Herbert Diess (pictured) has replaced Matthias Müller has the boss of the Volkswagen Group. Picture: VOLKSWAGEN GROUP
Herbert Diess (pictured) has replaced Matthias Müller has the boss of the Volkswagen Group. Picture: VOLKSWAGEN GROUP

Former BMW development boss Herbert Diess is the new CEO of a rejigged Volkswagen Group.

The supervisory board of the world’s biggest car maker decided it was time for CEO Matthias Müller to be moved aside, partly to pair its upcoming zero emissions cars with a zero emission CEO.

Diess has already succeeded in scoring supervisory board approval for an enormous shake-up of the structure of the behemoth car maker, which owns its eponymous Volkswagen and Volkswagen Commercial brands, but also the Audi, Bentley, Bugatti, Seat, Skoda, Porsche, Lamborghini, Ducati, MAN and Scania brands.

The 59-year-old has already split the company into six business areas, plus created a special internal system for China, which makes up for more than a third of global volumes for some of its brands.

Value group

He has grouped Seat, Skoda and VW together to create a Value group, allowed under-fire Audi chairman Rupert Stadler to head up a Premium group that includes Bentley and Ducati, and placed Porsche boss Oliver Blume at the head of a Super-Premium group, which will include Porsche, Lamborghini and Bugatti.

The two men also wear other hats, with Stadler taking over the Volkswagen Group sales as well as the Premium group, while Blume takes over Volkswagen Group production and gains a management board seat.

The two heavy truck brands will be taken off Diess’s radar, though, and will move to Munich to be spun off together and listed on Germany’s stock exchange. While it was unclear if Diess would continue as the head of the VW brand, he will split his time as Volkswagen Group CEO, head of research and development and head of information technology.

"My most important task will now be to join with our management team and our Group workforce in consistently pursuing and pushing forward our evolution into a profitable, world-leading provider of sustainable mobility," Diess said.

"The Volkswagen Group is a union of strong brands with great potential. Matthias Müller has laid the groundwork for our transformation. In a phase of profound upheaval in the automotive industry, it is vital for Volkswagen to pick up speed and make an unmistakable mark in e-mobility, the digitalisation of the automobile and transportation as well as new mobility services," he said.

Müller was replaced after failing to reorganise the Volkswagen Group during his three-year tenure after being parachuted in at the height of the Dieselgate emissions-cheating crisis. He will not technically leave the company, though, because in a deal worth more than €20m, the 64-year-old will be retained on his existing contract for at least two years.

"Müller has done outstanding work for the Volkswagen Group," supervisory board chairman Hans Dieter Pötsch said. "He assumed the chairmanship of the board of management in the fall of 2015 when the company faced the greatest challenge in its history.

"Not only did he safely navigate Volkswagen through that time; together with his team, he also fundamentally realigned the group’s strategy, initiated cultural change and, with great personal commitment, made sure that the Volkswagen Group not just stayed on track but is now more robust than ever before. For that, he is due the thanks of the entire company."

For all that, the core of the supervisory board’s rationale for dumping Müller was his failure to change the brand to meet its Strategy 2025 goals to be a leader in electrification and clean transportation.

Diess quickly garnered the opposite reputation, staring down Germany’s union leaders to cut 30,000 jobs at the height of the Dieselgate crisis, saving more than €4bn and doubling the brand’s notoriously thin profit margins.

He also had the advantage of being completely untouched by Dieselgate, the crisis that had its origins at Audi in about 2006. He was seriously considered to take over the Group in September 2015, when the company forced embattled CEO Martin Winterkorn to resign, but he barely knew where the tea bags were.

"The Volkswagen Group’s goal is and remains to align the company and its brands with future needs, to safeguard its position among the leaders of the international automotive industry with innovativeness and profitability and to be instrumental in shaping tomorrow’s personal mobility with the strength of our group brands," Pötsch said. " Diess is the right manager to do that. In realigning the Volkswagen brand, he has demonstrated to impressive affect the speed and rigour with which he can implement radical transformation processes.

"This accomplishment makes him predestined to fully implement our Strategy 2025 in the decisive years that are now to follow," he insisted.

Diess harboured ambitions to head up BMW, but they were thwarted by the elevation of relatively young Harald Krüger in May 2015. Diess jumped to become CEO of the Volkswagen brand just two months later and now he heads up a company with more than 600,000 employees around the world.

Labour unions

While investors and, in particular, the majority owners, the Porsche and Piech families are happy, its unions are not so pleased. Like the state of Lower Saxony where Volkswagen is based, the company’s labour unions have a supervisory board seat.

Bernd Osterloh, the union’s board representative, is the man who blinked when Diess faced down the unions in 2016 and there remains bad blood between the two. Osterloh’s price for his forced support for Diess was the appointment of a union leader, Gunnar Kilian, as head of human resources.

Another to have butted heads with Diess is the Volkswagen Group’s head of purchasing (and chairman of Seat’s supervisory board), Javier Garcia Sanz, who is leaving "at his own request", though insiders say he made it clear that he would not work under Diess’s management.

Diess’s head of procurement at the VW brand, Ralf Brandstaetter, will replace him temporarily. It’s a field Diess is known to have opin€ions on, having held the same position at the BMW Group and saving €4bn to keep the car maker safe during the financial crisis.