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  6. A look into the future with Herbert Diess and Bernd Osterloh

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A look into the future with Herbert Diess and Bernd Osterloh

Major double interview with the Volkswagen CEO and the Chairman of the Works Council

In a major double interview with Volkswagen CEO Herbert Diess and the Chairman of the General Works Council Bernd Osterloh, you can read how Volkswagen is tackling the new WLTP test procedure, turning its production around and standing by the Chemnitz case:

Mr. Diess, VfL Wolfsburg has started the season with two wins. Is the club Volkswagen’s standard bearer again?

Diess: Soccer is our most important marketing platform. I’m delighted the team has got off to such a successful start. After all, the past two years were tough. I was with Mr. Osterloh in the stadium to watch the first home game against Schalke. I was impressed by the team, especially its attitude. At the end of the day, that’s more important to me than the final result.

Mr. Osterloh, what’s it like watching soccer with Mr. Diess?

Osterloh: Great. Mr. Diess isn’t perhaps quite as emotional as me (laughs). But talking with him shows me that he knows his soccer. By the way, we shouldn’t forget VfL’s women’s team. They’re just as big a part of the club. Their league season hasn’t got underway, but they’ve won their first game in the cup.

Diess: Counting the cup win by the men’s team, that makes it four wins for VfL in the new campaign. By the way, there are many similarities between the work of a soccer coach and that of a CEO: The team is always what counts. You have to field your players in the right positions. A lot is about skill and training – but your approach and attitude are at least just as crucial. That applies at VfL and Volkswagen alike.

From soccer to cars. Mr. Diess, why is Volkswagen struggling with the issue of WLTP?

Diess: Volkswagen and Audi are lagging behind as regards WLTP. That’s also because we’ve devoted a lot of our attention to the diesel crisis. Our development teams were under huge pressure. However, we also have to be self-critical and admit that we didn’t control the WLTP project enough. Volkswagen has to improve how it controls processes as a whole. As regards WLTP at the moment: September and October will still be tough, but things should look up after that.

Mr. Osterloh, does the workforce appreciate the reasons for the closure days in Production?

Osterloh: The closure days have not exactly been greeted with joy by our colleagues. Many ask why we’re so late with WLTP.

Diess: I understand that the team is unhappy. But moaning about colleagues in Technical Development won’t help now, either.

Osterloh: And no one’s doing that. We know that our colleagues at the test beds are virtually working round the clock. They’re doing a good job. But I have a fundamental question: What has caused the delay in WLTP? 
Is it because of the processes there? The organization? Management? And a completely different issue: What actually will improve because of WLTP? Lawmakers have severely increased the work required. And that’s done nothing to change consumption itself. The only difference is the testing is now far more extensive. The measurement results are now a little closer to actual consumption. But that still has nothing in common with actual consumption on the road – as has really always been the case.

Mr. Diess, you’ve called for Production at Volkswagen to be more assertive. Why isn’t it so at the moment?

Diess: At a volume manufacturer like Volkswagen, Production is responsible in particular for generating earnings – as well as for high productivity and ensuring the start-ups go smoothly. However, Production at Volkswagen has often tried too greatly in the past years to fulfill the wishes of Development. The result has been great complexity and a lot of work and effort. There were often late changes shortly before start-up. That’s why Production has to exert a greater influence in the early phase of vehicle projects and avoid late changes. Of course, that doesn’t mean that we live solely from excellent processes, as some manufacturers do.
We at Volkswagen still want to build excellent products of exceptional quality. But we have to find a better balance so as to earn more money with our vehicles. We need that to invest strongly enough in Volkswagen’s future. We’ve made good progress recently and the latest start-ups were decent. But there’s still a lot of potential. We still need too long to make a vehicle.

Herbert Diess and Bernd Osterloh on WLTP, production and the VfL Wolfsburg

Mr. Osterloh, has it always been the case at Volkswagen that Technical Development sets the agenda?

Osterloh: No. Back at Auto5000 GmbH, we built the Touran, a vehicle with little complexity and few equipment variants. That was the right way, especially since the vehicle also sold well. Unfortunately, the issue petered out again afterwards. Don’t misunderstand me: I don’t want a single standardized car. We want to fulfill customers’ individual wishes. But, of course, we still have to keep looking for ways to reduce complexity and diversity of variants. Alone at Wolfsburg in the past years, we’ve built thousands of Golfs that are unique in their combination of engine, color and interior.

Diess: That shows how flexible we are in Production. However, that’s also a great burden and entails a high logistics effort. And that weighs on productivity. Our goal must be to reduce the variants.

Mr. Diess, is it mistaken to say that we seem to be much too slow in software development?

