Your browser is not supported. Please update it.

27 July 2022

Porsche boss drinks from VW “transformation” poison chalice

This week the share price of Volkswagen continued to fall. It has been falling since Dieselgate and certainly since the Spring of 2021 when it was valued at $175 billion – today that is closer to $107 billion. The recovering share price of Tesla, once again up to $832 billion, and it has previously been over $1 trillion – only goes to demonstrate all the things that it is good at, which VW has yet to conquer. Software, battery design, EV data systems and data services for clients, to name but a few.

The trigger to the latest fall in the VW share price is the sacking of its boss, CEO Herbert Diess, an import from BMW back in 2015, for his failure to make VW look more like Tesla. Now it is someone else’s turn to fail and watch the VW share price fall over the next few years and don’t call us, we don’t want the job.

The reasons are all the reasons you would expect. Car companies think in terms of 3 or 5 years, like the distances between models, and yet software updates need to roll out on an almost daily basis. Instead of hiring a bunch of ex-Google experts in this, Dies tried to build his own software culture within the group and failed horribly. Porsche in particular had to suffer from software which was slow to update and which failed to do its job properly. The Porsche brand’s reputation fall has been significant.

Connecting a car to a network and treating it like a piece of software on wheels only works if you are already used to doing this. Tesla is, VW still is not, and there are two views on Diess – one; he went about it the wrong way –  two; there was no right way for VW.

Diess was welcomed into the CEO’s chair in time to face down the 2015 VW emissions-cheating scandal – Dieselgate. Then he took the decision that owning his own software was the ONLY way to proceed so he tried to fix the German-based software firm Cariad which the car company owned, but he tried to build it from car-people with that famous 5 year mentality, instead of importing a counter culture – either way you approach this, it is not going to work with an existing car culture.

For years people at car companies have tried to offer services from the data that is collected from connecting the car to a network and it has been little short of a headache in most cases. Services like personal navigation are better supplied through phones, fault prediction involves changing how the cars are serviced, and all that’s without changing them to EVs and ensuring that each trip can be completed without running out of range, with an app to guide the car to a nearby charge point.

Starting a car operating system is an achievement that companies like Apple and Google are more suited to. Never mind doing it with an automotive cloud,  or turning your phone into a key for your car, without leaving it easy to hack, of offering intelligent parking services, pre-booking re-charges, giving advance repair warnings accurately, or corporate fleet management, or paying for tolls automatically.

If you wanted these services – you would never look for people to program them from people who work in a car company.

But it was when EU lawmakers voted to ban sales of combustion engine cars from 2035, when suddenly the focus came on Cariad – without it VW was screwed, and continuing with it in its current state, the company was similarly screwed, because now it was absolutely vital – but not fit for purpose.

There were software bugs in Porsches, Audis and Bentleys but worse in the new ID EV designs.

Diess had often talked about building a software culture inside the company – now his replacement – Porsche boss Oliver Blume, will have to achieve two impossible feats, fix the software processes and do it virtually overnight before the company gets a reputation for poor service quality. And all the time people at VW don’t speak to Cariad; people at Cariad refuse to talk to VW.

The common practice of claiming a predecessor’s successful achievements while simultaneously blaming failings on the past boss, only lasts for so long and Blume won’t have long. The press talks about head hunting someone from Silicon Valley – but the list of candidates that would be happy to accept a poison chalice are few. It is calamities like this which have led to car firms merging over the past decade.

Diess will get little comfort from having his contract fully paid to the end of the next three years, a payment reported to be of some €30 million, since the curse of being fired from such a post is to find that it is tough to ever work again.

Perhaps another issue is the long standing care that VW has taken in keeping the right side of Union disputes and Diess focused more on a plan that would play fast and loose with Union ideas of a job for life. They didn’t like him, so he had to go.