Wolf of Wolfsburg’s departure marks sea change at VW

Volkswagen is under new management.

That was the message that reverberated around the Wolfsburg HQ of the world’s second-largest carmaker on Friday morning, when news of Bernd Osterloh’s departure was announced.

The bearded 64-year-old is neither the company’s chair nor chief executive. But as head of VW’s fearsome works council, which represents most of the manufacturer’s 300,000 workers in Germany, he had amassed enough power to rival them both.

Thanks to the co-determination model, staff representatives in Germany play a central role in the governance of large corporations. At VW, one of Europe’s largest employers, they are kingmakers too, through a loose alliance with the state of Lower Saxony, a major shareholder.

Osterloh clashed with VW boss Herbert Diess twice during the past year over his plans to rival Tesla by spending €35bn on transforming the company into a leading electric car producer, and his attempts to aggressively cut costs in pursuit of that aim.

In June, he forced an apology out of Diess, who had suggested that members of the supervisory board — composed of shareholder and workers’ representatives, including Osterloh — were undermining VW by leaking details of its technology failings to the press.

At the same time, he managed to oust the former BMW executive from his role as leader of the VW brand — the largest of the group’s 12 marques — replacing him with Ralf Brandstätter, a local boy and life-long VW employee seen as more friendly to unions.

Diess will be very happy to have got rid of [Osterloh]. They were two alpha males

In December, after a spat over appointments to VW’s management board, Osterloh also moved to block an extension to Diess’ contract, which expires in 2023.

All of which made Friday’s announcement more shocking to VW staff. In a short statement, the works council said its leader of 16 years would not only be leaving his post, but crossing the aisle to take a management position, as head of human resources at truck-subsidiary Traton.

There, he will be responsible for the fate of almost 100,000 employees worldwide.

Osterloh, who has worked at VW for 44 years, said he was confident he was leaving staff in “the best hands”, after taking over as head of the works council in 2005, in the wake of a prostitution and corruption scandal that made his predecessor’s position untenable.

In the years since, he fought a takeover attempt by Porsche, and managed to secure production of electric vehicles in German plants. The VW brand has also managed to avoid the sweeping job cuts suffered at rival carmakers. In an email sent to employees and seen by the FT, Osterloh said staff had beseeched him to stay on, even referring to him as “Mr Co-determination”.

His resignation was greeted with silent relief by VW’s top brass. “Diess will be very happy to have got rid of [Osterloh],” said a person with knowledge of VW board’s views. “They were two alpha males,” the person added, emphasising the clash of personalities that heightened tensions.

Osterloh’s departure is unlikely to dramatically weaken the works council in Wolfsburg, which is so central to operations that it carries out its own investor roadshow. But the move “signals an improvement of the balance of powers in favour of management at VW”, said Arndt Ellinghorst, an analyst at Bernstein.

“Diess’ most outspoken opponent is sidelined and it is fair to say that it creates the opportunity to run VW in a more rational fashion,” he added.

Osterloh’s chosen successor, his deputy Daniela Cavallo, “has a different style”, said a person who has observed her dealings with management. Some 18 years his junior, Cavallo is the first woman to head the works council and, as a qualified economist, the first to have come via white-collar roles, rather than starting on the factory floor.

Her appointment is a sign of the seismic shifts at VW. Of the 65,000 staff employed at the sprawling Wolfsburg campus, only 25,000 are directly involved in building cars, while technology and marketing specialists make up much of the remainder.

But Cavallo is no pushover. She used to represent Wolfsburg’s in-house catering and security staff, who have resisted repeated attempts by management to replace them with cheaper external contractors. Diess infamously complained to reporters that these workers’ bargaining power meant that a one-litre pot of coffee for a meeting at the plant costs the company roughly €60.

Moreover, “she will have to show that she is as strong as her predecessor”, said one company insider. Cavallo herself said her appointment showed that “we stand for continuity and predictability”.

The irony of Osterloh’s move, however, will not be lost on VW employees. The “Wolf of Wolfsburg” will now be in charge of carrying out some of the deepest job cuts within the VW group, at Traton’s Man brand.

Last year, when Man’s management tore up a deal with unions and terminated job guarantees in an attempt to axe 9,500 roles, Osterloh’s council called it an “attack on the entire Volkswagen family” and warned of repercussions.

In a short statement on Friday, Diess greeted Osterloh’s decision by saying that he would make an “important contribution” to Traton. There, in his new role, Germany’s most powerful labour representative may be forced to recall a sentiment expressed in his departing letter.

“My power was always our power,” he wrote. “It was only ever on loan.”