Volkswagen boss Herbert Diess wants to beat Tesla
WOLFSBURG, Germany – When Herbert Diess, Chairman of the Board of Management of Volkswagen, wanted to congratulate the company on a strong first half in July, he wrote a video of himself, as he darted across a waterway in an electric hydrofoil at the company’s headquarters in Wolfsburg and delivered a message of thanks to the roughly 200,000 employees at VW.
“I’m looking forward to seeing you again after the vacation,” he said, cutting lazy donuts into the water, “and working together on the success of VW.”
At a time when Volkswagen is still trying to regain the trust it lost in the 2015 emissions scandal and stave off the growing threat from Tesla, the message was clear: this wasn’t a 62-year-old engineer at a hidden company that was founded in the 1930s but a dynamic doer who is ready to lead a revitalized company into a prosperous future.
It’s been a bumpy ride since then.
The crippling global semiconductor shortage has slowed VW’s production lines, resulting in a 24 percent drop in shipments in the third quarter and a sharp drop in earnings, which eroded the share price. Workers are increasingly unhappy that limited vacation days, introduced during the coronavirus pandemic to prevent layoffs, have been extended by the company.
Meanwhile, VW’s new leading rival, Tesla, has reached a number of milestones. Tesla’s stock value has surged to over $ 1 trillion. His Model 3 recently became the best-selling car in Europe, the first electric car and the first vehicle outside of Europe, according to market research company Jato Dynamics. And 160 kilometers east of Wolfsburg, Tesla’s new $ 7 billion plant could start producing cars in a matter of weeks.
While Volkswagen workers grumbled about their lack of work, their CEO kept a steady stream of adventure on social media, rode a Porsche e-bike in the Alps, and rode one of the company’s ID.3 electric models across Austria to demonstrate its battery longevity.
But when Mr Diess, who turned 63 last month, recently leaked that Wolfsburg may have to cut up to 30,000 jobs as the company switched production to electric vehicles, union leaders said workers had seen enough.
“You regularly provide us with beautiful photos of your excursions, but unfortunately still not with semiconductors,” said Daniela Cavallo, senior employee representative at Volkswagen and member of the supervisory board, Mr. Diess this month at a works meeting.
“Stop speculating about downsizing,” she said, “and work with us to find solutions.”
Since then, a committee has been convened within the board of directors to deal with tensions between the two sides and fuel speculation about whether Mr Diess’ job might be at stake. Lists of possible successors began to circulate.
A rare outsider chosen by BMW three years ago to lead the world’s second largest automaker, Mr Diess (pronounced DEES) has been tasked with a two-pronged challenge: regaining the trust of customers who turned their backs on VW after the diesel scandal , and make the company an electric mobility powerhouse that can counter Tesla’s rise in the European market.
Since his acquisition, he has tried to open a company known for its island culture to a wider audience and has focused on the need for VW to develop its own batteries and software. He doesn’t seem to miss an opportunity to compare Volkswagen with Tesla, often unfavorably.
“We need a new way of thinking at Volkswagen AG in order to face the new competition,” wrote Diess on his LinkedIn page after Elon Musk, CEO of Tesla, spoke at a closed meeting for VW managers in October. “We did a lot of things right in the past. Volkswagen is strong in the old world, but there is no guarantee for the new world.”
While VW employees may rub themselves against their boss’s style, many others believe that a long-established company (some of its manufacturing facilities are on local registers of historic sites) can only compete with a Silicon Valley with such outspoken tactics.
“One thing that Diess does is positive, he keeps repeating – even if nobody in Wolfsburg wants to hear it – that Tesla is the benchmark,” says Stefan Bratzel, head of the Center of Automotive Management in Bergisch Gladbach. “He uses Tesla to generate pressure in the company for a necessary transformation.”
However, Mr. Bratzel warned that Mr. Diess needed the support of the company’s employees, whose representatives hold half of the seats on the 20-member board of directors, which hires and fires executives, and sets strategies. Two other members, the representatives of the state of Lower Saxony, which owns 20 percent of the company, tend to vote with the employees.
The situation at Tesla is very different: Mr. Musk has resisted efforts to unionize the company’s workers.
The latest sales success of the Tesla Model 3 in Europe hit Wolfsburg hard. It pushed the Golf, Volkswagen’s most important compact model for decades, to fourth place.
“Tesla ends the golf era with its Model 3,” headlined the German daily Die Welt. “THAT makes Tesla better than VW,” said the national newspaper Bild in an article that highlighted the innovation and speed of the Californian company in bringing new ideas to market.
Mr. Diess repeatedly emphasizes the differences in efficiency between the two companies. While Tesla wants to assemble a car in 10 hours in the new plant, he points out that the workers at the Volkswagen plant in Zwickau need three times as long to produce an electric ID.3 or ID.4. A planned renovation of the plant in the coming year will shorten this production time by 10 hours, but it will still be twice as long as the time allotted at Tesla.
Ralf Brandstätter, head of the Volkswagen branding division, announced earlier this month that the company is considering building a new factory from scratch for its Trinity fast-charging electric sedan, which is due to hit the market in 2026. The factory is downright radical for Volkswagen, which The eighth generation of the Golf is already assembling the factory in the 1930s, where the first Beetles were made.
“Within five years, we want to turn the location into a global beacon for the most modern and efficient vehicle production,” said Brandstätter.
Workers welcomed the proposal, which, as Ms. Cavallo emphasized, was developed with employee representatives in order to keep the Wolfsburg workforce. However, observers indicated that the timeframe was too long for a company looking to demonstrate its agility and speed up its reflexes.
“What Tesla has done in two years, Volkswagen says takes five,” said Mr Bratzel, pointing out how Mr Musk began building his German factory before all the necessary permits were granted – a bold gamble, the one judicial Order risked Tesla wants to demolish the new facility.
“The established German players must be able to rethink their processes in order to find out how they can become faster and more efficient,” said Bratzel. “Tesla is very good at it.”