The failure to flip Volkswagen’s software unit appears to have cost CEO Herbert Diess his job in the latest battle for the German automaker to modernize its organization.
Herbert Diess (left) driving a 1928 Bugatti (with navigator Jon Drechsler on the right) in the 2019 Mille Miglia in Florence, Italy. Photo By: Bob Cullinan / Shutterstock
The exec will leave on September 1, three years before the end of his contract.
Diess had a rocky start at the automaker, facing charges related to the 2015 VW emissions scandal before being settled by the company for €9 million (then about $10 million) – with no admission of liability. Diess and his fellow executives have always denied all charges, with his lawyers noting that he could not have foreseen the impact of the emissions fraud allegations on the market, having only joined the company in July of the year the scandal broke. .
Once he joined the automaker, one of his main tasks was considered to be turning over VW’s software unit Cariad, which the group considered vital to the development of electric vehicles across its broad group of brands. EU lawmakers recently voted to ban the sale of combustion engine cars from 2035, making the unit particularly important.
But delays in shipping software from Cariad to other units have delayed several launches, including models from Porsches, Audis and Bentleys. Software flaws were also behind the initial launch of VW’s ID models, which the manufacturer hopes will challenge leaders in the electric vehicle market.
Industry insiders have noted that failing to get Cariad back on track is a major contributor to Diess’ departure.
However, it was not because of a lack of recognition of the importance of software development to the future of the automotive industry.
In May, Diess said on Twitter that the “development of [our] proprietary software expertise is the biggest turnaround for the automotive industry – much bigger than the transition to e-mobility.”
When appointed, Diess seemed to recognize the need for change. He said VW “needs a software culture”.
This, he said, should be “different from the typical culture at VW, AUDI, Porsche: long-term, brand, complex. Cariad needs to be much faster to basically deploy weekly and be attractive to software talent. I’m concerned to get Cariad far enough away from Group, OEM processes and culture. Copy and paste definitely won’t work,” he posted on LinkedIn.
But three months ago, Diess appeared to be aware of the tension between Cariad and the rest of the VW group, citing complaints in another LinkedIn post.
“…Cariad is getting faster, and to be clear, it is the most ambitious project in our entire industry to tap into the most relevant profit pools of the future – it will take two life cycles to be realized, so I would to the critics within the Group: it is better to work together for progress than just complain,” he said.
How well that went down with executives and managers across the VW group remains to be seen, but in the final twist, the board seemed to agree that the best way forward was without Diess.
VW is now turning to Porsche boss Oliver Blume to take the reins at the Group and change the culture that Diess apparently struggled to change.
The position of chairman of the supervisory board at Cariad – previously held by Diess itself – remains vacant for the time being, but Blume is also expected to urgently focus on solving problems at the software subsidiary.
Speaking to Bloomberg, auto industry analyst Matthias Schmidt said the unit needed new blood and doubted German auto managers could tackle the problems alone.
“They should have headhunted the best people from Silicon Valley,” said Schmidt. “You can’t run software with people from the automotive industry.”
One person who agrees with the diagnosis is Elon Musk, rival electric car maker Tesla. Tweeting his reason for Diess’ departure, musk said:: “Software is the key to the future.”