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VW announces Herbert Diess as new CEO

Volkswagen has chosen Herbert Diess as its new chief executive in an overhaul that includes streamlining the company’s multiple car brands into just three groups while preparing its truck business for a potential listing.

Matthias Mueller’s replacement with VW brand chief Diess follows slow progress in reorganising the group’s car brands, a key pillar of “Strategy 2025” to transform the Germany’s biggest car company into a leader in cleaner cars and to move on from its diesel emissions scandal of 2015.

For Volkswagen its the biggest development since it became a multi-brand conglomerate under former chief executive Ferdinand Piech.

The carmaker said it planned to create six new business areas and a special portfolio for China, its largest market, and split its brands into three new vehicle groups with categories for value, premium and super-premium nameplates.

The “super premium” group would include sports car brands Porsche, Bentley, Lamborghini and Bugatti. Audi would be excluded from this group and form its own premium division.

Analysts welcomed the appointment of Diess, a former BMW executive who has more than doubled profitability at the VW brand since taking charge in 2015.

“Diess is a man of action, he is the most plausible choice at VW to lead the group into the next phase of its transformation,” said Nord LB analyst Frank Schwope, who has a “buy” rating on Volkswagen.

Separately, VW said works council executive Gunnar Kilian, a close aide to labor boss Bernd Osterloh, will replace group human resources chief Karlheinz Blessing who will stay at VW as an adviser. 

VW will tighten leadership duties within the group and empower the heads of the three vehicle categories to take on company-wide responsibilities.

With VW’s core namesake brand shouldering the bulk of development spending within the group, Diess will also become responsible for R&D activities across the group. Rupert Stadler, CEO of luxury division Audi will take charge of group sales.

Oliver Blume, head of sports car brand Porsche and newly appointed to the group executive board, will oversee production at the multi-brand organisation, VW said.

Diess, Stadler and Blume will also take charge of the new groups Volume, Premium and Super Premium respectively, VW said, without giving more details.

Analysts at Goldman Sachs say there is 160 billion euros worth of “hidden value” in the European autos sector that could be unlocked through portfolio simplifications.

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VW set to replace Müller as CEO

Volkswagen has seen its reputation battered in recent years by the scandal

Volkswagen is set to replace its chief executive, Matthias Müller, due to the diesel emissions scandal that has cost the car manufacturer billions of dollars, led to the imprisonment of two executives, and ruined the German carmaker’s reputation.

Two people with knowledge of the situation told the New York Times that Herbert Diess, who is in charge of the company’s flagship Volkswagen brand, was likely to succeed Müller. The company said earlier on Tuesday that it was considering a leadership change, and a final decision was expected by the end of the week.

In the statement, Volkswagen said it was considering “a further development of the management structure of the group,” which could “include a change in the position of the chairman of the board of management,” referring to Müller.

Political leaders are currently pressing the German carmaker to compensate diesel owners who bought cars that turned out to be dirtier than advertised, which could add to the already huge cost of the scandal.

Müller, 64, took over Volkswagen days after it admitted in September 2015 that it had cheated on diesel emissions tests, installing illegal software in 11 million vehicles.

He succeeded in preventing a collapse of sales and profits. But Müller, who has spent his entire career at Volkswagen or its subsidiaries, struggled to deliver on his promise to remake the company’s solid foundation.

However, the carmaker has continued to suffer blows to its reputation, including revelations in January that it had financed tests on monkeys in an attempt to show that diesel exhaust was not as dangerous as it once was.

“This is a chance for Volkswagen to make a change,” said Christian Strenger, the former chief executive of Deutsche Bank’s wealth management division, who is suing Volkswagen because he said it violated its duty to shareholders by failing to be forthcoming about the emissions scandal. 

Diess has led Volkswagen’s push to mass produce electric cars, which are seen as essential to the company’s ability to defend itself against challengers like Tesla, Uber and Google that are trying to upend the auto industry.

German prosecutors have not charged anyone in the Volkswagen case, but they expect to complete their investigation this year.

Two former Volkswagen executives are currently serving prison sentences in the US after pleading guilty to charges including conspiracy to violate the Clean Air Act.

Müller was a high-ranking executive involved in product development at the same time that the company was developing the illegal software and deploying it in vehicles, however he has insisted he was ignorant of any wrongdoing, but he has faced the accusation that he was part of a system that allowed it to take place.

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