Diess on the hot seat because of comments on staff reductions
It is not easy to go green, as Herbert Diess, Chairman of the Board of Management of the Volkswagen Group, finds out. When you’re the head of an organization with 675,000 employees and shareholders that includes local governments and production workers, it must be difficult to navigate the dichotomy of all these stakeholders.
Diess recently told his people that the company risks losing 30,000 production workers if it doesn’t accelerate the transition to electric cars and become more efficient in its manufacturing process. He points out that the new Tesla factory near Berlin with 12,000 employees will produce 500,000 cars a year. The largest Volkswagen plant in Wolfsburg produces 700,000 cars a year, but needs 24,000 workers.
Diess says the trend is not sustainable. If Volkswagen doesn’t increase productivity, it won’t be competitive in the market. This will result in lower sales, which in turn means fewer cars will be produced and fewer workers will be needed to build them. It seems like Business 101, but many within the company aren’t happy with the message.
They are also not happy that Elon Musk was allowed to dial in at the most recent meeting with executives. Diess has praised Musk and Tesla exuberantly, and that is not well received by the works council, which roughly corresponds to the UAW in Germany. He also holds several seats on the supervisory board.
The works council chairwoman Daniela Cavallo recently criticized Diess for his blunt communication style she said Reuters has caused concern among workers. And who wouldn’t worry if they think they’re being told they’re going to lose their job? “We are tired of hearing over and over again that the works council is apparently only interested in maintaining the status quo,” she said, adding that all employees and employee representatives support the planned revisions.
It’s one thing that Diess often refers to as a heroic figure, but inviting him to this meeting with superiors was a bridge too far for some. “The fascination you seem to have for Mr. Musk and the effort to keep in touch with him – we would appreciate it if it were the same with the great challenges the company is currently facing,” said Cavallo. Sometimes, Herbert, it doesn’t matter what you say, but how you say it. People’s plumage becomes disheveled when they are blamed for things they believe are beyond their control. Are the workers to blame for the sharp drop in sales of conventional cars at Volkswagen in the third quarter?
Diess, for his part, said to those at the last meeting: “I am often asked why I keep comparing ourselves to Tesla. I know that annoys some. Even if I stop talking about Elon Musk, he will still be around and revolutionize our industry and quickly become more competitive. Only as a team can we make Volkswagen future-proof. “
The result of all this is that a meeting of the rarely used mediation committee of the supervisory board was called to discuss the future of Diess with the company Yahoo Finance. The mediation committee consists of Hans Dieter Poetsch, chairman of the supervisory board and chairman of the board of management of Volkswagen’s largest shareholder, Porsche SE; Stephan Weil, Prime Minister of Lower Saxony, which owns a fifth of the voting rights in Volkswagen; Works Council Chairman Daniela Cavallo; and Jörg Hofmann, head of Germany’s largest trade union IG Metall.
Unnamed sources have told Reuters“We are currently having constructive and confidential discussions. Possible outcomes will be communicated in due course. ”Well, if you were teaching a corporate communications course, that quote would be included in the lesson on how to say absolutely nothing in as few words as possible.
Diess the outsider
Diess took over at Volkswagen in 2018 and has a contract until October 2025. You may remember that at the beginning of the year he was deposed as Chairman of the Board of Management of the Volkswagen brand and replaced in this role by Ralf Brandstätter, who probably has more friendly relations with the unions, the not like Diess from outside, but through the Volkswagen organization.
There is no doubt that Diess’ style is a little too aggressive for some. In a company as large as Volkswagen, unanimity is impossible. But the message that Diess is conveying must be heard by the company. If dumped overboard, how could that affect the company’s move to electric cars?
Someone else might decide to slow down the process to help soften the rough edges and keep the family peaceful. Or the new boss could take a page from Akio Toyoda’s playbook and loudly proclaim that electric cars will kill the German economy. It’s about more than Musk and Tesla, however. The Chinese are starting to gain a foothold in the European and UK markets, and frankly, these companies don’t care about Toyoda and its backward-looking philosophy. Conventional cars with hellish internal combustion engines are about to have their Kodak moment. The ground beneath their feet is shifting quickly and threatening to replace what was with what will be.
Toyoda is right about one thing – the broader economic influence of the auto industry is enormous. Each automotive manufacturing job provides employment for at least 5 additional employees in sales, transportation, repair, finance and the entire supply chain. This means that more than three million people are directly or indirectly dependent on Volkswagen for their livelihood. They also buy food and clothing, build houses and go on vacation, which spreads their economic impact around the world.
This is correct
Ultimately, Diess is right. Just aggressively pushing the EV revolution will save all of these German factory jobs and the wider economic activity they create. That’s a lot of weight on a person’s shoulders. The workers and their unions find his remarks disdainful of the contribution they have made to the achievement of his goals for the company. No doubt Diess could do more to soften the tenor of his statements.
There are similarities between Musk and Diess. Both have a fairly autocratic leadership style. But to put it aside would likely delay Volkswagen’s journey into the future of the electric car, and that would be unfortunate for everyone involved, both inside and outside the company.
No date has been set for the Conciliation Committee meeting, but it will likely be soon and there probably won’t be much publicity about it. No doubt there will be some cheerful speeches in public relations about “full and open discussions” and the like. Perhaps Diess explains that his remarks were taken out of context, but all of that is now behind us and we are heading into a bright new day together.
Only one thing is certain. The Volkswagen Group does not currently need a change of leadership in order to continue on its path to full electrification.
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