It says a lot about the state of the auto industry and where it’s going that software issues have cost the CEO of an automaker his job.
Volkswagen ousted Herbert Diess as chief executive officer after severe software development delays delayed the planned launch of new Porsches, Audis and Bentleys. This was untenable given that buggy software delayed the debut of VW’s first rollout of ID models, and customers still have to drop off their cars at the dealership for updates that made it difficult for the company over the air.
Of course, Diess also didn’t do enough to make allies and became increasingly isolated due to his stubborn leadership style. In his bid to turn the company into an electric vehicle leader, he repeatedly clashed with union leaders by warning that VW would lose to Tesla and cut thousands of jobs. But failures at Cariad, the automaker’s software unit, ultimately detracted from Diess’ support from the mighty Porsche and Piech family that make up its mind.
In December, VW overhauled its management, stripping Diess of some responsibilities while instructing him to turn Cariad around. While much has been rearranged since then, Diess failed to fix the issues.
Discord at Cariad has pushed back the introduction of major new models, including the electric Porsche Macan, a high-volume sports car for the division that plans to go public in the fourth quarter. Audi’s new line of Artemis EVs has been delayed by about two years to 2027. And VW’s ultra-luxury brand Bentley may not be able to go all-electric as planned by the end of this decade due to its software glitches, Automobilwoche reported earlier this month.
“The takeover of the ship at Cariad appears to have been the downfall of Diess,” said Matthias Schmidt, an independent auto analyst based in Berlin.
VW’s solutions to challenges usually reflect its status as an industrial behemoth: it is capable of throwing a lot of money and people at its problems. But to modernize the business for the digital age, you need to bring in talent and build skills outside of traditional areas of expertise. Drivers increasingly demand intuitive user interfaces and services that, if executed correctly, can create new revenue streams.
“Software is the key to the future,” Tesla’s Elon Musk tweeted when one of his followers asked if VW would switch CEOs.
Diess was certainly not lacking in ambition. His latest spending plan called for investing $89 billion ($91 billion) in software and EVs over the next half-decade. VW said last year it would eventually employ 10,000 people just inside its software business, making it one of Europe’s largest companies in the space. Just three weeks ago, he teased major investments in China to hire thousands of software engineers in the largest auto market.
The stakes were also clear. Diess regularly cited Nokia’s inability to respond to the rise of Apple’s iPhone as a cautionary tale and his belief that self-driving functionality would drive an even more fundamental transformation of the industry than the shift to battery power.
VW now turns to Porsche boss Oliver Blume, counting on him to be more of a team player and a shrewd navigator of the group’s various factions. Unlike Diess, Blume is not very present on LinkedIn or Twitter, but he has proven he can spot car trends. The former Audi intern who has been at the head of Porsche since 2015 has championed the Taycan, the sports car brand’s first all-electric model, which now surpasses the 911.
It won’t be easy to get VW out of its software swamp. Schmidt said Blume needs to create a deeper cultural change at Cariad for things to work, and doubts German auto managers will be able to fix the company on their own.
“They should have been chasing the best people from Silicon Valley,” said Schmidt. “You can’t run software with people from the automotive industry.”