The boss of Volkswagen is on his way out and he putTesla on a pedestal as his benchmark for automotive innovation.
On Friday, the German carmaker's fractious board of directors dropped the bombshell news it would replace Herbert Diess as CEO with the 54-year-old head of the group's luxury brand.
According to reports, the Austrian national had a friendly rivalry with Musk and he was almost hired by the company.
Thanks Elon for always thinking outside of the box. And for strengthening the market capitalization of our industry and helping to cut through German bureaucracy.
— Herbert Diess (@Herbert_Diess) April 22, 2022
He was not fired because of his strategic direction or vision for his company, but rather because of his combative management style.
According to a source close to VW's board, Diess had his strengths broken up. In the case of CARIAD, his deficits in execution became obvious as time went on.
So what does this mean for the automotive industry as a whole?
The VW Group can be difficult to manage with its three main stakeholders.
The regional government of Lower Saxony has a blocking minority, the German labor union IG Metall has half the seats on the company's board, and thePorsche and Piech clans have a majority of the votes.
The dual mandate for management is to maximize profits and employment at the same time.
VW is a company that longs for internal harmony while being notorious for generating the most drama of all German companies.
CARIAD is an in-house software unit created by Diess after the Golf was plagued with bugs. It would have 10,000 developers, become the second largest software group in Europe, and eventually program 40% of the code for the group in-house compared with 10% at the beginning.
VW would not be demoted to the status of a hardware manufacturer that didn't have access and the ability to monetize customer data, that's what Diess wanted to make sure.
CARIAD has failed to pay off thus far.
Software remains a key pain point for customers, particularly for the VW brand's new EV, which has proved exceedingly difficult to implement.
The easier method of outsourcing this task was chosen by Volvo cars.
The brand has been sequestered away in the world ofPorsche, a carmaker that cranks out double-digit profit margins as if by assembly line.
It has just six main model lines built at three European plants and is easy to handle compared to the hundreds of models built at 100 different plants.
The first VW Group executive to push for aPorsche IPO is the finance chief of Blume.
While he has been in charge of VW Group production at the C-suite level since the beginning of the year, it is clear that he will need a lot of help navigating the pitfalls in the city.
He will have a new operations chief at his side that can take the heat off him and act as a bad cop to the good cop.
A leader who can unite the disparate tribes and balance their interests is needed in the Volkswagen Group truce.
VW needed to be woken up from its slumber and reminded of the harsh competitive winds coming from Chinese EV companies, according to a person who disagreed with him.
It comes back to haunt you if you don't spend enough time forging alliances and instead pick fights that leave your chairman mending fences and cleaning up after your mess.
A new mandate from the board can start with a clean slate.
Volkswagen used to purge CEO hopefuls that flew too close to the sun.
The boss of VW's Czech value brand koda was sacked in 2020 because he was too ambitious.
The installation of Blume at the top happened without warning and should limit the damage done by disgruntled senior execs.
VW won't backslide on its EV strategy because the man most identified with it has been fired.
His predecessor put VW on a path to electrification with his " Roadmap E" issued in September of last year.
There is a lot of speculation that German labor leaders will put on the brakes. The works council of the car company recognised the risk and saw the transition of electrification as an inevitability.
The decision to promise unions what they couldn't get under Mller was one of the main reasons why Diess got the job.
Their main concern last year was the allocation of an EV model called Trinity to the historic Wolfsburg plant.
VW's greatest strength going forward is its early pivot to electric vehicles, while its greatest weakness is its lack of expertise in software.
VW's dismissal of Herbert Diess shows how far away the company is from a software-driven tech company likeTesla.
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