Political Theater at VW
The board of Volkswagen and the founding families behind the company have fired Herbert Diess, the CEO they recruited in 2015 from BMW to transform the business.
He’d joined just as the company was accused of purposefully lying about the fuel economy of its diesel engines, which later resulted in a $4.3 billion fine. During the same period, VW announced it would stop developing new combustion engines and focus on electric vehicles, and that it would build its first huge battery factory in Germany. Despite that adversity and change, as well as the pandemic, it also reported reasonably good sales results and ditto on profits (though the stock is where it was in 2017).
Also, in in the depths of the pandemic, Diess had the audacity to announce that VW’s shift to making EVs represented a larger transformation of it and its industry, and that it would result in massive layoffs.
Wonder why he got fired?
Company propaganda cites he was let go because of “key project failures combined with worker discontent.” Was the transformation too fast or too slow?
The answer is likely both; the waves of transformation are uneven, messy, and unpredictable, and Diess was the rock thrown in a lake that had been too turgidly still for too long. His job was to initiate change and he did so, however imperfectly due to personal shortcomings and/or the nature of such efforts.
He’s been replaced by the head of the Porsche division, a lifer at the company, and a former McKinsey consultant-turned-CFO who will also serve as company COO. They aren’t game-changer types by any stretch of the imagination.
So, my bet is that VW’s plans won’t change, mostly because the external conditions and challenges it faces won’t go away with Diess’ dismissal. The company will pivot to EVs and its factories and workforce will need to accommodate that new work.
The new leaders will begrudgingly embrace all the “bad” news that will come with it (investment cost and those layoffs Diess mentioned, for starters), positioning themselves as “feeling the pain” instead of causing it.
Putting more pleasant faces on the unpleasant aspects of transformation is typical political theater — it’s all about appearances and communications, not substance — and maybe VW’s unions and minority investors will fall for it.
Let’s hope they do, because if the Diess exit means VW is putting the brakes on its transformation, the news will be far worse over time.