VW CEO urges ‘radical overhaul’ to tackle technology shift

Christoph Rauwald

Volkswagen AG Chief Executive Officer Herbert Diess told top managers that the world’s largest automaker needs to undergo a “radical overhaul” in the face of industry change or risk being pushed aside.

“The time of traditional car manufacturers is over,” Diess said in prepared remarks at an internal meeting on Thursday. The company must boost software operations to harness data from future cars, he said, citing a recent surge in electric-car rival Tesla Inc.’s share price as evidence of a changing competitive landscape.

Diess has called for deep changes at the industrial giant before, but his latest comments add a sense of urgency and risk reigniting tension with labor unions because he raises the possibility of additional cost cuts. It may be necessary to “slaughter holy cows” for VW to reach its full potential, he said.

Volkswagen AG Chief Executive Officer Herbert Diess presents the I.D. Vizzion at the 88th Geneva International Motor Show in this March 6, 2018, file photo.

His remarks echoed comments by former Porsche CEO Wendelin Wiedeking a decade ago during his bold attempt to take over control of much-larger Volkswagen. The comment sparked fierce clashes with VW’s workforce. Wiedeking succeeded in acquiring a majority stake in VW but ran out of funds when the financial crisis erupted. The sportscar maker was folded into VW and Wiedeking left.

If VW fails to keep up with data and software, it could end up like Nokia Oyj, which overlooked the threat posed by Apple Inc.’s iPhone, Diess warned, calling for a stronger focus on profits and cash.

So far, VW has been relatively resilient to industry headwinds, eking out a small sales gain last year and record deliveries. Global demand for new vehicles declined in 2019 as sales in China, VW’s largest market, contracted and trade disputes stoked uncertainty across regions.

VW executives must recognize the “the magnitude of our task and the brevity of time” the company has left to react, Diess said. “It gives us exactly one single try.”