His tenure will be judged early on by whether he can scale up a revamp of the VW nameplate to the entire 12-brand group and prepare for an era of battery-powered and autonomous vehicles.
The former BMW Group executive, who joined VW just a few months before the emissions violations came to light, pledged from the beginning to pursue new technology while reining in spending growth. That project became much more urgent as the diesel scandal generated massive costs, and meant taking on established interest groups.
Bernd Osterloh, the company’s powerful labor leader, balked at negotiating with him during tough contract talks in 2016, but Diess prevailed with a landmark deal that paved the way to cutting as many as 30,000 jobs and saving 3.7 billion euros ($4.6 billion).
"My most important task will now be to join with our management team and our Group workforce in consistently pursuing and pushing forward our evolution into a profitable, world-leading provider of sustainable mobility," Diess said in the statement.
Although specific details of VW Group’s new senior management roles won’t be available until Friday, the company did make some things clear. Rupert Stadler, the embattled head of Audi, was given responsibility for sales for the entire Volkswagen Group, while Oliver Blume, head of Porsche, was put in charge of group production and will join the group’s management board, the company said.
VW is also making a change in its purchasing operations. The company said Francisco Javier Garcia Sanz, its head of procurement, is leaving the company "at his own request." Sanz played a pivotal role as the automaker wound its way through the diesel emissions violations. He is to be replaced, at least temporarily, by Ralf Brandstaetter, who oversaw procurement for the Volkswagen brand, the company said.
Other appointments announced Thursday by the automaker include Gunnar Kilian, from the company’s works council, as group head of human resources, succeeding Karlheinz Blessing, who will be available as a consultant until his contract expires.
As head of purchasing at BMW, Diess was instrumental in the luxury brand’s ability to weather the financial crisis by squeezing more than 4 billion euros out of supply costs. He then took charge of development, but was ultimately passed over for the CEO job, when the company picked Harald Krueger in December 2014. That spurred his move to Volkswagen.
The appointment of Diess was cheered by analysts.
"Diess is a man of action. He is the most plausible choice at VW to lead the group into the next phase of its transformation," said Nord LB analyst Frank Schwope.
Bloomberg, Reuters and Larry Vellequette contributed to this report