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Diess and Osterloh: The Big Double Interview

90 easygoing minutes in the brand tower: inside spoke with the Volkswagen CEO and the Works Council Chairman about VfL Wolfsburg’s great start to the season, the problems with the WLTP, the new significance of production and the midterm review of the Zukunftspakt.


Mr. Diess, VfL Wolfsburg has started their season with two wins. Will VfL once again be the standard bearer for Volkswagen?
Diess: Soccer is our most important marketing platform. I was very happy that the team had such a successful start. After all, we are just coming out of two difficult years. I was in the stadium with Mr. Osterloh for the first home game against Schalke. I was impressed by the team, especially their attitude. In the end, that’s almost more important to me than the results.

Mr. Osterloh, what’s it like watching soccer with Mr. Diess?
Osterloh: Terrific. Mr. Diess may not be quite as emotional as I am (laughs). But my conversations with him show that he’s well versed in the sport. By the way, we can’t forget the VfL women at the start of the season. They’re just as much a part of it. The Bundesliga may not be running for them yet, but they won their first cup game.
Diess: Taken together with the men’s cup victory, that makes four wins at the start of the season for VfL. There are also many parallels between the work of a soccer coach and a CEO: it’s always about the team. You have to put the players in the right positions. A lot of it is skill and training – but conduct and attitude are at least just as important. That’s true for both VfL and the Volkswagen.

From soccer to cars. Mr. Diess, why is Volkswagen having so much trouble with the WLTP issue?
Diess: Volkswagen and Audi are trailing behind in terms of the WLTP. This is also down to the fact that we have been very preoccupied with the diesel crisis. Our development team were under major pressure. But we also need to admit, self-critically, that we didn’t manage the WLTP project well enough. Overall, Volkswagen needs to improve on process control. As far as the WLTP is concerned, September and October are still going to be difficult, but after that things should start to improve.

Mr. Osterloh, does the workforce understand the closing days in production?
Osterloh: Our colleagues weren’t exactly thrilled about the closing days. Many people are asking themselves why we’re so late to the game with the WLTP.
Diess: I understand that the team is dissatisfied. But there’s no point in complaining about our colleagues in Technical Development.
Osterloh: Nobody’s doing that. We know that our colleagues at the test benches are working practically around the clock. They’re doing a good job. But I’m asking myself one fundamental question: what caused the delay with the WLTP? Is it because of the processes there? The organization? The leadership? And a completely different topic is what is actually improving with the WLTP. Legislators have heavily increased the outlays required. Nothing has changed in terms of the expenditure itself, the testing is just much more extensive now. The measurements are somewhat closer to actual consumption now. But, as always, that has nothing to do with real consumption on the road.

Photo shoot at the brand tower: Volkswagen CEO Herbert Diess and Works Council Chairman Bernd Osterloh took 90 minutes for a joint interview with inside.

Mr. Diess, you’ve expressed the idea that production at Volkswagen needs to become more self-assured. Why isn’t that the case today?
Diess: At a volume manufacturer like Volkswagen, production is particularly responsible for the results – as well as for high productivity and for the fact that the start-ups are in place. But over the past few years, production at Volkswagen has often tried too hard to meet development requirements. This has led to a high level of complexity and outlays. There were often late changes shortly before the start. Production therefore once again needs to exert a stronger influence in the early phase of vehicle projects and avoid late changes. Of course, that doesn’t mean that we can live off of excellent processes alone, as some other manufacturers do. At Volkswagen, we still want to build excellent products with special quality. But we have to find a better measure to make more money with our cars. That’s what we need to invest heavily enough in the future of Volkswagen. We’ve made good progress recently, and the most recent attempts have been good. But there’s still plenty of potential. It’s still taking us too long to produce a vehicle.

Mr. Osterloh, has it always been the case that Technical Development sets the tone for Volkswagen?
Osterloh: No. At the former Auto5000 GmbH we built the Touran, a vehicle with low complexity and few equipment variants. That was the right path, especially given that the vehicle sold well. Unfortunately, the issue fizzled again after that. Just so I’m not misunderstood: I don’t want a standard car. We want to fulfill the individual wishes of our customers. But we still need to keep looking to reduce complexity and variant diversity. In recent years we’ve built thousands of Golfs in Wolfsburg alone, which are unique in their combination of engine, color and interior.
Diess: On the one hand, this shows how flexible our production is. On the other, however, this is a major burden and takes a great deal of logistical effort. That costs productivity. Our goal needs to be to reduce the number of variants.

Mr. Diess, do I have the wrong impression or are we far too slow when it comes to software development?
Diess: No, you’ve got it right. Digitalizing our vehicles is currently our biggest challenge. Many of the growing pains we’ve experienced in the recent past are the results of problems with the functionality of the software. The importance of software in cars will continue to increase significantly, which will make it a crucial competitive factor. We still don’t have enough in-house expertise for this. This also has to do with the fact that, in the past, we had outsourced almost 80 percent of our electrics/electronics. My goal is for us to develop more software ourselves again. To achieve this, we need to hire new software engineers and properly train our employees. This opens up new opportunities for many colleagues. You don’t necessarily have to have studied computer science to be able to program.
Osterloh: Speaking of software, the company management has simply been asleep at the wheel – for years – in terms of setting the right course. Other areas, whether exterior or interior, have enjoyed higher priority. The topic of digitalization, however, has not played enough of a role at Volkswagen. That needs to change. It isn’t all that easy to find IT experts on the labor market right now. That’s why those of us on the Works Council have always stressed that we can retrain employees with a passion for IT within our own ranks. 
This is also a major issue in the Zukunftspakt. More has to be done here.

