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21 Mar, 2019 12:33

Volkswagen CEO Diess’ future in doubt over Nazi-era blunder

Volkswagen CEO Diess’ future in doubt over Nazi-era blunder

Independent investors have been raising questions about the future of Volkswagen’s (VW) chief executive Herbert Diess after he evoked a Nazi phrase in a management meeting last week.

The CEO reportedly told the company’s managers that the high margins of VW Group’s Porsche brand gave it more freedom than its other marques, such as Audi. “Ebit macht frei,” Diess told his managers, which translates as “Profits will set you free.”

The phrase has echoes of “Arbeit macht frei” or “Work sets you free,” the slogan which hung on the gates of concentration camps during the Holocaust where millions perished.

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“I think he is going to be fired,” said one long-term US institutional investor as cited by the Irish Times. “I’m torn about it. On the one hand, he’s one of the few managers that could probably move the company in the right direction. On the other hand, it’s so offensive I don’t think it’s really excusable.”

Another Volkswagen investor in the US said that, “Any shareholder would know that whatever his utterances, Diess is the best thing to happen to the company in the last 50 years.”

Ulrich Hocker, a director at DSW, a group representing small shareholders in Germany, called Diess’s statement “ridiculous,” adding: “It’s not a sentence you can say in Germany.”

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Hocker said he planned to demand another apology at Volkswagen’s upcoming shareholders’ meeting, but was not sure it warranted the CEO’s removal.

“[Shareholders were] very upset and shocked by the comments. We had high hopes for him — for his ambitious strategy and focus on costs. But what changed last week is now there are big question marks over his judgment.”

Diess has issued an apology for what he described as “definitely an unfortunate choice of words.”

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He denied referencing the Nazi phrase and explained that he was referring to the freedom afforded to VW brands in strong financial health. “At no time was it my intention for this statement to be placed in a false context. At the time, I simply did not think of this possibility,” he said.

Experts say Diess who took the reins of the world’s largest carmaker has been making progress. He is the second CEO to run VW since the ouster of Martin Winterkorn in 2015 over the diesel scandal at the automaker. The company reported profit of €12 billion for 2018 despite paying out heavy settlements related to the Dieselgate emissions scandal.

Founding member of Germany’s corporate governance commission Christian Strenger said removing Diess after his full apology “would be quite a mistake” given the progress he has made getting the Porsche-Piëch families on board with reforms. “He’s been pretty successful in getting them moving.”

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