Diess: No, that perception is not mistaken. Digitalization of the car is currently one of our biggest challenges.
Many of the problems with start-ups we’ve had recently are due to problems with the software functionality.
The importance of software in cars will continue to grow significantly and so become a crucial competitive factor. We still have too little in-house expertise in this field. That’s also because we outsourced almost 80 percent of the electrical equipment/electronics in the past. I want to see us develop more software ourselves once again. To do that, we need to hire new software engineers and qualify employees.
That opens up new opportunities for a lot of colleagues. You don’t necessarily need a degree to be able to program.

Osterloh: The company’s management has simply neglected for years to lay the right foundations in the area of software. Other areas, whether exterior or interior, had greater priority. But the issue of digitalization hasn’t played a sufficient role at Volkswagen. That has to change. It’s not at all easy to find IT experts on the market at the moment. That’s why we on the Works Council have always emphasized that we can retrain colleagues who have a passion for IT from our own ranks. After all, that’s also a big issue in the Pact for the Future. Even more has to be done in that direction.

Now that you mention the Pact for the Future: What’s your verdict on it after two years, Mr. Diess?

Diess: We’ve got off to a good start. At the time the Works Council and company concluded the pact, we aimed to increase our return on sales to five percent. We’ve already managed to do that. But we still need to do far more. Because the burdens on the company, such as the costs of launching e-vehicles, will be higher than expected. Especially since we’ve seen that some of our competitors have made even greater progress.
We need higher profits to be able to fund our future. Four percent is the minimum, you can make a few investments in the future with five or six percent, and seven or eight percent will make us crisis-proof. That’s why we still have to become much more efficient. That also goes specifically for our administration.

Mr. Osterloh, how do you view the progress made under the Pact for the Future?

Osterloh: There are many who envy us for what we’ve already achieved. We can be proud of what we’ve done. Sure, there have also been disagreements now and then. But that’s part and parcel of when you negotiate such a pact. Five percent is an impressive return – and it would have been even higher if we had sold more cars. If 800,000 and not 700,000 cars had come off the line here in Wolfsburg last year. I wish our board member in charge of sales and marketing would inject even more drive here. But I should spell one thing out clearly here: Securing jobs up to 2025 is also one of the successes of the Pact for the Future alongside achievement of the targets for return on sales. It’s thanks to it that our colleagues can focus all their strength on developing our company further.

Bernd Osterloh and Herbert Diess at the summer interview in Wolfsburg

Mr. Diess, the news that Zwickau of all places will become the center for electromobility came as a surprise to many employees.

Diess: We can already see that focusing on one location for electromobility from the outset was the right decision. That’s the only way we can be competitive and accomplish the start-ups for our brands in a sensible manner.

Should other locations fear they’ll be left straggling by Zwickau?

Diess: No. We’re ensuring better capacity utilization at the MQB plants by pooling Passat production at Emden and Golf production at Wolfsburg. And Osnabrück is getting a new model, the T-Roc convertible, which the location is to develop and produce itself. More than 80 percent of all vehicles will still have a conventional drive in 2025. So the locations will work to capacity moving ahead. When electromobility then becomes really established, we’ll also convert other locations.

Mr. Osterloh, what’s the response of the workforce in Zwickau to it becoming the electromobility location?

Osterloh: When the news was announced, the first reaction of most people was naturally great happiness. As things stand at the moment, e-mobility is the future of mobility. However, that happiness was then mingled with uncertainty: The location will be completely converted – and so many colleagues are asking what that means for them personally in their day-to-day work.

Mr. Diess, a new corporate culture is invoked everywhere at Volkswagen. Do you personally feel any of that?

Diess: Quite a bit has already changed. My predecessor Matthias Müller did a lot of good groundwork. We’ve become more open and no longer shy away from conflicts. We speak more with each other instead of about each other. The Monitor also helps us strengthen dialog. As is traditional, the Works Council stages dialog events, but management has also become better.

Osterloh: In my eyes, the corporate culture at Volkswagen was never bad. The problem was a hierarchical management culture. It made it easy for managers not to have to take decisions in the past. Decisions were always fobbed off to a higher level in the hierarchy – right up to the Board of Management. However, I believe that all managers must be able to take decisions and be capable of dialog.

Mr. Diess, Volkswagen has a plant in Chemnitz. Chemnitz has recently received negative publicity due to the xenophobia there. What’s your view of that?

Diess: It seems that many people are afraid. We have to help here. We at Volkswagen are leading by example: We have many employees with a migrant background. The rapport between different nationalities and religions is a foundation for our success. We as a company have always been able to integrate people. And we as a company need to do even more. Every single one of us can help here: By taking a stand against hate, prejudice and cheap slogans – in and outside the plant. After all, we’re the largest employer in Saxony.

Osterloh: That’s precisely why I was in Chemnitz last week together with Director of Labor Relations Gunnar Kilian. We held an impressive event at our plant. We are standing up against right-wing extremism and for democracy. Policymakers haven’t succeeded so far in allaying people’s fears of integration. However, I’ll also say this here: All of us have to do our bit – integration can only succeed if we work together. We need immigration in Germany.