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“We need strong companies and more free global trade”

Interview with Herbert Diess

Apple, China, Russia, Hydrogen: In an interview Herbert Diess, CEO of Volkswagen Group, talks about the stress ratio between politics and economics.

Mr. Diess, how political can or should a Group CEO be today?

As Group CEO, I am accountable for the company. Politically, I get involved when Volkswagen or its stakeholders are affected.

You don't have a political stance?

As a private citizen, of course I do. But as soon as I sit here in the office, I act as CEO in the interest of our 670.000 employees, customers and shareholders around the world. That is my responsibility. We are not a political entity, but an international business enterprise.

A manager has to behave opportunistically, always and everywhere?

No. Volkswagen in particular stands up for its values like hardly any other company: We stand for the peaceful coexistence of countries, open global trade, economic development, fair working conditions, individual freedom and condemn all forms of discrimination. Standards like the Universal Declaration of Human Rights and the Social and Labor Standards of the ILO are our guiding posts. But we are not only a German company with almost 300.000 employees but we employ the same number of people in the world. We work in different value systems, while implementing our values at all of our sites.

Do you have any scruples putting up your plants in countries with autocratic governments?

We live in a complex and unfortunately imperfect world. According to the Economist, only 5.7 percent of the world's population live in a democracy as we know it. If we only operated in these countries, we and all other global companies would not last.

You were also in times of military dictatorships in Latin America or in South Africa during apartheid. From today's perspective, was this not a serious mistake?

We made serious mistakes in Latin America, which we deeply regret. That's why we have come to terms with our role during the military regime and made compensation payments. In the long term, however, our presence in Latin America has brought more benefits to society than if we had turned our backs. And even Nelson Mandela said after liberation, after the end of apartheid: It's good that we, as foreign industry, stayed and represented Volkswagen's values at our sites. This is also confirmed by science: economic activity has a positive effect in such states; the automotive industry in particular, with its long value chain, promotes prosperity and the democratic opening of states.

Doesn't that make you complicit with dictators?

No, it doesn’t. What is important is that we remain in dialogue instead of closing ourselves off. Turning away from the economy leads to poverty and an increase in violence. What’s more, investments in the automotive industry are not designed for parliamentary terms of individual politicians, but for 40 to 50 years. Simply popping in and out of political system changes is therefore impossible and makes no sense for anyone.

If need be, you refuse to support the German government, for example when the German Chancellor calls for sanctions against Russia.

As Volkswagen, we don't want to be a vehicle for governments. We have 6.000 employees in Russia, plus suppliers and customers. We have a market there, so we are happy when Russia is doing well, which is why sanctions hurt. Diplomacy and negotiations are always better than trade restrictions, which hurt us as well as the people of Russia.

Now you sound like former Chancellor Gerhard Schröder, the Putin-understanding man.

We invested in Russia even before Putin, created thousands of jobs there, and we have a responsibility to these people. Are we supposed to let them down? Of course we live our values locally, but we are also part of the Russian economy, just like the German or Chinese economy.

The economy is overwhelmed to force a systemic change towards peace and freedom?

We cannot meet this demand at all. It is asking too much of companies like Volkswagen to push through a change of a political system. We have a responsibility to our employees around the world, to their families, to the suppliers and everything that depends on them. And also for our shareholders, the institutional and large ones, but also the small ones, for many people their retirement provision depend on the Volkswagen stock through pension funds. That is the reality. If we really want our value system to have a positive impact on the world, we need strong companies and more free global trade - not less.

Human rights activists call this attitude convenient, if not cynical. You can do business anywhere with that argument.

I disagree.

Where is the limit? How inhumane can a regime be before the industry pulls out?

Countries that are not part of the international community and our global world order are out of the question. And, it must always be ensured that we can implement our high standards and values at our sites. That is an absolute condition, and that is where the line is drawn.

Doesn't VW have a higher responsibility because of its history: The company was founded by the Nazis, so we should be particularly sensitive to moral issues.

Absolutely! Volkswagen must not allow itself to be abused and takes a clear stand against racism and anti-Semitism. It is precisely because of our history that we are so insistent on enforcing our values at our locations worldwide. We have all reason to say that we are a role model in that respect.

Even in China, where you have a plant in the province where the Uyghur Muslim minority is persecuted?

We have been in China for almost 40 years. People have become freer and more prosperous in that time, and half a billion Chinese have been lifted out of poverty. We stand by our commitment in China, including in Xinjiang. Here, too, our presence on the ground is more likely to improve things than turning away.

Even if you can't be sure that forced laborers will be sent to your factories there?

Yes, we are sure! Neither we nor our suppliers employ forced laborers. We have zero tolerance here. We also uphold our values in Xinjiang, including employee representation, respect for minorities, and social and labor standards.

VW sells more than 40 percent of its cars in China, and a large part of your profit depends on that. How much courage can you afford against the rulers in Beijing?

We talk to the Chinese government, as we do with other governments, also about human rights. And quite clearly, it is not an option for a company of our size to withdraw from China, in which case you lose your raison d'être as a global player. For us, however, China is not a major, threatening power, but a huge opportunity. Incidentally, this also applies to global challenges such as combating climate change. This can only be done with China, not without it.

In Turkey, you refrained from building a new plant after facing political opposition, and President Erdogan is now taking revenge by stirring up trouble against VW and throwing your brands out of the state vehicle fleet.

