VW CEO Has ‘Old, Encrusted’ Structures Left to Break Up

(Bloomberg) -- Tensions at the top of Volkswagen AG are spilling over into public view, with the chief executive officer swiping at opponents within the company who stand in the way of making the massive carmaker more nimble.

In a German business newspaper op-ed, Herbert Diess likened VW to a “tanker” at a time when automakers’ survival depends on quickly pursuing electrification and digitalization. He wrote that the company is highly influenced by labor unions who sometimes have different interests than shareholders.

“When I took office in Wolfsburg, I had firmly resolved to change the VW system,” Diess wrote Friday in Handelsblatt. “That means: breaking up old, encrusted structures and making the company more agile and modern. Together with many companions with the same level of motivation, I have succeeded in doing this in many places, but not in some, especially not yet at our corporate headquarters in Wolfsburg.”

The latest call to speed up VW’s overhaul reflects the challenges Diess, 62, has had pushing through more dramatic reforms. He has struggled to win support from key stakeholders for his picks to fill top executive posts and floated the prospect of extending his contract before it would normally be up for renewal, people familiar with the matter said earlier this week.

A fresh vote of confidence at VW’s regular supervisory board meeting next month could bolster his chances of making more radical changes. But if key stakeholders refuse to discuss his contract beyond 2023, Diess’s machinations could backfire. It’s more typical for extensions to be granted one year in advance of expiration.

Labor Pains

VW officials including chairman Hans Dieter Poetsch and former German Chancellor Gerhard Schroeder on Friday praised the strong influence labor representatives have at the company in statements relating to an event celebrating 75 years of the so-called “co-determination” system. The comment Diess submitted was more measured, referring to VW having “catch-up demand” with regard to efficiency improvements.

His comment in Handelsblatt about inflexible structures at VW’s headquarters echoed remarks supervisory board member Wolfgang Porsche made at the Geneva auto show last year, which disgruntled labor representatives. In a rare moment of candor, the leader of VW’s reclusive owner family criticized the amount of sway unions have over the company.

Diess wrote that VW’s management is “conditioned on internal competition, shaped by Ferdinand Piech,” referring to Wolfgang Porsche’s deceased cousin who shaped the industrial giant over two decades as CEO and chairman. He said the company’s scale, history and prowess at engineering and manufacturing traditional vehicles don’t protect the organization from disruption and “can even turn into a burden in a time of dramatic change.”

The changes sweeping the auto industry “will happen in the next ten years, with our without Volkswagen,” Diess wrote.

Dust-Ups

Diess has mounted an aggressive push into electric vehicles that analysts see becoming a competitive advantage, but his hard-nosed management style has ruffled feathers across the organization. He joined VW from BMW AG five years ago and pushed aside several executives in a sweeping shakeup of management this summer.

Renewed infighting with unions could bog down VW’s efforts to challenge Tesla Inc.’s electric-car leadership by spending a record 73 billion euros ($87 billion) on technology over the next five years.

Diess has repeatedly clashed with VW’s unions that often are backed by the German state of Lower Saxony, the company’s second-largest shareholder with a 20% stake. The board took away the CEO’s direct control of the namesake VW brand in June following a dust-up over his request for a contract extension and other issues.

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