Volkswagen Says EV Shift Will Continue Under New CEO


Volkswagen AG

VOW 2.27%

said that its new chief executive would continue the company’s ambitious shift toward electric vehicles, as investors questioned how the ousting of CEO Herbert Diess would affect strategy.

Europe’s biggest car maker by sales posted results Thursday that beat expectations, despite a drop in second-quarter profit. VW reaffirmed its outlook for the year on the back of an improving supply-chain situation and rising demand for cars. VW’s German-listed shares traded around 2% higher following the results.

The management shake-up has worried investors though. They look to VW’s new boss,

Oliver Blume,

to accelerate Mr. Diess’s plan to beat

Tesla Inc.

in the electric-vehicle space, reboot VW’s lagging software unit, and guide it through an increasingly tumultuous macroeconomic environment.

Investors have questioned the decision to have Mr. Blume, who takes over officially on Sept. 1., lead both the VW group and its luxury Porsche brand, which is preparing for an initial public offering. In a snap poll by Bernstein Research following Mr. Diess’s departure, 63% of investors voiced concerns for the stock, while only 22% thought the move could improve the outlook.

Under Mr. Diess, VW went all-in in pivoting to electric vehicles, partly in an effort to meet Europe’s tightening greenhouse-gas emission targets. Like other traditional car makers, it has struggled to execute its plans.

“There is now a risk that the electrification strategy will not be pushed forward so consistently, and corporate governance will remain weak,” said

Ingo Speich,

head of corporate governance and sustainability at VW shareholder, Deka Investment.

Investors say that Mr. Blume’s double-CEO role could prove a distraction. In Bernstein’s poll, 71% of investors said that the decision would negatively affect Porsche’s planned IPO.

“Both roles, in our view, require the full dedication of an experienced manager,” Bernstein analysts said. “It creates further disarray at a time when neither Volkswagen or Porsche can afford to miss a beat.”

Deka Investment’s Mr. Speich said the dual-CEO role would challenge the luxury brand’s need for independence. “This…is poison for the Porsche IPO,” he said.

VW said Thursday that a decision on the IPO details was expected late summer, and that as dual-CEO, Mr. Blume stood for an independent Porsche with access to Volkswagen synergies.

“There are a lot of decisions that absolutely align,” said VW Chief Financial Officer

Arno Antlitz,

who will also become chief operating officer as part of the reshuffle and assist Mr. Blume with day-to-day operations.

Volkswagen is investing in electric vehicles more than legacy car makers in the U.S. WSJ goes inside an engine factory that is being transformed into a battery plant as the German giant looks to change its image and become a rival to Tesla. Photo illustration: George Downs (Originally published Aug. 24, 2021)

Analysts expect Mr. Blume to be less confrontational than Mr. Diess, who was ousted Friday after the board lost confidence in him, in part because of his fraught relationship with the company’s powerful worker representatives, according to people familiar with the situation.

The most immediate challenge for Mr. Blume is fixing Cariad, the software unit created in 2020 to build a single operating system for all VW vehicles. Brand chiefs have complained that delays in delivering the finished code had forced them to postpone important model launches, The Wall Street Journal has reported.

“The Cariad delay is serious and negative for Volkswagen; we will be interested to see if new CEO Blume will manage to accelerate the tech delivery,” Bernstein analysts said.

VW said Thursday that Cariad had signed multiple agreements to secure hardware to develop the software platform. “Software is an important pillar of our strategy,” said Mr. Antlitz.

VW will face more economic headwinds in the second half of the year amid a global economic slowdown, the war in Ukraine and a wobbling Chinese market hit by Covid-19 lockdowns. Many economists expect Germany to enter a recession this year.

Europe, VW’s key market, has been hit by reduced Russian natural-gas deliveries. The company said Thursday that it was working to reduce its gas consumption and substitute it with coal wherever possible. VW had been preparing to replace coal-fired boilers with gas turbines at two plants that power its factories in Wolfsburg, Germany, but the work is being paused as a result of the gas-supply issues.

Write to Georgi Kantchev at

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Source link