Why Volkswagen fired Herbert Diess -An in-depth analysis- (2/6)

Hot on the heels of news that Volkswagen Group (VW) CEO Herbert Diess would be leaving the company at the end of August 2022, just about four years after he took over in 2018, the people have asked a lot of questions, and the most pressing is why.

In this series of six articles, I will try to explain the reasons for the decision to push Herbert Diess out of the management of VW and why it was not a surprise at all.

The operation of the VW group

The groups that made or influenced the decision to leave Mr. Diess are:

  • the Porsche and Piech families, which hold significant stakes in the company (52% of the voting rights via Porsche SE),
  • the Chairman of the Supervisory Board, Mr. Pötsch,
  • the State of Lower Saxony (20% of the voting rights), represented by the Minister-President, Mr Weil,
  • the IGM union, which has seats on the supervisory board, under a special Volkswagen law,
  • the works council, which has seats on the supervisory board,
  • The direction,
  • employees of the Volkswagen Group,
  • and, of course, Volkswagen shareholders.

All exerted their influence and supported the decision in one way or another. And it wasn’t a single game or a single incident, but an accumulation of decisions made over the past four years, by different people and parties for various reasons.

Diagram showing how the Volkswagen Group works
Diagram showing how the “families” of the Volkswagen group are distributed

However, it all started with a recent push by the Porsche-Piech families, which number a few hundred members, and which was decisive. It was the little extra pressure that tipped the pendulum against Herbert Diess.

According to some sources, the “families” were disappointed with the performance of the Cariad software group under the responsibility of Herbert Diess. This led to Porsche and Audi being asked at the last oversight meeting to leave the program and develop their own solutions to avoid further delays on critical BEV (Battery Electric Vehicle) models.

The sequence of events

Momentum towards Diess stepping down ahead of VW’s summer break began to build last weekend during individual talks among the eight presidium members on its supervisory board.

The decisive meeting took place on July 20, when the senior committee of VW’s supervisory board, made up of representatives of the families, officials of the German state of Lower Saxony and union leaders, decided that Diess’s time had passed.

He learned about it over lunch the next day in a surprise midday meeting from board chief Pötsch, still jet-lagged after a visit to the automaker’s SUV factory. automobile in Chattanooga, Tennessee.

Diess was shocked and taken aback when he heard the news sources. They gave him a day to respond. And after consulting with his advisers, he accepted the inevitable and left in good faith. But with however a golden parachute which includes an annual salary of 2.2 million euros until 2025, the date of the end of his contract, and a pension thereafter.

A contract extended in 2021, from 2023 to 2025, which the supervisory board said last week was a huge mistake, and for which it is now paying the price. The statement released later that Diess will continue as a consultant will not take place, as he has lost all credibility and respect.

Therefore, the statement should be seen as a marketing move, aimed at soothing the emotions of people who rightly struggle to understand why a fired CEO is paid millions and millions, for years, without any work.

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