Herbert Diess
The VW boss is demanding a lot from his own supervisory boards: a new contract and new board members.
(Photo: Reuters)
Düsseldorf, Frankfurt It was actually supposed to be just a peaceful ceremony: the Volkswagen works council turned 75 on Friday last week. Former Chancellor Gerhard Schröder (SPD) had come to Wolfsburg especially, and IG Metall had sent its second chairwoman Christiane Benner to VW headquarters.
But the current conflict between corporate management and the works council over the future composition of the board lay like a big shadow over the anniversary celebration of the VW employee representatives. In the past week the dispute escalated: CEO Herbert Diess holds the works council against blockade policy, especially with further restructuring steps at the German VW locations with high production costs.
Works council chairman Bernd Osterloh rejects the criticism as irrelevant. Again a power struggle between the CEO and the employee side is emerging – with an uncertain outcome.
Even if Diess did not take part in the ceremony himself, his greeting was a more than clear indication of the current lines of conflict. Increases in efficiency are necessary and “not to be underestimated” for the continued existence of companies. “Here at Volkswagen we still have some catching up to do,” were his words of warning to the works council.
Because the company’s own works council has a stronger influence than other employee representatives through the VW law, this results in “outstanding responsibility” for the upcoming transformation of the group through electrification and digitization.
As soon as the ceremony at Volkswagen was over, another insight leaked to the public. The CEO Herbert Diess is pushing for an extension of his contract. His contract runs until April 2023. But from the 62-year-old’s point of view, it would be best to decide now about an extension. “He now needs confirmation that the supervisory board supports his course,” explained insiders. A company spokesman declined to comment.
The supervisory board is likely to deal with the contract extension soon
The supervisory body will probably deal with the request of CEO Diess. In the next few days, the top of the supervisory board should deal with the topic. Diess have placed his wishes in a targeted manner and a decision is now needed, according to corporate circles.
How the race will end and whether the supervisory board will get involved in Herbert Diess’ power poker is completely open. It is also conceivable that a common line with the CEO could no longer be found – and then he would face the threat of being replaced at short notice. None of the important factions in the supervisory board – employees or the Porsche / Piech family and the state of Lower Saxony as the largest shareholders – has an interest in an escalation. Hardly anyone really understands why the conflict between Diess and the works council is breaking out again now, of all times.
Actually, everyone at Volkswagen is longing for peace and quiet, which is already massively disrupted by the effects of the corona pandemic. Like other automobile manufacturers, the VW Group has to cope with significant losses in sales; a quick recovery is not in sight. A truly effective recovery is unlikely to take hold until a vaccine is actually available.
The discussion about the “Person Diess” is unnecessary for other reasons as well. A dispute over his position only escalated in early summer. After he saw himself discredited in public by IG Metall representatives, Diess had accused the supervisory board of violating the law in front of a group of top managers, but without being able to substantiate them.
In a meeting called at short notice, the most important members of the supervisory board prepared an immediate expulsion, but at the last moment refrained from doing so. In the balance, the damage to the group would have been greater from an unresolved leadership issue, it said from the supervisory board. So it has only been five months since Diess was able to prevent his demise in Wolfsburg.
This was allowed to stay – with the more than clear admonition to finally limit oneself to one’s work and not to look for a new confrontation. Works council chief Bernd Osterloh stood behind this vote, even if some other employee representatives had spoken out against further cooperation with Herbert Diess. “Since then, Diess has been under probation,” said a company insider.
So far this has not been able to take the “fortress Wolfsburg”
In the past few months, things have remained quiet in Wolfsburg at first. Diess actually tried not to set off a new conflict. He sometimes praised his works council boss and indicated in a small circle that he would henceforth take more care of the daily business and leave Osterloh Osterloh.
But: The Alerte Münchener thinks he is alone at the company headquarters in Wolfsburg, the plant where most of the world’s cars are still built. Too little is appreciated what changes he has initiated. He identified the resistance in the works council, which traditionally has a strong position at VW. Managers speak of the “Wolfsburg Fortress”. “Nothing happens against the union and Osterloh,” says some.
Bernd Osterloh
The VW works council chairman could block a contract extension from Diess.
(Photo: Imago)
In his two and a half years as CEO, Diess failed to capture this fortress. “When I took office in Wolfsburg, I firmly decided to change the VW system,” wrote Diess on Sunday in a post on LinkedIn. He wanted to break open old, encrusted structures. He did not succeed in doing this, especially at corporate headquarters.
It is an admission of failure. An unusual confession that Diess does not want to leave as a final judgment. He has not given up the fight for Wolfsburg. In order to still achieve this goal, from the point of view of his companions, he needs a new board contract. The Supervisory Board would thus express that it shares Diess’ desire for more efficiency and higher productivity. The appointment of the board candidates he proposed would also support him.
Therefore, this also makes the appointment of the executive board a question of power. CFO Frank Witter will retire next year. The successor favorite to Diess is Arno Antlitz, currently Audi CFO. But Osterloh rejects face all around. When Antlitz headed the finance department of the Volkswagen Passenger Cars brand in Wolfsburg, there were repeated disputes with the head of the works council.
With his fellow campaigner, Diess wants to drive further cost reductions and increases in productivity, especially at the German locations. Volkswagen has to become much more efficient in order to be able to secure its own continued existence in the long term, according to company circles. Diess repeatedly refers to the US competitor Tesla, which is technologically ahead of the VW group. Not only with electric drives, but also with the digitization of vehicles.
In the circles of the inspectors, the push for extension is met with incomprehension. Finally, Diess still has an ongoing contract until spring 2023. The discussion about it is actually not permitted under stock corporation law. Only in the last year of the contract’s validity can the supervisory board and management board talk about an extension.
An early new edition is only possible under certain conditions. One would be that the contract with Diess is terminated with immediate effect and a new contract with a five-year term is concluded immediately afterwards, according to corporate circles. Alternatively, it is conceivable that Diess will fulfill his current contract until 2023 and that he will already be promised an extension of another three years.
The 65-year-limit as an obstacle
At the end of an extended contract period, Diess would be 67 years old. It is precisely this fact that is now becoming a problem for him. Because an extension beyond the age of 65 is only possible if there is a special reason why. This is what the VW law provides, which grants employees in the group additional rights. Important decisions such as a management contract beyond the 65-year limit fall under this rule, which requires a two-thirds majority.
The powerful works council boss Bernd Osterloh can thus block a contract extension for the chairman of the board all by himself. But it is not only among employees that Diess finds few friends for his proposal. According to Wolfsburg, the wish of the VW boss to extend the contract met with little approval in the entire supervisory board.
The works council and the state of Lower Saxony as the second largest shareholder declined to comment. A spokesman for the Porsche / Piech family emphasized that the largest shareholder was behind Volkswagen’s strategy and behind Herbert Diess. When asked whether the family would also like to comment on a possible contract extension, a family spokesman responded with clear reluctance: “No comment.”
More: Unrest at VW: Can Diess prevail in the allocation of board positions?