Breaking News Emails

Get breaking news alerts and special reports. The news and stories that matter, delivered weekday mornings.
 / Updated 
By Paul A. Eisenstein

Embattled automaker Volkswagen has ousted CEO Matthias Mueller, as the German brand struggles to regain relevance following the devastating diesel emissions scandal that has cost the company over $30 billion.

The 64-year-old executive will be replaced by Herbert Diess, head of the flagship VW brand, the company announced Thursday.

The shake-up, which has apparently been in the works for months, has the blessing of some of VW’s top managers and shareholders, and it reflects the sense that Mueller was not working fast enough to both cut costs and reposition Volkswagen’s dozen brands as leaders in the fast-changing automotive world — especially in terms of new technologies like autonomous and electric vehicles, as well as new mobility services.

From Volk to fake

What began as the “people’s car” company grew into one of the auto industry’s powerhouses, taking the number two spot in 2015 and finally toppling global sales leader Toyota in 2016.

Then, in September 2015, the U.S. Environmental Protection Agency accused VW of cheating on diesel emissions tests.

The automaker quickly acknowledged its sins, ousting a number of top executives, including CEO Martin Winterkorn, a key architect of its global growth strategy. He was replaced by Mueller, who had himself helped transform Porsche from a niche brand into a broad luxury competitor.

Mueller quickly took a mea culpa tone and approved a series of settlements and buybacks. Despite the heavy financial burden, his approach appears to have paid off. The company’s 2017 after-tax earnings surged to 11.6 billion euros, or $14.3 billion, for 2017.

That might all seem to justify a vote of support by Volkswagen’s Supervisory Board, rather than a move to oust the CEO. But whatever the cause, Mueller has lost the support he would need to finish out a contract that was supposed to run through 2020.

"Cost-Killer" Diess

The 59-year-old Bavarian-born Diess is an automotive veteran who started out at German parts giant Bosch before jumping to BMW in 1996. He spent eight years on that company’s board before being recruited by VW in 2015, just months before the emissions scandal erupted.

With a doctorate in factory automation, Diess was given a mandate by Winterkorn to slash 5 billion euros, or $6 billion, in the flagship brand’s costs. But he quickly proved to be more than just a budget-cutter. Under Diess, the VW division quickly shifted focus from diesels to electrified vehicles, even announcing plans to launch an entirely new sub-brand to market products like the all-electric I.D. Buzz, a successor to the iconic VW Microbus of the hippie era.

Diess also started focusing on autonomous vehicles and on car-shifting and other mobility services that are expected to become increasingly important in the decade to come.