Chaos At Volkswagen’s Cariad Division May Lead To Delays & Job Cuts

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Cariad, the software division of Volkswagen Group, has been mired in controversy since its beginning. It was first created by former CEO Herbert Diess, who could see that having Porsche, Audi, Bentley, Volkswagen, and the other brands within the group all developing their own software platforms would be an inefficient use of resources. Better to create a separate division that would develop a common system that would serve the needs of all the companies in the vast Volkswagen empire.

Logically, that approach made perfect sense. The alternative was to hire an outside company to design a common software package, but that would mean admitting Volkswagen wasn’t up to the task — a corporate loss of face that was simply unacceptable. And yet, with Blume at the helm, Volkswagen has been more receptive to working with outside suppliers like Continental and Bosch. Audi has gotten so disgusted with the way software difficulties are delaying the launch of important new electric car models that it is talking about buying an entire platform from a Chinese competitor.

Cariad & The Computer On Wheels

Elon Musk pretty much started the whole “car as computer on wheels” vibe when the Tesla Model S debuted with a central touchscreen larger than some televisions. The success of the Model S flipped the script about electric cars and spurred traditional automakers into a frenzy of activity as they sought to create electric vehicles of their own. In doing so, they also adopted the “computer on wheels” idea, making it part of the EV revolution even though logically there are two different things.

Right from the get-go, there were problems at Cariad. The first production ID.3 cars were stockpiled in lots all around Germany, where they sat waiting for Cariad to fix the glitches in the software before deliveries to customers began. Even after all that, early customers of the ID.3 complained long and loud about buggy software that didn’t operate properly or was slow to perform requested tasks. Ultimately, the issues with Cariad may have cost Diess his job.

Spring Cleaning At Cariad

Last May, the top managers at  Cariad were jettisoned and replaced with new people. There were reports that Cariad would partner with Mobileye to fix some of the issues the company has experienced with its autonomous driving software. At that time, Oliver Blume said in a press release, “Last year, we drew up a ten point plan for operational and strategic areas of action within the Volkswagen Group. One key element is the realignment of Cariad, and we have already made good progress. We are now setting the next milestones for advancing strategic, structural, and personnel development.

“Cariad focuses on the development of digital future technologies for the Group brands. We are stepping up the pace and broadening our approach to partnerships. This is designed to combine our competences with the best solutions on the market for the benefit of our customers. The outcome is even closer software/vehicle development interaction.”

Housecleaning, Part Deux

The latest news from Cariad comes from Manager Magazin, a German trade publication (paywall). According to Reuters, the Volkswagen Group board of directors voted on October 25, 2023 on a plan that would cut 2000 jobs at Cariad as part of a restructuring plan which will see its long awaited new software architectures delayed even further. Ouch!

Peter Bosch, who was brought in to head the division after the former management team was fired last May, presented his strategy, including those job cuts, to the board prior to last week’s meeting, calling it a “rescue plan.” At the meeting, Bosch apparently presented three key points, according to Manager Magazin.

  1. Cut 2,000 of the 6,500 jobs in Germany. Details on locations or departments are scarce, but administrative positions are most likely first in line to be trimmed.
  2. Make Cariad more streamlined by divesting itself of about half of the 40 corporate holdings currently in its portfolio. It is expected that several will be sold after an internal review.
  3. Further delays are to be expected.

The market launch of the electric versions of the Audi Q6 e-tron and Porsche Macan has already been postponed several times due to delays in software development. Now there will be a further delay of 16 to 18 weeks. “Nothing will happen before spring 2024,” writes Manager Magazin. According to a recent media report, the presentation of the Audi Q6 e-tron and the Porsche Macan E will not take place  before March of 2024 at the earliest. Both new models are based on the PPE electric car platform and will use version 1.2 of the Cariad E3 software.

Delays Are Piling Up

More delays are coming. Software E3 2.0, which was originally intended for all models of the VW, Seat, Cupra, and Skoda brands beginning in 2025 and all Volkswagen Group vehicles thereafter, is being completely redeveloped. The SSP vehicle platform is being “largely rethought” once again. The previous development costs of around €1.5 billion will thus be completely lost.

Negotiations with the works council are one of the steps that need to be taken in order to push through the planned job cuts. There is an employment guarantee until the middle of 2025, but Peter Bosch wants to cut jobs as early as 2024. The first reaction from the works council is hardly surprising. It says cutting almost a third of the jobs is completely incomprehensible. Manager Magazin quotes Stefan Henze, the works council member responsible for Cariad, as saying, “It is now a matter of getting the software for the new models ready as quickly as possible. We need every man and woman here.”

The Takeaway

A big part of the “computer on wheels” concept is the enduring vision of building cars that can drive themselves. SpaceX has learned to make rockets that fly backwards, but making a car that can navigate on its own on highways and city streets has defied all attempts to bring that goal to fruition.

Even Elon’s tantrums and tirades, which he calls “real clear feedback,” haven’t been able to make that happen yet. Executive editor Zachary Shahan says he doesn’t even use the latest version of Tesla’s full self-driving software because every time he does, the wipers come on and won’t shut off.

Volkswagen and other manufacturers are desperate to crack that nut, but some wonder if that is about meeting customer demands or finding a new way to generate addition revenue for manufacturers after the initial purchase. Many years ago, a Volvo executive, in an unguarded moment, boasted that autonomous cars would be a “license to print money” for car makers.

Oliver Blume has a limited amount of time to get the problems at  Cariad sorted out. Otherwise, he may find himself joining Herbert Diess in the Ex Volkswagen Group CEO club.

 


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