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Volkswagen Seeks To Avoid Leadership Crisis After CEO Demands Vote of Confidence

The looming crisis at the world's largest automaker by volume highlights the difficulties of driving change in a company for which labor representatives control half of the board seats.

Image source: Volkswagen

By Jan Schwartz and Edward Taylor

FRANKFURT (Reuters) – Volkswagen’s top committee on Tuesday avoided discussing a potential contract extension for Chief Executive Herbert Diess in a bid to defuse a looming leadership crisis at the world’s largest carmaker, a person familiar with the deliberations told Reuters.

Earlier this week Diess had demanded a vote of confidence in his reform efforts by asking for an early contract extension even though key stakeholders at the company opposed the move, two people familiar with the matter told Reuters.

Volkswagen declined to comment.

“The executive committee will not be pressured into a decision, there is no rush,” one of the people familiar with the matter said, commenting on the potential contract extension.

The executive committee, headed by Volkswagen’s chairman Hans Dieter Poetsch, includes Wolfgang Porsche and Hans Michel Piech, members of the carmaker’s owning families who control a majority voting stake, as well as VW labour boss Bernd Osterloh.

Ahead of the meeting on Tuesday, Diess outlined his vision for reforming the carmaker, saying he had not succeeded in overhauling its German operations where VW’s labor chiefs can block significant decisions.

“The families continue to support Diess,” a spokesman for Porsche Automobil Holding SE, the company which holds a majority voting stake in Volkswagen said ahead of the meeting on Tuesday.

Diess, who defected from BMW in 2015, and helped Volkswagen reform after its diesel scandal with a 73 billion euro ($87 billion) electric vehicle investment plan, has grown frustrated with opposition to cost cuts.

Analysts said the potential crisis at Volkswagen highlighted the difficulties of reforming a carmaker where labor representatives control half the seats on the board of directors and local politicians have a 20% voting stake, allowing them to vote down strategic proposals.

“The company has some of the most amazing and most global brands, it has the scale to deploy any technology and the innovation power to be an early mover. What it appears to be lacking is the right corporate governance,” Bernstein autos analyst Arndt Ellinghorst said in a note late on Monday.

“There should be no illusion, this transformation will always trigger conflicts. Whether there is a new CEO or not, the questions will remain the same, and any VW CEO will need the full backing from VW’s largest shareholders, the Porsche families.”

Volkswagen is worth 77.2 billion euros ($92.4 billion), far below rival Toyota Motor Corp’s market value of $155.7 billion and Tesla Inc’s $555 billion.

That is despite the fact that Volkswagen sold 10.96 million vehicles last year – the most by any carmaker around the globe – while Toyota came in second with 10.74 million. Tesla sold only 367,500 cars in the same period.

Volkswagen Group had 671,205 employees at the end of 2019, compared with 359,542 at Toyota at the end of its fiscal year, and 48,016 at Tesla last year.


German companies customarily deliberate contract extensions for management board members only a year ahead of expiration. Diess, however, forced the issue after Osterloh stifled his reform efforts.

They included Diess’ attempts to install allies Arno Antlitz as chief financial officer and Thomas Schmall as chief procurement officer on the management board, the three sources told Reuters.

Rather than approving each individual appointment, the labour leaders insist on approving a “package solution” which is “harmonious”, two people familiar with the deliberations said.

Osterloh is also said to oppose an early contract extension for Diess, one of the three sources said.

In a post on LinkedIn this week, Osterloh said there was no fight about management appointments because no committee on the supervisory board had been formally consulted about the issue.

Diess, for his part, voiced his frustration in his own a post on Linkedin.

“When I started in Wolfsburg, I was determined to change the ‘Volkswagen system’. What I mean by that is to break down antiquated structures, and make the company more agile and modern,” Diess said.

“With the support of many equally motivated people around me, I succeeded in doing so in several areas, but not in others; foremost amongst them at our corporate headquarters in Wolfsburg.”

Reporting by Edward Taylor and Jan Schwartz; Editing by Pravin Char, Mark Potter and Tom Brown

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