It was for economic reasons that we stopped the project, mainly due to the economic development caused by COVID-19. Of course, this hurts the government concerned. But we will not lose sight of Turkey, which remains an important growth market. A plant of ours there would certainly have contributed to opening up the country and bringing it closer to Europe.

The federal government's supply chain law forces corporations to provide fair production conditions, even for their suppliers far away. Many managers are resisting this, are you?

We will significantly exceed the requirements of any law. We ensure that human rights are observed everywhere and that child labor is avoided. We are aware of our responsibility, and we will live up to it.

When should you expect the Chinese to say, we don't need you anymore, we can do it on our own now?

China has been working for 30 years to become better than us. And when it comes to innovations and future technologies, China is already the benchmark in many areas, just like the U.S. But our goal is to prove that they also need VW. We are succeeding quite well, we are the market leader in China with a market share of over 20 percent, we have two plants there just for electric vehicles and we are continuing to grow. And China is opening up further; since last year, foreign companies like us have been allowed to acquire majority stakes in joint ventures. The presence in China is definitely a strength of VW and I'm sure that in the future we will use new technologies from China in the rest of the Group.

You are betting heavily on e-mobility. Is this billion-euro bet working out?

It's not a bet, that's important to emphasize. A management team of a company of this size doesn't bet. It was a conscious strategic decision that we made five years ago. And yes, we can see today: It was the right one! With our new e-models e-tron, Taycan, ID.3 and ID.4, we are already the market leader in many countries, especially in relevant electric markets like Norway. Now the e-vehicles are being launched in three global markets, which will massively increase our market share. Our MEB platform for all electric models helps us scale e-mobility worldwide. Most competitors are now following suit, which confirms the course we set years ago.

So you've given up on the fuel cell as an alternative, even though everyone is promoting the future of hydrogen?

This whole discussion about the alleged openness of technology, driven by some parties and associations, is misleading for customers. This openness simply does not exist. The climate targets can only be achieved with purely electric cars. Hydrogen for cars is too expensive, too inefficient and too complex - we will not see a large number of fuel cell cars. I am convinced of that. The discussion about technology openness ensures at best that the necessary change to sustainable mobility is slowed down. People need clarity, they need the necessary infrastructure, more renewable energy, for example. E-mobility has won the day, as can be seen from what the competition is offering. Even fuel cell pioneer Toyota has announced one million e-cars per year by 2025.

Many other car managers, including your former colleagues at BMW, claim the opposite: that it's too risky to put all your eggs in the same basket, the battery drive.

I'm just sticking to the facts: Physical production is simply too expensive and inefficient; moreover, to combat climate change, hydrogen is much more urgently needed for other things, such as steel production. Here, green hydrogen can be a good solution. Synthetic fuels, by the way, are also more likely to be used where electrification is not possible, such as in aircraft. The only things on the road that work are battery-powered electric cars.

Are you actually still a fan of Tesla pioneer Elon Musk?

He changed the industry with Tesla. Tesla is now our main competitor in the electric world. I think it's good that Tesla is coming to Germany. Competition is good for us, and we are embracing it with our Trinity project in Wolfsburg. The conversion at our corporate headquarters will revolutionize the whole region. Competition is a locational advantage, as a look at southern Germany shows: Audi, Porsche, BMW and Daimler are all located within a few hundred kilometers of each other, and they lure the best people away from each other, driving each other to peak performance. Something like this could happen in the north between Tesla in Brandenburg and VW in Wolfsburg.

Their supervisory board, IG Metall boss Jörg Hofmann, can no longer hear the praise for Tesla: They should first adhere to German labor law and proper collective wages. Do you envy Elon Musk for not having to take a works council into account?

If you start with a clean sheet of paper, you always have an advantage. However, I firmly expect that IG Metall, with its powerful position in Germany, will ensure that Tesla, too, has to provide fair working conditions and that we get equal opportunities with Tesla.

Even more powerful than Tesla is Apple: Will the iPhone manufacturer soon be your toughest competitor?

To be honest, I expected Apple to get into the car business sooner. It's a very logical step, because they have the expertise ready for the new automotive world: batteries, software and also design - Apple has all of that, plus practically infinite financial resources. Nevertheless, we're not afraid: The automotive industry is not a typical tech industry, it can't be taken over in a sweep. Apple will not succeed overnight.

Sooner or later, however, traditional manufacturers like VW will only be left with the role of contract manufacturer?

Don't worry, in the case of Volkswagen, that's not going to happen.

Now we almost missed asking Diess, a private citizen, about his political preference: Who will get your vote in the federal election in the fall?

Since I have an Austrian passport, I'm unfortunately not allowed to vote here.

The interview was published on February 14th 2021 in the Frankfurter Allgemeine Sonntagszeitung.

Author: Georg Meck

Fuel consumption

ID.3 - combined power consumption in kWh/100 km (NEDC): 15.4-14.5, CO2 emissions in g/km: 0; efficiency class: A+

ID.4 - power consumption in kWh/100 km (NEDC): combined 16.9-15.5; CO2 emissions in g/km: 0; efficiency class: A+

Audi e-tron - Combined electric power consumption in kWh/100 km (NEFZ) (62.1 mi): 24,3 - 21,0; Combined CO2 emissions in g/km: 0

Porsche Taycan - Electricity consumption combined in kWh/100 km: 28.7 – 28.0; CO2 emissions combined g/km: 0

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