VW Board Member Meeting Yields No Plan for Defusing CEO Spat

(Bloomberg) -- A Volkswagen AG supervisory board panel ended a three-hour meeting without a concrete proposal for defusing internal tensions over Chief Executive Officer Herbert Diess’s desire for a contract extension and more dramatic changes at the world’s largest automaker.

More talks are required ahead of a meeting of the full supervisory board next week, according to people familiar with the outcome of Tuesday evening’s gathering. Discussions about Diess, 62, and selections for top management posts will continue in the coming days, said the people, who asked not to be identified because the conversations are private.

Representatives for the carmaker declined to comment.

VW slumped as much as 2.6% in early Frankfurt trading on Wednesday. The shares have lost nearly a fifth since the beginning of the year, underperforming German rivals Daimler AG and BMW AG.

A dispute over who should fill openings for jobs including the finance and purchasing chiefs and Diess’s push to reshape VW spilled into the public last month. Diess wrote a newspaper op-ed in which he referred to the German industrial giant still having “old, encrusted” structures that must be broken up. He’s floated the idea of staying on as CEO beyond his current mandate through April 2023, according to people familiar with the situation, even though his contract would normally be up for renewal a year before it ends.

The meeting on Tuesday was limited to the eight top representatives of key stakeholders. “We trust that, ultimately, Chairman Hans Dieter Poetsch will manage to find an agreement with the different parties in the coming weeks,” JPMorgan analyst Jose Asumendi said in a note to clients.

Diess, a former BMW AG executive, has ruffled feathers across a sprawling organization known for its complex governance and pushed aside several high-ranking executives in a sweeping management reshuffle this summer. The electric-vehicle chief of the main VW car brand, Thomas Ulbrich, decided to leave the company for “private reasons,” the manufacturer said Wednesday in an emailed statement. It rejected a media report that suggested the departure was linked to a conflict with Diess.

Since joining VW as head of the main car division in 2015, Diess also frequently clashed with the company’s powerful labor unions. They’re often backed by the German state of Lower Saxony, which is the second-largest shareholder with a 20% stake.

The Porsche and Piech owner family has supported Diess’s strategy. But the reclusive Austrian billionaire clan that holds a 53% voting stake tends to avoid direct conflicts because unions and Lower Saxony have far-reaching veto rights cemented in the company’s bylaws.

“VW has a truly fascinating opportunity to shape the future of electric, digital and fun mobility,” Sanford C. Bernstein analyst Arndt Ellinghorst, who rates the stock the equivalent of a sell, said in a note earlier this week. “What it appears to be lacking is the right corporate governance to effectively and sustainably tackle these opportunities.”

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