Emergency exit

Volkswagen’s surprise CEO swap may trigger more board departures

Volkswagen
Let me give you one parting word of advice - watch your back. Source: Reuters

Volkswagen has let it be known it is naming a new chief executive to shake up the company, but the world’s largest carmaker may be getting more shaking up than it bargained for. The board on Thursday officially appointed Herbert Diess as CEO, replacing Matthias Müller and confirming reports that first broke earlier this week. But the surprise decision has created turmoil in the top ranks and may prompt other departures.

Executive board members feel snubbed by the move. “The way in which it was done is unspeakable,” was the harsh verdict reported by some insiders. Chief Financial Officer Frank Witter, who is highly regarded in investor circles, is among those said to be outraged by the abrupt move to oust Mr. Müller in favor of Mr. Diess. There is now a chance that Mr. Witter or other high-ranking managers decide to leave the carmaker, people familiar with the matter told Handelsblatt.

Mr. Diess, 59, hasn’t helped matters by aggressively presenting his reform plans even before he was officially confirmed in the job, the insiders said. On Tuesday, at the same meeting where top managers were informed about the new CEO, Mr. Diess already floated some of his ideas for shifting responsibilities among board members. It was as if he wanted to divvy up the pelt of freshly killed game, was the colorful description offered by one insider.

“It’s not out of the question that we will have further personnel changes to announce.”

VW insider

The first heads below the boss have begun to roll. On Thursday, VW said executive Francisco Javier García Sanz will resign from his post as group head of purchasing. He was not willing to serve with Mr. Diess at the top, Handelsblatt has learned.  The head of human resouces, Karlheinz Blessing, will also step down, VW said, confirming earlier reports. Gunnar Killian, a powerful works council member, will replace Mr. Blessing.

If more managers were to leave the company it would not matter in many cases, given the restructuring and the need to reallocate responsibilities. The one person VW really doesn’t to lose is the CFO, Mr. Witter, whose expertise and credibility would be sorely needed to help carry out the transition. Analysts portrayed him as an anchor of stability amid the diesel emissions turmoil.

VW is still seeking to put the Dieselgate scandal behind it and evidently felt a change in leadership was necessary to do so. Beyond that, the Wolfsburg-based carmaker faces the same challenges as Daimler, BMW and other carmakers to manage the transition from combustion engines to electric cars. After years of defending “clean diesel” as the solution to harmful emissions, German carmakers are now busy shifting to electric models after revelations that diesel was clean only if emissions-cheating software made it appear so.

As CEO, Herbert Diess will continue running the namesake passenger car brand and take on responsibility for R&D and vehicle IT, two areas that are crucial to promote electric and self-driving cars. VW also promoted Porsche CEO Oliver Blume to the carmaker’s executive board, making him the head of group production. Mr. Blume, 49, is seen a candidate to become group CEO in the future. A chief operating officer will become the deputy head of the VW passenger car brand to relieve Mr. Diess of some of his duties, the works council wrote in a letter to employees.

main 0201870428 Swen Pfoertner dpa – Herbert Diess new VW Group CEO April 13 2018 succeeding Matthias Mueller Volkswagen boardroom shakeup
Herbert Diess: A very happy driver. Source: Swen Pförtner / dpa

VW also confirmed it would change the legal structure of VW Truck & Bus to a joint stock corporation from a private limited company, a prerequisite to list the business, which includes the MAN and Scania truck brands. VW Truck & Bus will relocate its headquarters from Braunschweig, sources told Handelsblatt. The new company is likely to be included in the DAX index of German blue chips once it is listed, most likely next year. The controlling shareholders of VW will have no representation on the board of VW Truck & Bus once it becomes independent, sources said.

VW will also bundle some of its 12 brands, which include Skoda, Seat, Lamborghini, Bentley and Bugatti, into three groups called “Volume,” “Premium,” “Super Premium.” More changes are potentially on the horizon: Speaking for the first time as CEO on Friday, Mr. Diess said he would review all operations and could even consider selling some businesses. That would put a whole different spin on parting ways with employees and managers.

Stefan Menzel writes about the auto industry focusing on Volkswagen. Martin Murphy covers the steel, car and defense industries for Handelsblatt. Darrell Delamaide and Gilbert Kreijger adapted this article into English for Handelsblatt Global. To contact the authors: menzel@handelsblatt.com and murphy@handelsblatt.com

This article was updated on Friday to include VW’s confirmation of its reorganization.

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