VW CEO lost his job because of buggy software that delayed new models

It says a lot about the state of the auto industry and the direction it is headed, that software glitches cost the CEO of an automaker his job.

Volkswagen ousted Herbert Diess as CEO after serious software development delays delayed the planned launch of new Porsches, Audis and Bentleys. This was untenable given that the software buggy delayed the start of the initial rollout of VW’s ID models, and customers still have to drop their cars off at the dealership for updates that the company has struggled to do in direct.

Of course, Diess also didn’t do enough to win allies and became increasingly isolated due to his hardline leadership style. In his efforts to turn the company into a leader in electric vehicles, he repeatedly clashed with union leaders warning that VW was losing to Tesla and had to cut thousands of jobs. But the failures of carmaker Cariad’s software unit ultimately eroded Diess’ support from the powerful Porsche and Piech family who make the decisions.

In December, VW shuffled its board, stripping Diess of some responsibilities while tasking him with turning Cariad around. Although there have been many reorganizations since then, Diess has failed to make the problems go away.

Discord at Cariad pushed back the rollout of major new models, including the electric Porsche Macan, a high-volume sport utility vehicle for the division that is slated for an IPO in the fourth quarter. Audi’s new Artemis range of electric vehicles has been delayed about two years to 2027. And VW’s ultra-luxury brand Bentley may not be able to go all-electric by the end of this decade as expected due to software issues, Automobilwoche reported earlier this month.

“Taking over the ship from Cariad seems to have been Diess’ downfall,” said Matthias Schmidt, an independent automotive analyst based in Berlin.

VW’s solutions to challenges tend to reflect its status as an industrial giant: it’s able to pour lots of money and people into its problems. But modernizing the company for the digital age will require bringing in talent and developing skills outside of its traditional areas of expertise. Drivers are increasingly demanding intuitive user interfaces and services that could create new revenue streams, if executed correctly.

“Software is the key to the future,” Tesla’s Elon Musk tweeted when one of his followers asked about VW’s CEO change.

Diess certainly did not lack ambition. Its latest spending plan called for investing 89 billion euros ($91 billion) in software and electric vehicles over the next five years. VW said last year that it would eventually employ 10,000 people in software mining alone, making it one of Europe’s biggest companies in the industry. Just three weeks ago, he teased major investments in China to employ several thousand software engineers in the biggest auto market.

The stakes were also clear. Diess regularly cited Nokia’s failure to respond to the emergence of Apple’s iPhone as a cautionary tale and his belief that self-driving functionality would lead to an even more fundamental transformation of the industry than the shift to battery Powerful.

VW is now looking to Porsche boss Oliver Blume, counting on him to be more of a team player and a savvy navigator of the various factions in the group. Unlike Diess, Blume doesn’t have a huge presence on LinkedIn or Twitter, but he’s proven he can spot automotive trends. The former Audi intern who has run Porsche since 2015 has championed the Taycan, the sports car brand’s first all-electric model, which now outsells the 911.

Getting VW out of its software quagmire won’t be easy. Schmidt said Blume needed to make a deeper cultural shift at Cariad to make things work, and doubts German automakers will be able to fix the company on their own.

“They should have kicked out the best people in Silicon Valley,” Schmidt said. “You can’t run on software with automotive people.”

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