In July 2021, Volkswagen Group CEO Herbert Diess released a video to celebrate the company’s strong first half. The video shows him speeding down a waterway at the company’s headquarters in Wolfsburg in an electric hydrofoil, thanking some 200,000 Volkswagen employees.
The Volkswagen Group is still trying to rebuild the trust lost over the 2015 “emissionsgate” scandal, while battling increasingly powerful rival Tesla. The message of the video is clear: this is not a 62-year-old engineer running a rigid business founded in the 1930s, but a dynamic leader ready to lead this resurgent business into the future.
Of course, this revival journey is bound to be bumpy.
A severe global shortage of semiconductors has led to a 24% drop in VW Group deliveries in the third quarter of 2021, a sharp drop in profits and a hit on its share price. At first, the company introduced a temporary emergency leave system to avoid layoffs during the Covid-19 pandemic. Now that the temporary leave has been extended, employees are increasingly dissatisfied with it.
VW Group CEO Herbert Diess is interviewed in his office overlooking the Wolfsburg factory.
Meanwhile, Volkswagen’s rival Tesla has done well — its stock price has soared to over $1 trillion. Tesla’s Model 3 recently became the best-selling first electric car in Europe, and it was also the first non-European-made car to do so, according to market research firm Jato Dynamics. About 100 miles east of Wolfsburg, Tesla’s new $7 billion factory will soon be in production.
While Volkswagen Group employees are complaining about not having a job, Diess is active on social media, live-streaming his adventures: He gallops through the Alps on a Porsche e-bike and drives across Austria in a Volkswagen ID.3 electric car , showing the super battery life.
Diess, who had just turned 63, revealed vaguely that Wolfsburg may eventually need to cut as many as 30,000 jobs as the Volkswagen Group transitions to electric vehicles.
Daniela Cavallo, president of VW’s general union, told Diess at a recent staff meeting: “You’re always showing us your travel photos, but you can’t give us semiconductors.”
She added: “It’s better to work with us
instead of laying off staff.” Later, a committee was convened within the oversight committee to ease tensions between the two sides, sparking speculation of Diess’ departure, and a list of possible successors began to circulate. .
After leaving BMW, Diess took charge of the world’s second-largest automaker as an “outsider”. At that time, he faced dual challenges. First, the Volkswagen Group needed to regain the trust of customers after the “emission gate” incident, and the second was to transform into an electric vehicle giant to counter Tesla’s rise in the European market.
Since taking office, Diess has led the Volkswagen Group from being isolated and conservative to being more open, while focusing on developing its own batteries and software. Of course, he never seems to miss any comparison with Tesla.
In October 2021, Tesla CEO Elon Musk attended a Volkswagen Group executive meeting and delivered a speech, followed by Diess in a LinkedIn post saying: “The Volkswagen Group needs a new kind of thinking. We have done a lot of things right in the past, but in the new era it may not work.”
Volkswagen Group employees may be unhappy with Diess’s style of doing things, but many believe that this straightforward approach Strategy is the only way a traditional giant can compete with Silicon Valley startups.
Stefan Bratzel, director of the Center of Automotive Management in Gladbach, Germany, said: “Diess is doing a positive thing, he’s reiterating that Tesla is the benchmark. —Even in Wolfsburg no one wants to hear that. He is using Tesla to create pressure within the group to push for the necessary transformation of the group.”
But Bratzel also cautioned that Diess needs the support of his employees . In stark contrast, Musk has been resisting unionization.
Most recently, the Tesla Model 3’s sales in Europe have dealt a heavy blow to the Volkswagen Group, leaving the Golf, a decades-old classic, in fourth place. Germany’s largest newspaper Bild commented that “Model 3 proves that Tesla is better than Volkswagen”.
Diess has repeatedly emphasized the gap in efficiency between the two companies. He pointed out that Tesla aims to produce each car in just 10 hours at the new factory, but Volkswagen takes three times as long to produce an ID.3 or ID.4 at the German factory in Zwickau. The plant is scheduled to be remodeled next year to cut production time by 10 hours, though that’s still twice as long as Tesla expected.
In December 2021, Volkswagen Group brand chief executive Ralf Brandstätter announced that the company was considering a new factory for the all-new Trinity electric sedan, which is scheduled to go on sale in 2026. The idea is a game-changer for the Volkswagen Group, which has been building Golf at the same factory where the first Beetles were built in the 1930s, and is now in its eighth generation.
Employees welcomed the proposal, which Cavallo emphasized, which was developed with union representatives to keep Wolfsburg employees. But observers say the timeline is too long for a company trying to speed up its transformation.
”What Tesla does in two years, VW takes five years,” Bratzel said, referring to Musk’s start of construction of the new German factory before all the necessary permits were issued — a slap in the face. A high-roller gamble that is likely to be dismantled by a court order.
Bratzel believes: “German established companies must rethink production processes and find ways to be faster and more efficient.”