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Global Economy

How things will continue at Volkswagen

Herbert Diess is said to have been on the verge of leaving as VW CEO twice in the past. On Friday evening the time had come: It became known that the CEO, who had been repeatedly criticized for his edginess and erratic nature, actually had to go.

On September 1st, Porsche boss Oliver Blume is to succeed him and reorganize the car manufacturer. According to company circles, Diess will continue to work for the company afterwards. The 63-year-old will initially remain as a regular consultant until the end of the contract in autumn 2025 and will continue to be paid, reports the dpa news agency.

Dual function for flower

With a short message after a meeting of the supervisory board, the end of the Diess era was clear on Friday after almost seven years in office. According to VW, the decision about the change at the top was “consensual”. Diess "significantly drove forward the transformation both during his time as CEO of the Volkswagen brand and of the group," said Supervisory Board Chairman Hans Dieter Pötsch, thanking the outgoing CEO.

In particular, the former BMW manager pushed the conversion of VW to e-mobility and the expansion of the business to include mobility services. Without him, the group with its electric models would not be where the largest European car manufacturer is today, according to experts.

Blume, who is also to remain head of Porsche, has long been considered the "crown prince" and a potential successor at the top of the group. He is described as a highly talented manager and is considered to be calm – both in his communication and in his strategic approach. In day-to-day business at VW, Blume is to receive support from VW CFO Arno Antlitz.

Difficulties with new IT platform

An exciting question now is how much Blume will change in the group. Diess is highly regarded in the industry – especially for its electric offensive. However: Recently there have also been difficulties, especially with the tedious development of our own software. At a meeting two weeks ago, the supervisory board discussed the discrepancies in the expansion of the Cariad IT division.

The Cariad project is about an operating system that is to be used in the future as a uniform program and electronic platform for all models. "There are quite a few people at VW who say: We don't need that at all, others are more competent," explains mobility expert Guido Reinking in an interview with tagesschau.de.

Despite objections from the subsidiaries Audi and Porsche, for example, the project will continue for the time being. The problems with the software are said to have played a role in the end of Diess. In the end, the manager probably stumbled over the fact that VW was "not really making any progress on this important issue," said Stefan Bratzel, director of the Center of Automotive Management (CAM) research institute at the Bergisch Gladbach University of Applied Sciences, compared to tagesschau24.

"VW is years behind Tesla"

According to Reinking, networking and digitization in the car are much more decisive for the future of the industry than the drive. "That's what VW urgently needs to do now, because the company is actually years behind its competitor Tesla."

According to the car expert Ferdinand Dudenhöffer, Blume will therefore realign the division. "Cariad will not stay the way it was," said the Duisburg professor. "The plan to do everything independently and centrally should be reconsidered."

Observers are curious to see whether Blume can accelerate the development of a common IT platform for the group's car models. Expert Bratzel certainly believes that he is capable of this: "It has always been the case that Blume has managed to develop a good strategy for Porsche." It is not for nothing that the sports car manufacturer is a source of returns for Volkswagen.

Blume also stands for electromobility

Otherwise, there is much to suggest that Blume will continue Diess' strategy. This is also indicated by the new consulting activity of the previous VW group boss.

After graduating from high school in Braunschweig, Oliver Blume studied mechanical engineering and did his doctorate at the Technical University there. The 54-year-old knows the VW Group with its many different brands very well. He started as a trainee at Audi in 1994 and worked his way up. This was followed by a position at Seat before he became Head of Production Planning at the Volkswagen brand in 2009. Four years later, Blume ended up as a board member at the sports car subsidiary Porsche in Stuttgart. Before he was appointed CEO in 2015, he was responsible for production and logistics.

Blume geared Porsche towards electromobility early on and spent billions on it. At the same time, however, he continued to generate reliable profits. Since the introduction of its first all-electric sports car, the Taycan, at the end of 2019, Porsche has delivered more than 75,000 units worldwide. By 2030, the company wants to sell 80 percent of its cars as pure battery models. Blume, on the other hand, completely eliminated the diesel engine.

The new VW CEO could now stand for a change in management style. Critics missed Diess, for example, the appreciation for his employees and denounced his solo efforts. "Despite all the merits he earned when switching to electromobility, he also showed clear deficits – especially when it came to taking the workforce with him," says Reinking. The manager apparently had difficulties with team play. However, this leadership quality is needed at Volkswagen more than at any other automaker. The IG Metall trade union even expressed its distrust in an open letter to Diess.

Is peace now returning to the group?

Diess also often had his conflicts with the supervisory board. In the summer of 2020, Diess accused members of the control panel of "crimes" and "lack of integrity" for leaking sensitive information. Some later complained that he demanded additional backing through an early contract extension. The weak capacity utilization of many plants due to the chip crisis also caused resentment.

Many now associate the new CEO with the hope that he will strengthen cohesion in the group. "I expect him to calm things down and take the workforce with him when it comes to future changes," says auto expert Reinking. The supervisory board is apparently also hoping for more harmonious cooperation. "Blume should continue to drive the transformation with the entire board – with a leadership culture that focuses on team spirit," said the VW statement on Friday.

Investors react nervously

However, investors are skeptical about the change in management at VW. The shares of the carmaker and its major shareholder Porsche SE lost up to 3.2 and 2.5 percent respectively today. A stock trader criticized the personnel situation shortly before the planned IPO of Porsche AG. Diess received a lot of encouragement from investors for his consistent shift towards e-mobility.

The experts at the US analysis company Bernstein Research are particularly bothered by Blume's planned dual role as head of VW and Porsche. "Volkswagen makes a bad management situation worse," wrote analyst Daniel Roeska in a study. The timing for a new appointment to the top management is wrong, because the group is heading for a challenging year 2023.

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