Volkswagen promotes brand chief Herbert Diess to CEO to lead structure revamp

Herbert Diess Volkswagen chief executive / Inside Volkswagen

Volkswagen’s brand chief Herbert Diess has been promoted to the top job, replacing the automaker's chief executive Matthias Mueller with reports suggesting he will overhaul the structure of the business.

Diess will be tasked with rebuilding the brand's reputation following a number of scandals in recent years – including a 2015 expose which found it to have lied about how it measured toxic emissions in some of its diesel cars, and more recently its use of animal testing.

The exec's remit will also include cost-cutting in anticipation of pricey fines from regulators; he is already credited with doubling profitability at the company.

Mueller leaves the firm more than two-and-a-half years after succeeding former chief executive Martin Winterkorn in the throes of 'dieselgate', he will now relinquish his responsibilities.

"Matthias Mueller has done outstanding work for the Volkswagen Group," said VW supervisory board chairman Hans Dieter Pötsch said in a statement, addinng that the boss led VW through the "greatest challenge in its history."

Reuters reports that Diess has plans to overhaul the company into three new car brands and prepare its truck group for a public listing as part of its Strategy 2025 initiative.

Diess has served in the auto industry for decades, but in recent years has spent much of his time managing the brand's image.

He has multiple degrees and a doctorate in engineering and served at Bosch between 1989 to 1996. Following this, he was at BMW for 19 years, progressing up the chain from technical workshop roles to executive positions. He is reputed with helping BMW make $4bn in savings purchasing car components and was vital in developing its electric car programme.

Diess arrived at VW in a board position just a few months before than 11 million VW cars worldwide were found to have been rigged to cheat emissions tests.

At the time, Winterkorn branded his Diess as “an outstanding personality and one of the most capable minds in the automotive industry”. Similarly, JP Morgan auto analyst Jose Asumendi had high praise for the new hire: “If there is anyone who can do it, it’s Diess," he said. "If you look at his track record at BMW, he did a fantastic job there and the company never should have allowed him to leave.”

One of Diess’ first major acts upon joining was to ditch the Volkswagen mantra ‘Das Auto’. It was assumed that this strapline contrasted with the VW’s path towards solemn and humble brand communications, clashing with its new tone in light of the emissions scandal.

More emissions fallout?

Last year, his effective crisis PR helped Volkswagen overtake Toyota to become the world’s biggest car manufacturer, but the emissions scandal could continue to haunt the company for a while yet.

For instance, the brand could still invoke a steep fine from US authorities - the US Department of Justice is suing Volkswagen for £32.3bn for breaching US environmental laws.

Outgoing Volkswagen chief executive Mueller recently told his German employees that the controversy could still inflict "substantial and painful" financial damage to Volkswagen.

In addition, jobs are potentially on the line as a result of the impending fine, with VW’s works council’s chairman, Bernd Osterloh recently urging the DOJ to be aware of its “social and employment-political dimensions”

Bubbling in the background of this industry-defining reckoning is the fact that the future looks cloudy for auto brands, especially those who made their names in diesel which is increasingly being regulated. With the advent of green energy and the emergence of convenient transit apps like Uber, firms like Volkswagen are looking to reposition as mobility companies.

Looking to Tesla

On future-proofing the firm, Diess said auto firms could learn from what Elon Musk has done with Tesla.

“In the old world it is Toyota, Hyundai, and the French carmakers. In the new world it is Tesla.

“This shows that we need to significantly improve. We can do this. We measure ourselves against Tesla quite deliberately. Our goal: Using our abilities not just to catch up, but even to overtake."

Announced alongside Diess' promotion was the news that VW works council exec Gunnar Kilian will replace HR chief Karlheinz Blessing who will remain on board in an advisory role.

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