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Business & Finance

Volkswagen boss loses control at critical juncture

  • The former BMW executive is developing a habit of opening his mouth just to change feet. Last year an agonisingly ill-advised Nazi joke at an internal event attracted widespread criticism.
Published June 10, 2020
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LONDON: It's hard to feel sorry for Herbert Diess.

The boss of $86 billion Volkswagen has been forced into making a public apology after his indiscreet comments prompted a boardroom row.

As the Wolfsburg-based carmaker struggles to recover from Covid-19 and take on Tesla in electric vehicles, the self-inflicted wound could hardly come at a worse time.

Earlier this month Diess criticised VW's supervisory board for leaking sensitive information to the German media, describing their actions in an online company gathering as "crimes", according to a Reuters report.

Venting to a group of close friends may be understandable.

But doing so to an audience of over 3,000 senior company managers shows a lack of judgement, and earned him a formal reprimand from the supervisory board and a humiliating admission from Diess that his barbs were "inappropriate and wrong".

The former BMW executive is developing a habit of opening his mouth just to change feet. Last year an agonisingly ill-advised Nazi joke at an internal event attracted widespread criticism.

Some board members wanted him gone this time, according to a person familiar with the situation.

But Chairman Hans Poetsch brokered a compromise in which Diess would step down as chief executive of VW's eponymous car marque but retain control of the group, which includes the Audi and Porsche brands.

That's arguably the right decision. True, the Golf-maker's shares sit some 18pc below where they were before Diess got the top job in April 2018.

But in part due to his adept handling of an emissions scandal which predated his appointment, they have handily outperformed German peers Daimler and BMW - plus merging European rivals Fiat Chrysler Automobiles, and Peugeot - over the same period, according to Refinitiv data.

There may be a subtext to the spat. Diess has provoked unions, which account for half the supervisory board seats, because he wants deep job cuts as the carmaker prepares to launch its first mass-market electric vehicle - the ID3 - to compete against Tesla's Models 3 and Y.

But if Diess succeeds in hitting his ambitious target of selling three million e-cars by 2025 - one-fifth of VW's projected total sales - then the company will probably need fewer industrial engineers as it switches away from internal combustion engines.

Commercially, Diess could yet be vindicated. But he can't afford any more verbal slip-ups.

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Volkswagen boss loses control at critical juncture

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