The Dramatic Sacking Of Volkswagen CEO, Still Jet-lagged From US Visit 2022
According to his contract, Herbert Diess is likely still eligible to receive his total compensation through October 2025. The unprecedented decision by Volkswagen AG to remove its aggressive chief executive officer launched a week ago when his support from the wealthy Porsche and Piech families began to wane.
Herbert Diess had managed to survive repeated confrontations with influential employee representatives thanks to the steadfast assistance of the secretive clan that controls a majority of VW. But the family concluded that he had to leave because the important projects failed and staff was unhappy.
People familiar with the discussions claim that July 20 was the pivotal day. Diess’s tenure at VW was terminated by the high committee of the supervisory board, which was made up of household representatives, Lower Saxony state officers, and labour leaders. The following day, around noon, still jet lagged from a visit to the automaker’s SUV production plant in Chattanooga, Tennessee, he learned about this.
In the epigraph, Diess’s downfall is a stark illustration of the difficulties executives of corporate titans face trying to adapt to the digital age. Even by German standards, where employee representatives occupy half of the seats on supervisory boards, VW’s unions have significant influence. Their government and leaders are resistant to radical and quick changes that can compromise jobs.
While Diess was excellent at directing VW’s strategic trajectory, the company’s execution has been uneven as a result of his supply. The outsider offered by BMW AG in 2015 did not amass enough pals and has grown farther away. Threats of price reductions and delays in developing software for future cars ultimately cost him his position.
According to Philippe Houchois, a Jefferies analyst, “the resignation of CEO Herbert Diess should not be a big surprise how sidelined he had been in recent months.” The timing is terrible and is another example of VW’s incompetence. VW’s spokespersons declined to comment on the events, notably Diess’s firing.
Technology Woes
Momentum to remove Diess before VW’s summer vacation started to develop last weekend during one-on-one meetings in the eight presidia inside its management board. Diess was in the US to accelerate growth in a market where Europe‘s top automaker has long lagged.
Key officials of VW’s major stakeholders started thinking about who would replace Diess should tension in the company deteriorate while the top government was gone. There have been other flare-ups, including late last year when Diess warned the company risked falling below Tesla Inc. and entertained the idea of significant job cutbacks.
When VW reorganized its management team in December, Diess was given control of Cariad, the automaker’s software division, and was relieved of several other responsibilities.
Since then, internal strife at Cariad has delayed the planned release of important new models, including the electrified Porsche Macan SUV. His struggle to safe more support to carry out his 89 billion euro ($91 billion) electric car and software strategy started to erode Porsche and Piech relationships.
The Replacer
Due to his long history of holding important operational positions at VW and track record of revitalizing the sports-car sector, Porsche CEO Oliver Blume emerged because of the inheritor during discussions last week.
Although Blume’s most notable accomplishment is Porsche’s all-electric Taycan, he has completed big jobs across the company, earning the support of VW’s different factions.
As VW’s power players considered the advantages and disadvantages of appointing a new leader, they started to lean in favour of making a change. Diess was presented with the option and allowed 24 hours to respond after arriving from Chattanooga a few hours earlier. He decided it was time to leave after speaking with approved counsel.
Hans Dieter Poetsch, the knowledgeable chairman of VW, on Friday. The 20-member supervisory board of the corporation met at 4:30 p.m. German time.
The presidium members informed their various camps that Diess’s replacement was on the schedule fifteen minutes before the start of the meeting. A unanimous vote of the board dismissed him.
Diess, credited with organizing the company’s largest EV launch, will make way for Blume in just over a month. He may still be entitled to receive the total amount due under the terms of his contract by the end of October 2025. The amount could reach more than 30 million euros, depending on the automaker’s operational results and share efficiency.
Majority decision
Diess was presented with the choice and allowed 24 hours to answer after arriving from Chattanooga a few hours earlier. He selected to leave after speaking with legal counsel.
On Friday, Diess notified VW chairman Hans Dieter Poetsch. The 20-member supervisory board of the corporation was scheduled to convene at 4.30 p.m. in Germany. The presidium members informed each camp that Diess’s replacement was on the program 15 minutes before the meeting began. A unanimous vote of the board dismissed him.
In less than a month, Blume will replace Diess, who is credited with implementing the largest EV launch in the industry. He certainly still has a claim to full payment under his contract through October 2025. The sum could exceed €30m, depending on the automaker’s operating results and share performance.
The drastic action taken by Volkswagen to remove its aggressive CEO, Herbert Diess, was initiated a week ago when his support from the wealthy Porsche and Piech families started to wane.
Diess had escaped many confrontations with worker representatives because of the unwavering support of the secretive dynasty that controls the bulk of VW. But the family came to the conclusion that he had to go after major project failures and employee unhappiness.
Those acquainted with the discussions claim that July 20 was the pivotal day. Diess’s tenure was eliminated by the top committee of VW’s supervisory board, composed of family representatives, representatives from the German state of Lower Saxony, and labour leaders. He discovered this the following day, still exhausted after visiting the SUV production of the automaker in Chattanooga, Tennessee.
