New CEO brings peace back to VW – while it lasts

The difference was in a single word, but the audience did not know what they were experiencing. In a video conversation, Volkswagen CEO Oliver Blume and the chairman of the works council Daniela Cavallo tutored each other.

They had not experienced that at the largest car manufacturer in Europe for years, it was reported Die Welt. Blume’s predecessor, Herbert Diess, had always insisted on more formal manners. He was permanently at odds with the Works Council, which made a friendly relationship like that of Blume and Cavallo seem completely unimaginable.

In the tutoring of Cavallo and Blume, a lot comes together from the first six months of the new CEO. For years, Volkswagen made headlines with quarrels between CEO and works council. Diess, on the other hand, had made firm statements: how progressive Tesla was as a car manufacturer, and how visionary Elon Musk. Or he emphasized how likely it is that traditional car manufacturers will perish in the switch to electric driving.

In the summer of 2022, the Supervisory Board (SB) was done with it – and decided to replace Diess with 54-year-old Blume on September 1. Since then, something remarkable has been going on at Volkswagen: it is quiet, the atmosphere is good and decisions are being made. And that is also badly needed – because things are not going well with one of the largest industrial employers in the world (660,000 workers, turnover in 2021 250 billion euros).

At every meeting, Blume arrives with a Porsche notebook. He takes notes in it. At the end of a meeting, he makes concrete agreements with those present. And then after a while he comes back to it.

Sound like a normal CEO? It was a relief for the Volkswagen managers, wrote Handelsblatt after Blume took office. They were used to Diess, who broached topics haphazardly and never returned to them.

In everything, engineer graduate Blume – little is known about him except for his love of running – is so far the anti-Diess. He does not make controversial statements. He does not see himself as a visionary who has to shake up a dormant company, but as a worker. And he makes concrete, clear decisions.

Part of this involved clearing debris from its predecessor in recent months. Blume, as described by German media, reorganized a number of unsuccessful projects initiated by his predecessor. He soon broke ties with the American Argo AI, which worked with Volkswagen on autonomous driving. He sold the car sharing subsidiary WeShare to a competitor.

New vision

In January, Blume presented its new vision of the numerous Volkswagen brands, from Seat and Audi to Porsche and Skoda. According to him, brands should get more identity again, so that consumers do not think that all cars from the VW group are the same.

It was mostly fine within the group. And that while some considered Blume too light and too nice shortly before he took office. Volkswagen, the story went, is so complex that there must be a strong, authoritarian figure at the top. Only such a person can hold his own among the many interests – from employees and brand bosses to those of shareholders such as the Porsche and Pïech families and the state of Lower Saxony.

So far, that appears to be quite different. Blume is not, like Diess, an outsider: he comes from Braunschweig, close to the headquarters, and has worked for the company all his life. He knows all relationships, contradictions and interests through and through.

This is also evident in his dealings with the staff. Diess eventually had to leave partly because he had lost Cavallo’s confidence in the Supervisory Board. The powerful works council chairman was not served by his constant hammering – that everything had to be better and more efficient, and above all: more like at Tesla. Diess also regularly alluded to large rounds of layoffs.

Blume emphasizes everywhere that he starts from Volkswagen’s “own strength”. The same is true of his statement that “man is at the center.” Sounds like a management cliché, but is “balm for the soul of the staff,” an OR source told Die Welt.

Double roll

So much for the good news. The fact is that Blume faces various challenges and conflicts are lurking.

First, some investors have criticized his dual role. Blume is also still chairman of the board of the listed Porsche, of which Volkswagen is a major shareholder. On Monday, he will chair the Porsche board meeting in Stuttgart. On Tuesday he will do the same for the VW group in Wolfsburg.

So far that’s fine. But what if, for example, there is a shortage of raw materials and it has to be decided which brand will receive the goods? Blume has said he will remain neutral then, but at shareholder meetings he received many critical questions about it.

Then there is the state of affairs at Volkswagen itself. One of Blume’s biggest challenges is getting the company’s software arm, Cariad, up and running. That’s crucial, given that cars are increasingly moving computers. But under Diess there were constant delays and cost overruns in this area, while the software in cars sometimes faltered. Blume must ensure that Cariad finally achieves success.

And then there are car sales. Volkswagen is starting to lag behind local manufacturers in its largest market, China. Competitors’ electric cars often seem to outperform. In January, Volkswagen reported very poor sales figures; the years of billion-dollar profits are clearly over (the exact figures will follow later in March). At the same time, the works council is asking for an 8 percent wage increase for the staff. It therefore seems only a matter of time before the fun in Wolfsburg is over.