Case D: Transforming a Tanker

Resit Dossier: Digital Leadership (DL)

Author

Andy Weeger

Published

Sep 24, 2026

Modified

Sep 25, 2026

Overview

Leader Herbert Diess, CEO of Volkswagen Group (2018–2022)
Organization Volkswagen AG and its software unit Cariad
Period September 2021 – July 2022
Situation type Digital transformation, conflict with labor representatives, and dismissal of the CEO
ImportantAssigned Theoretical Lens

Sources of Power & Organizational Politics

Background

Diess joined Volkswagen from BMW in 2015 and became group CEO in 2018. He committed the group to a fast transition to electric vehicles (around €52 billion for battery-electric development) and aimed to develop the software for all group brands in-house. For this purpose, the software unit Car.Software.Org (later Cariad) was founded in 2020. Diess repeatedly and publicly used Tesla as a benchmark and warned that Volkswagen was falling behind.

Volkswagen’s governance is special: the supervisory board has 20 seats, half of which are held by labor representatives. The works council represents about 300,000 employees in Germany. The state of Lower Saxony holds 20% of the voting rights, which under the Volkswagen Act gives it a blocking minority. The Porsche and Piëch families control the majority of voting rights via Porsche SE. In 2020, Diess had already handed over the management of the VW brand.

Timeline

Date Event
Late Sep 2021 In a supervisory board meeting, Diess mentions a scenario in which up to 30,000 jobs could be cut in Germany to keep up with new competitors such as Tesla. The statement becomes public.
Oct 2021 Diess invites Elon Musk to join a meeting of about 200 top managers by video. Works council chair Daniela Cavallo publicly criticizes Diess; the works council states that it is not opposed to electromobility, but to the way Diess is pushing his course.
Nov 2021 The conflict escalates. Lower Saxony’s Minister-President Stephan Weil reportedly withdraws his support. The supervisory board sets up a mediation committee. Porsche SE continues to back Diess.
Dec 2021 Compromise: Diess remains CEO but loses responsibility for the mass-market brands (VW, Škoda, SEAT), which Ralf Brandstätter takes over on the group board. Diess is to focus on strategy and technology.
H1 2022 Cariad falls behind schedule. Launches of key models of other group brands (e.g., Porsche’s electric Macan, Audi’s Artemis project) are delayed because the software is not ready.
Jul 20–22, 2022 The executive committee of the supervisory board (including representatives of the families, Lower Saxony, and labor) decides that Diess has to go. On July 22, Volkswagen announces that Porsche CEO Oliver Blume will succeed him on September 1, 2022, while remaining head of Porsche. Blume is described as a team player and skilled internal negotiator.

Key Actors

  • Herbert Diess: group CEO; strategist of the transformation.
  • Works council / Daniela Cavallo: half of the supervisory board seats; historically strong co-determination.
  • State of Lower Saxony / Stephan Weil: shareholder with a blocking minority; political interest in jobs.
  • Porsche and Piëch families (Porsche SE): controlling shareholders.
  • Hans Dieter Pötsch: chair of the supervisory board; led the negotiations in 2021.
  • Cariad: the software unit on which the group brands depended.
  • Oliver Blume: CEO of Porsche and successor.

Contested Points

  • The relative weight of the reasons for the dismissal: conflicts with labor representatives and leadership style vs. Cariad’s delays vs. weak results in China.
  • Whether Diess’s confrontational communication was a deliberate means of creating urgency, or the cause of his failure.

Sources

This list is not exhaustive.