Bernd Osterloh, labour nemesis of Volkswagen’s boss, abdicates

“THE MOST powerful man at Volkswagen.” Ferdinand Dudenhöffer of the Centre for Automotive Research, an influential think-tank, was not referring to Herbert Diess, the German company’s boss. Rather, he reserved that title for Bernd Osterloh. In his 16 years as head of the carmaking group’s works council, which represents workers, Mr Osterloh organised his own roadshows and travelled with his own entourage (including a translator). His press team was bigger than Mr Diess’s. Some investors mistook him for the giant firm’s chief executive and wondered why he did not speak any English.

Then, on April 23rd, Mr Osterloh announced he was resigning. He was widely expected to stay until the next works-council election in March 2022—and then for another three-year term. Instead, on May 1st he will take over as personnel chief at Traton, a lorry-maker that is part of Volkswagen. Daniela Cavallo, his 46-year-old deputy, will assume his old post.

Works councils play a big role in all German companies with more than 2,000 employees. Workers can nominate half the members of the supervisory board, which oversees the management board under the country’s two-tier structure. At Volkswagen they wield even more influence thanks to the 20% voting share that Lower Saxony, home to its headquarters in Wolfsburg, has in the group. To protect investment and jobs in the Land, it backed Mr Osterloh and the board’s other nine labour representatives. They in turn listened to IG Metall, the metal-workers’ union to which nearly all Volkswagen workers belong.

The main reason for Mr Osterloh’s sudden exit was a rare boardroom defeat. He had tried to topple Mr Diess, who wants to push Volkswagen into the electric age. That means retraining many of its 665,000 workers or getting them to retire—anathema to the works council if it results in job cuts. In December the supervisory board gave the CEO its full backing. A move to a cushy job with a reported annual salary of €2m ($2.4m) could be seen as a face-saving way for Mr Osterloh to lick his wounds.

Testy corporate governance has made Volkswagen’s flagship VW brand the world’s least-competitive big one, thinks Arndt Ellinghorst of Bernstein, a broker. The group derives 60% of net profit from two premium marques, Audi and Porsche. VW and the other nine mostly mass-market brands make little money outside China, which accounts for another 20% of profits (excluding Audi and Porsche). To change this Mr Diess must get along with Ms Cavallo. A trained economist, she is calmer than her irascible mentor, who started on the shop floor 44 years ago. She may be less averse to the sale of peripheral brands such as Ducati, a motorcycle-maker, which Mr Osterloh blocked. Convincing her to accept deeper changes will be tougher. ■