It isn’t easy going green, as Herbert Diess, the CEO of Volkswagen Group, is finding out. When you are the head of an organization that has 675,000 employees and shareholders that include local governments and production workers, navigating the cross currents created by all those interest groups has got to be tricky.
Recently, Diess has been telling his people the company risks losing 30,000 production workers if it doesn’t accelerate its transition to electric cars and become more efficient in its manufacturing process. He points out the new Tesla factory outside Berlin is slated to produce 500,000 cars a year with a workforce of 12,000 people. Volkswagen’s largest factory, located in Wolfsburg, churns out 700,000 cars a year but needs 24,000 workers to do so.
What Diess is saying is that the trend is unsustainable. If Volkswagen doesn’t increase productivity, it won’t be competitive in the marketplace. That will translate into lower sales, which in turn means fewer cars produced and fewer workers needed to build them. That seems like Business 101, but many inside the company are not happy with the message.
They are also not happy that Elon Musk was allowed to dial in to the most recent meeting with senior managers. Diess has been effusive in his praise of Musk and Tesla, and that hasn’t gone down well, particularly with the works council, which is roughly equivalent to the UAW in Germany. It is also holds several seats on the supervisory board.
Daniela Cavallo, the head of the works council, has criticized Diess recently for his blunt communication style, which she told Reuters has created concerns among the workers. And who wouldn’t be concerned if they think they’re being told that they are about to lose their jobs? “We’re tired of hearing time and again that the works council is apparently only concerned with preserving the status quo,” she said, and added that all the workers and labor representatives are backing the proposed overhauls.
It’s one thing that Diess often refers to Musk as a heroic figure, but inviting him into that meeting with supervisors was a bridge too far for some. “The fascination that you apparently feel for Mr Musk and the effort you’re making in staying in contact with him — we would welcome if it was the same for the huge challenges the company currently faces,” Cavallo said. Sometimes, Herbert, it’s not what you say but how you say it. People get their feathers ruffled when they are blamed for things they feel are beyond their control. Is it the workers’ fault that Volkswagen’s sales of conventional cars was down sharply in the third quarter?
For his part, Diess told those at the most recent meeting, “I’m being frequently asked why I keep comparing us with Tesla. I know this is annoying to some. Even if I no longer talk about Elon Musk, he’ll still be there and revolutionizes our industry and keeps getting more competitive quickly. Only as a team can we make Volkswagen future-proof.”
The upshot of all this is that a meeting of the seldom used mediation committee of the supervisory board has been called to discuss Diess’ future with the company, according to Yahoo Finance. The mediation committee consists of Hans Dieter Poetsch, supervisory board chairman and CEO of Volkswagen’s largest shareholder, Porsche SE; Stephan Weil, state premier of the German state of Lower Saxony, which owns a fifth of the voting rights of Volkswagen; works council leader Daniela Cavallo; and Joerg Hofmann, head of Germany’s largest trade union, IG Metall.
Unnamed sources have told Reuters, “Constructive and confidential discussions are currently being held. Possible results will be communicated in due time.” Well, if you were teaching a course in corporate communications, that quote would be featured in the lesson on how to say absolutely nothing in as few words as possible.
Diess The Outsider
Diess took over at Volkswagen in 2018 and has a contract that runs through October 2025. You may remember that he was moved aside as CEO of the Volkswagen Brand earlier this year and replaced in that role by Ralf Brandstätter, who is thought to have a more cordial relationship with the unions, having come up through the Volkswagen organization rather than coming in from the outside as Diess did.
There seems little doubt that Diess’ style is a little too abrasive for some. In an organization as large as Volkswagen, unanimity is an impossibility. But the message Diess is delivering is one the corporation needs to hear. If he gets tossed overboard, how might that affect the company’s transition to electric cars?
Someone else could decide to slow the process down to soften its rough edges and keep peace in the family. Or the new leader could take a page out of the Akio Toyoda playbook and loudly proclaim that electric cars will lead to the death of the German economy. It’s about more than Musk and Tesla, however. The Chinese are beginning to dip a toe in the European and UK markets, and frankly those companies don’t care a fig about Toyoda and his backward looking philosophy. Conventional cars with infernal combustion engines are facing their Kodak moment. The ground is shifting rapidly under their feet and threatening to replace what was with what will be.
Toyoda is right about one thing — the broader economic influence of the auto industry is enormous. Every job in auto manufacturing provides employment for at least 5 other workers in sales, transportation, repair, finance, and throughout the supply chain. That means more than three million people depend either directly or indirectly on Volkswagen for their livelihood. They also buy food and clothing, build homes, and go on vacation, which spreads their economic impact worldwide.
Diess Is Correct
In the final analysis, Diess is right. Only pushing the EV revolution forward aggressively will save all those German factory jobs and the broader economic activity they create. That’s a lot of weight to put on the shoulders of one person. The workers and their unions feel his remarks have been dismissive of the contribution they have made to making his goals for the company a reality. No doubt Diess could do more to soften the tenor of his statements.
There are similarities between Musk and Diess. Both have fairly autocratic leadership styles. But moving him aside would likely delay Volkswagen’s journey into the electric car future and that would be unfortunate for all concerned, both inside and outside the company.
No date has been set for the mediation committee to meet but it will probably be soon and there likely won’t be a lot of publicity about it. No doubt there will be some public relations happy talk about “full and frank discussions” and the like. Maybe Diess will explain that his remarks were taken out of context but all that is behind us now and we are moving forward together into a bright new day.
Only one thing is certain. A change in leadership is not what Volkswagen Group needs right now if it is going to continue on its path to full electrification.
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