Volkswagen CEO Herbert Diess to be replaced by Porsche chief in major shake-up

In a major shake-up, Volkswagen CEO Herbert Diess is stepping down as head of the world’s second-largest automaker and will be replaced by Porsche chief Oliver Blume, the company announced Friday.

Blume will replace Diess in his role as chairman of the board of management on September 1st, the company announced. In a statement, Hans Dieter Pötsch, who chairs the company’s governing supervisory board, thanked Diess for his service and for his “key role in advancing the transformation of the company.”

It was a surprising development, considering Diess had narrowly avoided ouster by the VW supervisory board late last year. The German automaker has clashed frequently with labor unions and other key stakeholders over VW’s strategic direction and overall cost cutting, according to Bloomberg. The company was in the midst of raising more funds through an initial public offering of Porsche to help fuel its push into electric vehicles and software services. (VW is governed by a supervisory board, which delegates several seats to labor unions.)

Editor-in-chief Nilay Patel earlier this year on the Decoder podcast, Diess spoke about VW’s unique governing structure and how that makes his job different from most automotive CEOs.

“It is complex, and you need more alignment and a lot of discussion,” he said. “It doesn’t allow for random decisions because you have to defend your case as a shared interest in the future of the company.”

But as investors continued to voice concerns about VW’s direction, it was clear that Diess’ position at the head of the company was tenuous. He was hired away from BMW in 2015 with the mission to help regain trust from consumers in the wake of the Dieselgate scandal, in which VW was caught installing cheat devices in millions of vehicles. Diess himself narrowly avoided prosecution for his role in the scandal.

Diess was among the most aggressive in pushing the auto industry to embrace electrification, earning respect from Tesla CEO Elon Musk, among others. (He even tried tweeting like Musk for a while but couldn’t quite hack it.) It’s unclear what this leadership shake-up will mean for VW’s $100 billion investment in electric vehicles.

Diess was said to be intent on catching up with Tesla in the sale of electric vehicles and frequently imposed new directives on VW’s workforce in that mission. That meant reducing the company’s production time per vehicle from a current 30 hours to 10 hours, which Tesla appears close to achieving at its Berlin facility. Factory workers pushed Diess to help navigate the industry’s bigger crises, such as the semiconductor shortage.

The company also met obstacles in its efforts to expand in China, which is the world’s largest EV market. Earlier this year, Germany’s economic ministry refused to provide guarantees to cover new investments in China because of concerns over human rights, according to Der Spiegel.

Blume has been seen as a potential successor to Diess for years, though it was thought he would still have longer to wait, according to Bloomberg. He joined the company in 1994 and has held roles at a variety of its brands, including Seat, Audi, VW, and Porsche, where he has served as chair of the board of management (which is similar to the CEO’s role) since 2015.