New driver

VW CEO Matthias Müller resigning, Herbert Diess to become new boss

main 75448980 Philipp von Ditfurth DPA – VW CEO Matthias Mueller right Herbert Diess VW brand executive left
Handing over the mic to you, Herbert. Source: Philipp von Ditfurth / DPA

When Herbert Diess still worked at BMW, colleagues described him as a “hard dog” and a man of extremes who didn’t accept mediocrity. Others said the 59-year old engineer, who successfully cut supplier expenses by €4 billion at BMW, was “successful, ambitious and power-hungry.” Mr. Diess will now have to prove his worth as the head of Volkswagen, the world’s largest carmaker.

VW CEO Matthias Müller, 64, will step down and make room for the former BMW manager, who has worked with VW since July 2015, Handelsblatt has learned. VW’s head of human resources, Karlheinz Blessing, will also resign, sources said. The Porsche und Piëch families that control Volkswagen as well as major shareholders Lower Saxony and Qatar feel the world’s largest carmaker needs a reboot after Dieselgate.

The Wolfsburg-based carmaker offered little comment beyond confessing it may get a new boss as part of a management reorganization. “Mr. Matthias Müller showed his general willingness to contribute to the changes,” said the carmaker, which also produces Audi, Porsche and Lamborghini cars as well as MAN and Scania trucks.

The emissions scandal, which became public in September 2015, continues to haunt the company: Last month, VW offices were again raided and, in January, the carmaker was attacked for supporting gas tests on monkeys and humans.

The fraud, which affects 11 million cars globally and has cost €25 billion so far, hasn’t really touched Mr. Diess, because he joined in the summer of 2015 as head of the VW passenger brand – Dieselgate dates back to 2006. At the time, engineers discovered VW diesel cars could not comply with strict US emissions laws without fooling regulators. The only scratch on Mr. Diess’ reputation is an investigation into possible violation of investor disclosure laws at VW.

main 53187009 Bloomberg – VW Volkswagen core brand passengers cars CEO Herbert Diess Las Vegas CES hippie bus van Jan 2016
Riding glassy waves to the top, Herbert Diess. Source: Bloomberg

As with many high-flyers, his career is proof of his many talents. After earning a PhD in mechanical engineering in 1987, he moved to car component maker Bosch and became a general manager of a plant in Spain. After switching to BMW in 1996, he fine-tuned production of the British Mini brand and then spearheaded a draconian cost-cut at BMW’s suppliers. “Some threatened to stop deliveries,” an automobile outfitter recalled. “Mr. Diess then had to backpedal.” He’s also credited for setting up BMW’s electric car brand, the BMW i.

At VW, he has earned his stripes despite his short tenure. At the end of 2016, he reached a deal with the carmaker’s powerful labor representatives to cut 23,000 employees in Germany by 2020 and achieve annual savings of almost €4 billion. Mr. Diess has also managed to more than double the operating profit margin of the VW brand, which was notoriously low at 2 percent before he moved to Wolfsburg.

In 2015, he was already tipped as a potential CEO of the parent after he lost out to Harald Krüger to become BMW’s boss. As a VW executive, Mr. Diess’ straight talk and confident and calm appearances on stage have earned him the respect of the influential family shareholders and labor representatives, who also occupy half of VW’s non-executive board.

As a relative outsider, he will not shy away from taking drastic measures if needed, a manager told Handelsblatt. In cooperation with the supervisory board, Mr. Diess will also be able to choose new executives, because five out of nine of his colleagues are expected to resign in the short- to medium-term due to retirement or as part of the company’s management renewal.

Last November, Mr. Diess admitted that the VW brand “was in a very poor state even before the diesel scandal,” but he had seen positive changes, with successes in the US and South America and the company becoming less hierarchical. As CEO, he will now have to prove he can turn the group with 12 diverse brands, more than 600,000 employees, and €231 billion in revenue into a successful maker of electric and self-driving cars, and make Dieselgate just another chapter in the carmaker’s 81-year old history.

Martin Murphy covers the steel, car and defense industries for Handelsblatt. Markus Fasse is specialized in aviation and automobile industry news and based in Munich. Christian Schnell covers the auto industry for Handelsblatt’s companies and markets section. Rebecca Eisert is an editor with WirtschaftsWoche, a business weekly part of the Handelsblatt Media Group. Gilbert Kreijger, an editor with Handelsblatt Global, adapted this article in English. To contact the authors: murphy@handelsblatt.com and kreijger@handelsblatt.com

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