Incoming VW brand chief seen challenged by rising expenses image

Herbert Diess is scheduled to become the Volkswagen brand boss this Wednesday and his first order of business on the job will most likely be the need to tackle the group’s No.1 problem – lower costs at the mass-market unit.

According to a recent report from a BMW source, Diess made a scathing internal report about the VW Wolfsburg complex, highlighting to superiors the assembly facility’s workforce of 50,000 is filled with personnel that is unnecessary but has nevertheless been left alone. The person that ahs knowledge of the matter added the report was subsequently used by ex-chairman Ferdinand Piech to substantiate his attack of the company’s chief executive officer Martin Winterkorn earlier this spring. Diess was recruited by Piech from rivaling BMW, but the latter is now out of the picture and the former’s future with the biggest carmaker in Europe hinges on his ability to follow Winterkorn’s strategy to lower expenses at VW operations by 5 billion euros ($5.6 billion) a year by 2017. The main issue – a traditional resistance from German Unions and political interventions to cut jobs.

“There is a certain tenseness among staff and managers ahead of Diess’ arrival,” commented a VW manager for reuters. “Things are bound to get difficult.” The automaker has upheld the 56-year-old Bavarian as “the ideal candidate” to increase profitability at the core VW brand, which has fallen behind competitors such as Toyota, General Motors or Ford. But Diess, a manager that is known for his austerity measures at BMW back when the recession was killing off luxury sales, is going to be closely monitored by the powerful labor representatives.

Via Reuters