Volkswagen CEO Matthias Mueller saved the company. Now he’s headed for the exit

Volkswagen s board abruptly ended the tenure of Chief Executive Matthias Mueller — a caretaker who revived the company after its near-death experience of cheating on diesel-emissions testing — and turned instead to a leader who can implement deeper changes, people familiar with the matter said.

Key stakeholders came to the conclusion they couldn’t afford to wait two years for Mueller’s contract to expire before they appoint a fresh CEO, as they deliberated an overhaul that will probably include an IPO of the automaker’s heavy trucks division and how to most rapidly implement those changes, said the people, who asked not to be identified discussing the private talks.

The 64-year-old Mueller, always a reluctant CEO who had grown weary of the regular grillings by board members, responded during the talks by signaling he was prepared to step aside, they said. With Mueller agreeing to go, the controlling Porsche-Piech clan, the state of Lower Saxony and powerful labor leaders settled on Herbert Diess — the chief of Volkswagen’s namesake brand — as the successor, the people said.

None of these behind-the-scenes deliberations were apparent from the short, cryptic statement VW issued Tuesday. It said that the board was considering changes that included the position of the CEO, and that Mueller had signaled his “general willingness to contribute to the changes.” It didn’t identify Diess as a possible successor, and the company declined to comment further.

In choosing the 59-year-old Diess for the top job, Volkswagen is elevating a senior executive from its own ranks and handing the reins to someone who was not at the automaker when the diesel cheating began. Diess joined VW from German rival BMW in mid-2015, shortly before the cheating scandal erupted publicly. As the executive overseeing VW’s biggest unit, he has routinely butted heads with powerful labor leaders while seeking to cut costs and simplify the carmaker’s byzantine structure.

VW’s statement didn’t specify whether the planned changes meant replacing Mueller or simply a shift in responsibilities. It said that Chairman Hans Dieter Poetsch will spearhead the transition, and that there is no certainty that personnel changes will in fact occur.

The supervisory board will meet Friday to sign off on the management changes and other proposals, the people said.

Under Mueller — who was promoted to the top job in the chaotic days after the public disclosure of the diesel cheating — VW has weathered the blows from the scandal while embarking on an aggressive expansion into electric cars. Its profit margin climbed to 7.4% of sales last year from 6% in 2015, when the crisis hit. The carmaker also managed to fend off Toyota Motor Corp. to retain its status as the world’s largest automaker.

In the aftermath of the diesel-cheating scandal, Mueller sought to overhaul Volkswagen’s rigid top-down management structure, delegating more responsibility to its brand and regional chiefs. The complexity extends to its main shareholder, Porsche Automobil Holding, where Poetsch serves as the CEO and Mueller as a top executive. Porsche said in a separate release that any changes at VW would be reflected in its management.

Including Mueller, VW’s management board totals nine people, with responsibilities such as purchasing, legal affairs, financing and human resources. Audi, the VW brand, the trucks division and the group’s Chinese operations also have representatives on Volkswagen’s top executive body.

Publicly listed companies in Germany have two management structures: one consisting of the management board around the CEO, and a supervisory board that is made up — half and half — of labor representatives and members of the capital side to ensure even distribution of interests. Volkswagen is more complex than most of its peers, with the Porsche-Piech families de-facto controlling the manufacturer and the state of Lower-Saxony — home to the company’s headquarters and VW’s main factory — owning 20%.

Though Mueller is a lifelong VW veteran, at times he cut an uneasy figure in the top job, which required him to manage the often contradictory demands of angry car owners, disgruntled investors, well-organized workers and state officials with their own political agendas.

Tensions flared in recent weeks between Mueller and Lower Saxony’s leadership, which is represented on the supervisory board. Mueller told German magazine Der Spiegel in March that he “doesn’t like politicians meddling with my business,” likening a discussion about a salary cap for executives to the oppressive system of the former East Germany. Mueller’s total compensation was more than $12 million last year.

Mueller’s comments exhibited “a lack of sensitivity at a difficult time for VW,” Lower Saxony Economic Minister Bernd Althusmann, who also sits on VW’s supervisory board, told German daily Hannoversche Allgemeine Zeitung.

Volkswagen’s U.S.-traded common stock rose 4.1% on Tuesday to $41.89 a share.

UPDATES:

4:40 p.m.: This article was updated with additional information from people familiar with the matter.

This article was originally published at 12:10 p.m.