"Digitalizing our vehicles is currently our biggest challenge."

Herbert Diess,
Volkswagen CEO

The Zukunftspakt is a good watchword. What is your interim assessment after two years, Mr. Diess?
Diess: We’re off to a good start. When the Works Council and the company decided on the pact at the time, we set ourselves the goal of increasing our return on sales to five percent. We’ve already succeeded at that. But we have much more to do. This is because the costs for the company, such as the cost of introducing electric 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 finance our future. Four percent is the minimum; with five or six percent you can make a few investments in the future, and with seven or eight percent we’re crisis-proof. That’s why we need to become even more efficient. This especially applies to our administration.

Critical conversation partner: Bernd Osterloh appreciates Herbert Diess’ decision-making capabilities. Differences of opinion would only be natural. "But Dr. Diess is always open to arguments. That’s what makes him so reliable," says the Works Council Chairman. "And, beyond our issues, we can laugh together, too."

Mr. Osterloh, how do you rate the status of the Zukunftspakt?
Osterloh: Many envy us for what we’ve already achieved. That’s something we can be proud of. Of course, there have differences of opinion on occasion. But that’s part of negotiating a pact like this. The return of five percent is impressive – and it would have been even higher if we had sold more cars, if 800,000 cars had rolled off the production line here in Wolfsburg last year, instead of 700,000. I hope that our head of sales will bring even more drive to this. But let me make one thing quite clear: safeguarding employment until 2025 is just as much a part of the success of the Zukunftspakt as the return targets. This allows all our colleagues to concentrate all their energy on the further development of our joint company.

Mr. Diess, the news that Zwickau of all places was going to become the center of electromobility came as a surprise to many employees.
Diess: We can already see that it was right to concentrate on one location for electromobility at the beginning. This is the only way we can be competitive, the only way we can get our brands off to a good start.

Do other locations have reason to fear that they’ll be left behind by Zwickau?
Diess: No. By bundling Passat production in Emden and Golf production in Wolfsburg, we are ensuring better capacity utilization at the MQB plants. And with the T-Roc convertible, Osnabrück is getting a new model that the location can develop and produce itself. More than 80 percent of all vehicles will still be conventionally powered in 2025. This ensures proper capacity utilization in future. If electromobility makes the right impression, then we’ll convert other locations as well.

He appreciates entrepreneurial thinking in employee participation: Herbert Diess often discusses the right path for Volkswagen with Bernd Osterloh.

Mr. Osterloh, how does the workforce in Zwickau feel about the shift toward becoming an electric
location?
Osterloh: When the news was announced, most of them were very happy. As things stand at present, the future of mobility lies in e-mobility. But then that joy became mixed with uncertainty. The site is being completely rebuilt – and many colleagues are wondering what this means for them personally in their daily work.

Mr. Diess, a new corporate culture is being conjured up everywhere at Volkswagen. Are you already feeling any of that personally?
Diess: Some things have changed already. My predecessor, Matthias Müller, set us on the right path in several respects. We have become more open and we no longer shy away from conflict. We’re talking to, not over, each other. The monitor is also helping us strengthen the dialog. The Works Council does traditionally organize dialog events, but the management has also improved.
Osterloh: In my opinion, the corporate culture at Volkswagen has never been bad. The problem was that it was so hierarchical. In the past, that’s made it easy for managers to avoid making decisions. The decision has always been pushed up one hierarchical level – right up to the board. In my opinion, however, all managers need to be able to make decisions and engage in dialog.

Mr. Diess, Volkswagen has a plant in Chemnitz. Chemnitz has had some bad headlines lately concerning xenophobia. What are your thoughts on that?
Diess: A lot of people seem afraid. We need to help with that. At Volkswagen, we set a good example. We have many employees with an immigrant background. The coexistence of different nationalities and religions is a foundation of our success. As a company, we’ve always been able to integrate people. And, as a company, we need to do even more. Everyone can help with that. Take a stand against hatred, prejudice and cheap slogans – in the plant and outside the factory gates. After all, we are the largest employer in Saxony.
Osterloh: That’s precisely the reason I was in Chemnitz along with Chief Human Resources Officer Gunnar Kilian last week. We had an impressive event at our plant. We are flying the flag against right-wing radicalism and for democracy. Politicians have yet to succeed in taking away people’s fear of integration. At this point, however, I’d also like to say that we all need to pitch in. Integration can only succeed if we work together. We need immigration in Germany.

"Many envy us for what we’ve already achieved with the Zukunftspakt."

Bernd Osterloh,
Works Council Chairman