Inside VW's Big Fix-IT Job

Eager to put the “Dieselgate” scandal in its rear view, the German auto giant is overhauling its culture and making a bold bet on electric vehicles.

- Vivienne Walt

ON A HOT SUMMER afternoon in central Germany, the new CEO of one of the world’s largest automakers sinks into a white leather armchair, digs his shoes into the thick shag carpet under his feet, and grins. Herbert Diess, who took over as Volkswagen AG’s chief executive in April, has his tall frame folded inside a cherry-red chunk of metal that closely resembles a car—except for the fact that it’s missing a steering wheel, pedals, gears, or anything else you’d normally expect to find in an automobile. The slick contraption is a VW concept car called the I.D. Vizzion. It made its debut at the Geneva Motor Show in March.

The I.D. Vizzion is more than just an experiment, however, or a living room on wheels. Rather, says Diess, it offers a glimpse of our driverless near-future. And Diess is betting heavily on a strategy built on that vision—staking hundreds of millions of dollars on electric and autonomous technology. The CEO insists that getting the technology right will be key to the survival of his company.

“Look what happened when we went from horse-drawn carriages to cars, from chemical-based photography to digital photography,” says Diess, sitting in Volkswagen’s gargantuan factory headquarters in Wolfs burg, a sleepy company town of 125,000 people, some 140 miles west of Berlin. “There was huge disruption. Very few of the successful companies remained. Kodak did not make it, and they knew what was coming.”

Just a couple of months into his job, Diess, 59, has chosen to meet me inside Volkswagen’s secretive innovation center—a black velvet curtain hides one part of the room from view—in order to underscore his point: That only radical transformation can save the auto giant from being left behind by more nimble competitors. “It is now really important for us to change,” he says..