Following news that Volkswagen Group’s Supervisory Board has failed to decide on the future of CEO Dr. Herbert Diess;

David Leggett, Automotive Analyst at GlobalData, a leading data and analytics company, offers his view:

“A forceful debate for stakeholders at VW Group over strategy is nothing new. VW’s history is peppered with politically charged rows over strategic direction that have ultimately become embroiled in stakeholder confidence over the CEO of the time.

“The difference now is the competitive ante and threat has been much raised by Tesla, in the process of setting up a new plant in Germany that will come with industry leading automation and productivity levels.

“As Europe faces the big transition from combustion engines to battery electric vehicles (BEVs), incumbent players such as VW Group – which leads the European car market – will come under greater scrutiny on both their new product and manufacturing strategies.

“Diess has arguably successfully addressed product with BEV models such as the ID.3, but the latter is the perennial political hot potato for VW amid concerns over productivity and employment levels – especially at the lead Wolfsburg plant.

“In the light of Tesla’s challenge, Diess wants to proactively reshape the VW manufacturing footprint for greater efficiency and has warned that the consequences of not doing so will be to severely damage VW’s long-term prospects.

“Others, such as labour union representatives on the VW Group Supervisory Board, take a different view on the best way forward and are fearful of mass job losses. The debate has quickly become inextricably bound-up in views of Diess’s management style and will decide his fate as CEO.

“A compromise position that suits all parties could be very difficult to reach. Indeed, it would be no surprise if Diess has already uttered the fateful words: Back me or sack me.”