VW power struggle ends as board backs CEO, compromises with unions

MUNICH -- Volkswagen Group CEO Herbert Diess won backing from the automaker's supervisory board in a move that temporarily defuses a power struggle over his strategy to accelerate the automaker's push toward electric vehicles.

A statement from the supervisory board on Monday said members "unanimously resolved" to give its full support to Diess' strategy, in particular the orientation of the company toward electromobility and digitalization."

"Over the coming years, the executive board will implement this strategy under Herbert Diess' leadership," the board said.

The announcement gives Diess the endorsement from the board that he sought while granting some concessions to labor leaders.

Diess got the board's support for his candidate for chief finance officer and for his wish to separate the automaker's procurement and components divisions.

VW will also cut overhead costs by 5 percent and procurement costs by 7 percent over the next two years, the board said.

Key points from the board's statement were:

• Lamborghini and Ducati will remain part of VW Group. The divestment of the Italian luxury brands had been under discussion to streamline the group's brand portfolio. The statement gave no commitment to Bugatti. Reports have said VW is in talks to sell Bugatti to Croatian performance electric-car specialist Rimac.
• Bentley will be placed under Audi's control. Currently Porsche CEO Oliver Blume has overall responsibility for Bentley. Automobilwoche, a sister publication of Automotive News Europe, first reported the plan in October. Bentley's future lineup will share more technology with Audi, including using the Artemis technology project, which is developing a successor for Audi's A8 flagship sedan, to also develop a full-electric car for Bentley.

• VW's home plant in Wolfsburg will become "the pioneering factory" for the highly automated manufacture of electric vehicles. VW brand's flagship EV will be built there. The decision meets a demand by the automaker's German labor bosses.
• Arno Antlitz, currently Audi finance boss, will succeed Frank Witter as VW Group CFO. Antlitz's promotion to the VW Group post was originally opposed by labor leaders because he upset unions in his previous job as finance chief for the VW brand, sources have said.
• The group's procurement and components functions will be separated.
• Thomas Schmall will be responsible for a new management board function: technology. Schmall is currently CEO of Volkswagen Group Components. He has won praise for leading a switch to electrification at the automaker's components plants in Germany.
• Murat Aksel will take over the purchasing division. He will also continue as VW brand purchasing boss. "The separation of purchasing and components is meant to allow Aksel to concentrate fully on optimizing the material costs throughout the group," VW said in its statement.

Diess had sought to lower costs in Germany to free up resources for a mass electrification push and to transform the 83-year old automaker into a tech company modeled on Tesla.

That led to a clash with Bernd Osterloh, VW chief labor representative, over Diess' management board appointments and whether to extend Diess' contract beyond 2023. Diess dropped his demand for an early extension of his contract, according to people close to the supervisory board, which was seen as a victory for Osterloh.

Diess upset unions and some senior managers when he said in a newspaper opinion piece that there are "old, encrusted" structures for him to break up at VW headquarters in Wolfsburg.

Diess, 62, had asked for a contract extension to strengthen his position as he pushes ahead with reforms. Unions and some board members said it was too early to discuss the issue.

"This puts an end, at least for the moment, to the excessive frictions between management and other key stakeholders,” Arndt Ellinghorst, a Sanford C. Bernstein analyst, wrote in a report on Tuesday. "Yesterday's resolutions clarify management's mandate and offer an opportunity to focus on VW's fundamental matters."

Reuters and Bloomberg contributed to this report