VW has 'encrusted' structures to break up, Diess says

Tensions at the top of Volkswagen Group are spilling over into public view, with CEO Herbert Diess criticizing opponents within the company who are standing in the way of radically transforming the automaker.

Writing in the German business newspaper Handelsblatt, Herbert Diess said that the company is highly influenced by labor unions who sometimes have different interests than shareholders.

"When I took office in Wolfsburg, I had firmly resolved to change the VW system," Diess said. "That means: breaking up old, encrusted structures and making the company more agile and modern. Together with many companions with the same level of motivation, I have succeeded in doing this in many places, but not in some, especially not yet at our corporate headquarters in Wolfsburg."

The latest call to speed up VW's overhaul reflects the challenges Diess, 62, has had pushing through more dramatic reforms.

Diess has struggled to win support from key stakeholders for his picks to fill top executive posts, people familiar with the matter said earlier this week, and is angry at the slow progress the company has made untangling its conglomerate structure and narrowing its focus to key brands.

The comment about persistent inefficiencies at VW's headquarters echoes remarks supervisory board member Wolfgang Porsche made at the Geneva auto show last year, which upset labor representatives. In a rare moment of candor, the leader of VW's reclusive owner family criticized the amount of sway unions have over the company.

Diess wrote that VW's management is "conditioned on internal competition, shaped by Ferdinand Piech," referring to Wolfgang Porsche's deceased cousin who shaped the industrial giant over two decades as CEO and chairman.

Diess said the company's scale, history and prowess at engineering and manufacturing traditional vehicles do not protect the organization from disruption and "can even turn into a burden in a time of dramatic change."

The changes sweeping the auto industry "will happen in the next ten years, with or without Volkswagen," Diess wrote.

Diess has mounted an aggressive push into electric vehicles that analysts see becoming a competitive advantage, but his hard-nosed management style has irritated people across the organization. He joined VW from BMW five years ago and pushed aside several executives in a sweeping shakeup of management this summer.

Renewed infighting with unions could drag down VW's efforts to challenge Tesla's electric-car leadership by spending a record 73 billion euros ($87 billion) on technology over the next five years.

Diess has repeatedly clashed with VW's unions that often are backed by the German state of Lower Saxony, the company's second-largest shareholder with a 20 percent stake. The board took away the CEO's direct control of the namesake VW brand in June following a disagreement over his request for a contract extension and other issues.