directly to consumers, it angered Volkswagen Group's U.S. dealers.
Diess has repeatedly publicly expressed its admiration for Tesla and its CEO Musk. In 2015, just before Diesse decided to join the Volkswagen Group, Musk invited him to be Tesla's CEO.
During his career at Volkswagen Group, Diess took on many difficult tasks, including drastically cutting costs for the group's brands.
In 2015, Martin Winterkorn, then-Volkswagen Group CHIEF, gave Diess the task of cutting The Volkswagen brand costs by 5 billion euros ($6 billion) a year over two years. This task led to clashes with German trade unions.
Des reached an agreement to reduce the number of employees by 30,000 people, and the profitability of the Volkswagen Group still lags behind its competitors. Some members of the company's supervisory board believe that Dis seems to be moving too fast, but other members feel that it is not fast enough.
Diess has repeatedly clashed with Volkswagen's labor leaders, who have half the voting power on volkswagen group supervisory boards. The major shareholders in the Porsche and Piëch families worry that Diess' billions of euros in electric vehicles and software development will not yield a quick enough return.
In addition, Dees occasionally makes his frictions with unions and other stakeholders public. He likened volkswagen group to an "old, hard-shell cruise ship" that needed to disintegrate, vowing to modernize the company and speed up action.
In May, Volkswagen's Supervisory Board asked management to come up with a stronger plan for software subsidiary Cariad. Earlier this month, the head of cariad told Germany's Frankfurter Allgemeine Zeitung that cariad needed to streamline and speed up its actions.
Volkswagen Group's share price suggests that investors have similar concerns. Since Diess took office in 2018, Volkswagen Group shares have been flat, down 24 percent this year. Tesla's market capitalization is 15 times that of 2018, reaching $844 billion, equivalent to 10 Volkswagen groups.
On July 22, 2022, labor representatives issued a statement that did not perfunctorily praise the outgoing CEO, as usual. Daniela Cavallo, chair of the Volkswagen Works Commission, said jobs and profits should have equal weight in management decisions. "No aspect should be left behind, there is a reason for today's decision."
Diess once mentioned that before joining the Volkswagen Group, he had turned down Musk's job offer. This has sparked speculation that if he leaves the Volkswagen Group, will he join Tesla?
04.
"He didn't really change"
In 2021, Diess' most formidable rival, Musk, built a new factory just 200 kilometers from Wolfsburg, the headquarters of the historic Volkswagen group, and parked electric cars on the German group's lawn. The Bavarian executive's response was more enthusiastic than many expected.
In public, Dies told all those willing to listen that Tesla was paving the way, which was good for the auto industry. He enthusiastically praised Musk's achievements, even inviting the world's richest man to speak to Volkswagen group managers and trying to emulate the latter's use of social media.
Dees joked privately that he wanted Musk to move his factory "nearly 100 kilometers" from Volkswagen Group headquarters so workers could realize the American company was coming.
Although everyone knows that Dees often gaffes his words, his provocation this time is very obvious. Speaking about the manager's attempt to transform a company affected by the diesel emissions scandal into a nimble electric pioneer, Bernstein Daniel Roska said: "He may feel that if he angers others, he is going in the right direction." It's a desperate strategy. ”
Outside of the automotive business, Dies is best known for the series of mistakes he made in public. In addition to being forced to apologize for using "EBIT," earlier this year he suggested that Europe should seek negotiations with Russia, a view not uncommon in German business circles but rarely expressed on the international stage.
At its headquarters in Germany, the clashes between Diess and the Volkswagen Group's powerful labor committee are well known. The Labor Council represents 60,000 employees in Wolfsburg and most of the 230,000 new employees across Germany. Dees angered the Collective Management Committee. The group effectively controls the supervisory board through a loose alliance with Lower Saxony, the second largest shareholder of the Volkswagen Group.
Diess has also hinted that the Volkswagen Group has an excess of 30,000 employees in Germany. Last year, Diess also noted that it takes about 30 hours for the Volkswagen Group to produce an electric car, while Tesla employees only need 10 hours, a metric disputed by the Labor Committee.
As a result of the confrontation, Diess suffered several setbacks during his 4-year tenure. These include being removed from direct leadership of the Group's largest brand, Volkswagen, in 2020, and being removed from the position of head of Volkswagen's China business last year.
"He doesn't take his colleagues' feelings into account when he makes decisions." A person close to Dis said. But Dies believes that taking a combative approach is "the only way to move the Volkswagen Group forward" and to ensure the group's future.
In 2021, Diess' achievements gave it the opportunity to extend its contract early on to the Supervisory Board. As part of investing 52 billion euros to develop electric vehicle technology, he launched the Volkswagen Group's first dedicated electric vehicle.
A person familiar with the supervisory board's decision revealed that "things have been mixed," but recently, Diess' management skills have been seen as "strengths outweigh weaknesses."
Dees didn't get a chance to defend himself. Neither volkswagen groups nor unions nor shareholders are willing to publicly confirm why Diss' position is suddenly considered untenable.
Cavallo complained that the Volkswagen Group's software division was underperforming, forcing Audi and Porsche to rely on their own systems while waiting for the group's technology to catch up. Dees assumes personal responsibility for the department.
