German carmaker Volkswagen has named Herbert Diess as its new chief executive as part of a major management shake-up

Berlin (Germany) (AFP) - German auto giant Volkswagen on Thursday named Herbert Diess as its new chief executive, replacing Matthias Mueller, as the one-time paragon of German industry seeks to turn the page on the “dieselgate” emissions scandal that has dogged it since 2015.

Originally contracted to serve until 2020, Mueller was stepping down “by mutual agreement, effective immediately,” VW said in a statement released after a meeting of its supervisory board.

The change in CEO was part of a wider management shake-up, the carmaker said.

The executive and supervisory boards “have resolved to extensively revise the group’s management structure,” VW said.

“Volkswagen is thus systematically continuing to transform its business and establishing even more efficient group management in a phase of highly dynamic change in the company and the entire automotive industry.

“In order to sustainably implement the new structure, there will be a number of changes on the board of management. Matthias Mueller steps down as chairman of the board of management by mutual agreement, effective immediately. At its meeting on Thursday, the supervisory board appointed Herbert Diess as his successor.”

VW also said works council executive Gunnar Kilian would replace Karlheinz Blessing as human resources chief.

And the CEO of subsidiary Porsche, Oliver Blume, will join the VW board.

More details are expected to be revealed at a press conference at VW’s Wolfsburg headquarters Friday at 10:30 am (0830 GMT).

Volkswagen surprised markets earlier this week when it revealed it was considering reshuffling its board and replacing Mueller.

Mueller had “signalled he was open to play a part in the changes” in conversations with supervisory board chief Hans Dieter Poetsch, the company said.

German business newspaper Handelsblatt and national news agency DPA had all tipped Diess, head of the VW brand, as Mueller’s successor.

- Dieselgate fallout -

Mueller, a former chief executive of sportscar-building VW subsidiary Porsche AG, was brought in to replace Martin Winterkorn in 2015 and was contracted to serve until 2020.

Longtime CEO Winterkorn quit days after the firm admitted to installing software in 11 million diesel vehicles worldwide designed to cheat regulatory emissions tests in a scandal that became known as “dieselgate”.

Herbert Diess presenting the Volkswagen I.D, a 100% electric car, in 2016 as VW sought to diversify away from diesel in the wake of the "dieselgate" scandal

Mueller, 64, has steered the mammoth carmaker into a massive restructuring, aiming to offer electric versions of many of its models and slim down its operations over the coming decade.

But he has himself landed in prosecutors’ sights over suspicions he may have known about the cheating before it became public and failed in his duty to inform investors.

And while he brought VW’s share price and profits back up to pre-crisis levels, observers say he made little progress in shaking up the firm’s famously hierarchical corporate culture, which some critics believe discouraged employees from speaking up about the diesel scam.

“It’s right for VW to look in a new direction,” judged analyst Juergen Pieper of Metzler bank.

Diess, known as a “very good cost manager”, would be “the best solution as a successor for the next five years,” he said.

Shares in Volkswagen closed nearly two percent higher to 176.60 euros ahead of the closely-watched board meeting, outperforming the Dax index of leading shares that was up nearly one percent.

- ‘Ambitious cost cutter’-

Dieselgate has so far cost VW more than 25 billion euros ($31 billion) in buybacks, fines and compensation, and the carmaker remains mired in legal woes at home and abroad.

The dieselgate scandal has proved costly for VW, although the company has quickly returned to being strongly profitable

Suspicions of emissions cheating have also spread to other carmakers, shattering diesel’s image as a clean engine and prompting several smog-clogged German cities to mull diesel driving bans.

Having joined from BMW just a few months before the cheating became public knowledge, Diess has the advantage of being largely untainted by dieselgate – giving VW a chance at a fresh start.

In addition to taking on the top job, the 59-year-old Austrian will stay on as VW brand chief and also be head of research and development.

Described as highly ambitious, Diess has earned a reputation as a fierce cost cutter unafraid of pushing through big changes.

“Diess has no problem making enemies,” the Sueddeutsche Zeitung daily wrote, recounting how the “tough-as-nails” executive drove a hard bargain with suppliers as head of purchasing at BMW.

One of Diess’s biggest challenges as he takes the helm at VW will be to clarify the group’s vision for the future as the auto giant navigates between a pivot towards electric vehicles and clinging to the diesel technology it has invested so heavily in over the years.

Just last month, Diess said: “We need diesel, diesel has a future.”