Volkswagen CEO Herbert Diess to step down in surprise move

No reason was given for the departure of Diess, who will also quit his role as chairman on September 1

Volkswagen said the departing Herbert Diess 'played a key role in advancing the transformation of the company'. Reuters
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Volkswagen chief executive Herbert Diess, who was at the helm of Germany's biggest car maker during the controversial emissions cheating scandal, will be stepping down, the company said on Friday.

Mr Diess, who is under contract until 2025, will leave on September 1, Wolfsburg-based Volkswagen said in a surprise announcement on its website on Friday. No reason was given for the departure of Mr Diess, who will also quit as chairman of the group's board of management "by mutual agreement".

Oliver Blume, the chairman of Volkswagen subsidiary Porsche, will take over as chief executive. He could continue in the former capacity after a possible initial public offering from the company.

Hans Dieter Poetsch, chairman of Volkswagen's supervisory board, cited Mr Diess's contributions to the company, noting how he was able to navigate the car maker through difficult periods and helped to set it up for the future.

Mr Diess "played a key role in advancing the transformation of the company. The group and its brands are viable for the future; its innovative capabilities and earning power are strengthened", Mr Poetsch said.

"Mr Diess impressively demonstrated the speed at which and consistency with which he was able to carry out far-reaching transformation processes. Not only did he steer the company through extremely turbulent waters, but he also implemented a fundamentally new strategy.”

Shortly before his departure was made public, he said in a LinkedIn post that the company was in "good shape" for the second half of 2022.

Mr Diess took over as chief executive from Martin Winterkorn in 2015 amid the diesel emissions scandal, which uncovered that Volkswagen manipulated its software to lower emissions during tests.

The pair, along with Mr Poetsch, were charged with stock market manipulation over the emissions scandal by German prosecutors in September 2019.

EU authorities had also determined that Volkswagen and fellow German car makers BMW and Daimler colluded to limit the development of emissions-cleaning technology in cars.

The scandal hit Volkswagen's stock hard, plunging about 20 per cent and wiping off more than $13.2bn from its market value at the time. The company was also forced to pay more than $33bn in fines, settlements and buy-backs.

Mr Poetsch credited Mr Diess with "a number of innovative product ideas" and revamping Volkswagen's portfolios. The most important, however, was Mr Diess push to shift to zero-emissions cars.

"Groundbreaking platform-based approaches have been initiated such as, recently, in the case of battery cells as well as mobility services," Mr Poetsch said.

Analysts, however, said he wasn't able to create change within the company and that the carmaker has fallen behind in some key developments, such as software implementation.

“With industry challenges accelerating and a growing number of new and fast-follower challengers, new management offers an opportunity to revisit strategy or jump-start stalled relationships," analysts at Jefferies Equity Research said in a research note.

Still, Volkswagen credited Mr Diess with the new organisational orientation of the company with more independent regions, as well as the introduction of brand groups and series.

"In addition, the group’s capital market focus has been advanced and the viability of key group sites safeguarded," the statement added.

This week, Volkswagen said its cheaper brands — including Seat and Skoda — will share more parts and factories to boost efficiency in a bid to raise the portfolio's profitability.

Shares of Volkswagen closed down more than 1.1 per cent on Friday.

Updated: July 23, 2022, 2:10 PM
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