VW Board Backs CEO's Electric-Car Focus

By William Boston

BERLIN -- Volkswagen AG shares rose more than 5% on Tuesday after the car maker's top shareholders and union leaders issued a public statement backing Chief Executive Herbert Diess' strategy to refocus the company on electric vehicles.

The decision by the company's directors late Monday, which also confirmed several top appointments by Mr. Diess, put an end to weeks of internal wrangling over the pace of change at the world's biggest car maker by sales. The CEO's push to accelerate the shift to electric cars and quickly fill empty executive positions had met opposition from labor leaders who under German law hold half the seats on the company's board of directors.

"Everyone is grateful for the clear strategy that Diess is pursuing," Hiltrud Werner, a member of VW's management board who restructured the company's compliance and legal departments in the wake of the dieselgate scandal, told the Journal. "He has the support of all the people on the board."

VW's travails have highlighted the pressure global incumbent car makers from GM to Toyota are under as they seek to transform amid pressure to reduce carbon emissions. The transformation is having far-reaching effects on production processes, jobs, and even the economy of entire regions. The change is being driven both by tighter emissions regulation and increased competition from a new breed of all-electric startups that are increasingly challenging established players.

Arndt Ellinghorst, senior auto analyst at Bernstein Research, said the deal reached by the company's directors "puts an end, at least for the moment, to the excessive frictions between management and other key stakeholders," adding that "Yesterday's resolutions clarify management's mandate and offer an opportunity to focus on VW's fundamental matters."

In recent weeks, German media had reported that Mr. Diess was seeking an early extension of his contract as a vote of confidence from the board, which includes the Porsche family, who are the controlling shareholders, and the state premier of Lower Saxony, which holds a 20% blocking minority, as well as the Qatar Investment Authority. Neither Mr. Diess nor VW would confirm the reports.

Chairman Hans Dieter Pötsch met all of the players separately over the weekend, people familiar with the situation said, brokering a compromise in which the board would make a clear statement of support for Mr. Diess and his strategy and back his candidates to fill open positions on the executive board.

As a concession to the labor side, Mr. Diess agreed to make the company's main plant in Wolfsburg a model factory for building the most advanced electric vehicles, a move that would secure thousands of jobs for the next decade.

"For us it is of decisive importance that Herbert Diess with his new management team will continue to shape this important era at Volkswagen, " Wolfgang Porsche and Hans Michael Piech, heads of the Porsche-Piech clan, said after the meeting.

In the summer, Bernd Osterloh, head of VW's powerful works council and a member of the supervisory board, persuaded other directors to strip the CEO of responsibility for the day-to-day operations of the VW brand, the company's biggest business. That conflict left Mr. Diess uncertain about how much support he had from the board, according to people familiar with the situation.

After Monday's decisions, Mr. Osterloh said there was total agreement between the supervisory board, executive board, and labor representatives. Mr. Diess was relieved that the conflict had been put to rest and that the new board members would be able to take up their jobs soon, one person close to him said.

The board appointed Arno Antlitz to succeed Frank Witter as chief finance officer in June. Mr. Antlitz is currently CFO at Audi, VW's luxury car unit. The board also approved Mr. Diess' plan to split board responsibilities for purchasing and components manufacturing and create a new position, appointing Thomas Schmall, current head of the components business, as chief technology officer. Murat Aksel, currently purchasing chief at the VW brand, will take on additional responsibilities as purchasing chief for the entire Volkswagen company.

Write to William Boston at [e-mail]

(END) Dow Jones Newswires

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