More importantly, the Volkswagen Group has performed mediocrely in the Chinese market. The Chinese market has been the group's growth engine for decades and by far the group's largest and most profitable market.
Cavallo believes that Volkswagen Group's new ID. series of electric vehicles has not sold as much as expected in Asia, in part because of the failure to cater to local consumer preferences, such as the provision of in-car karaoke machines.
A person close to shareholders revealed that in recent weeks, Porsche and the Piersh family have come to believe that extending the Diss contract is a "mistake".
When Dies spoke to employees last month, the tone was more subdued. He told employees he believed volkswagen group would surpass Tesla in global electric vehicle sales by 2025, noting that Musk had recently encountered difficulties in getting factories to run at full capacity.
"We realise that he hasn't really changed." The source added.
The Supervisory Board concluded that Obermou may be a more comprehensive manager who has an understanding of business operations. He also has the added advantage that he was born near Wolfsburg and spent his career with the Volkswagen Group.
There are also concerns that Obermou's appointment could undermine the Volkswagen Group's long-awaited plans to launch the Porsche brand, as it runs counter to some of the publicly publicized listing goals of giving Porsche more entrepreneurial freedom. At the same time, it has heightened concerns about the intricate corporate governance structure of the Volkswagen Group.
In Wolfsburg, the Volkswagen Group will not have a fresh start. Its day-to-day operations will be overseen by Chief Financial Officer Arno Antlitz. Antlitz was a consultant to McKinsey and has been promoted to Chief Operating Officer.
Late July 22, Dees tweeted a photo of him smiling next to an electric Volkswagen minivan. Earlier, in an article LinkedIn, he stressed that, in part, the Volkswagen Group's recent woes have been caused by events outside Wolfsburg, including semiconductor shortages, other supply challenges, and rising raw material and energy prices.
But even a more favorable economic environment has failed to protect his predecessors from the very different political brokers of the Volkswagen group. Diess is the fourth consecutive CEO to fail to perform on a contract.
"There are so many different interests in this company." People close to Diess said, "It's a public company, but it's largely privately held. ”
| Holiday letters to employees before Diess left office
Happy holidays everyone!
After a stressful first half of 2022, many of us are looking forward to a relaxing summer vacation.
The pressure in the first half of this year is even higher than in 2021, which is already difficult. In addition to the COVID-19 pandemic, this has had a huge impact on our Chinese colleagues, and we have also encountered a war in Europe.
Our production is still affected by the shortage of semiconductors, and we are also seeing many other supply challenges as the world economy is under pressure, as well as soaring raw material and energy prices.
We also have a lot of positive aspects. We have some favorable factors: electrification is already working globally, and demand in China, Europe and even the United States is high. In the first half of this year, many of our electric vehicle products, such as id.3 and ID.4, Q4 e-tron or Porsche Taycan, sold out months in advance.
The Chinese market has rebounded in the last few weeks and we were able to regain market share here, once again becoming the undisputed number one. We launch exciting and exciting products such as ID.Buzz. Luxury cars do exceptionally well.
In many of our regions, we can continue to improve our market position and financial position, further enhancing our resilience. As you can see, these will be reflected in our performance data, which we will announce next week.
We have very popular products, and our sourcing and manufacturing teams are doing everything they can to increase production – still in a workgroup fashion. They have successfully tackled the shortage of semiconductors and wiring harnesses, signing strategic contracts with chipmakers ST and TSMC for the first time.
Our sales team is doing our best to keep our customers happy.
So, thank you for your efforts. Congratulations on our incredible achievements in most areas of our business and I am very satisfied with our performance. Semiconductors should improve in the second half of the year. I am confident that we will gain further upward momentum in the coming months.
Strategically, we also made significant progress in the first half of the year.
We broke ground at the giga battery factory in Salzgitter and built another battery factory in Valencia to lay the foundation for the electrification of the Spanish plant.
We completed the acquisition of Europcar, laying the foundation for the future of our mobile business. We had our first test drive in Munich with a ID.BUZZ AD robot shuttle. In the U.S., we decided to establish a new independent company to enter the electric pickup and SUVs market and revive the iconic Scout brand.
We are preparing for Porsche's initial public offering, which will concretize the value of porsche business and provide the Group with additional financial flexibility to drive transformation.
I would also like to congratulate our new colleague, Hauke, who really took on her task of improving our processes and IT tools. She significantly strengthens and empowers our IT organization. For the first time, Hildegard brought all the sales teams together to discuss a vision that would revolutionize the way the group sells, with a direct relationship with customers at its core.
Thomas got off to a great start at Volkswagen branding, making very quick progress in rebranding in bulk – impressive leadership.
Ralf has set out for China with ideas and plans to further improve its business in China, add more technical capabilities, and establish a more independent and more room for maneuver china's local supervisory board.
Manfred keeps many legal issues under control and continues to improve compliance and integrity.
Thank you. Thanks to colleagues who work in the Volkswagen Group and other brands in thousands of locations around the world. You guys are great.
Well, let's enjoy the holidays, let's get ready for the second half of the year.
Herbert
(Part of this article is a compilation of Reports by Automotive News, Staff and Wire Reports, Reuters, Finacial Times, wall Street Jornal, and some images from the Internet)