VW Oversight Board Criticizes CEO Remark Evoking Nazi Slogan

(Bloomberg) -- Volkswagen AG's supervisory board criticized a remark made by Chief Executive Officer Herbert Diess that appeared to play on the slogan on the gates of the Auschwitz concentration camp: “Work sets you free.”

The CEO apologized in a LinkedIn post for saying “Ebit macht frei” during an internal company event this week, in a reference to the abbreviation for earnings before interest and taxes, and evoking the Nazi slogan “Arbeit macht frei.”

Diess's comment “is in this context considered inappropriate,” the supervisory board said in an emailed statement to Bloomberg. The board “strongly distances itself from this, but at the same time takes note of the immediate apology from Mr. Diess.”

The utterance was all the more unfortunate considering Volkswagen's history. The automaker was founded by the German government in 1937 to mass-produce a low-priced car, and was originally operated by the German Labour Front, a Nazi organization. Volkswagen, whose factory was repurposed during World War II to build military equipment and vehicles, is today the world's biggest automotive group with brands including Audi, Bugatti, and Porsche.

Diess's misstep coincided with a notice that the U.S. Securities and Exchange Commission has sued VW over the diesel emissions cheating scandal.

Read here for more on the SEC suit over VW misleading bondholders

“It was in fact, a very unfortunate choice of words and I am deeply sorry for any unintentional pain I may have caused,” Diess wrote in a post on his LinkedIn page. “For that I would like to fully and completely apologize.”

The expression was made in an internal management presentation in connection with operating margins from various company brands, Diess said. Within Volkswagen, “brands with higher margins have more freedom within the Group to make their own decisions. My comment was made within this context,” he said.

The episode increases the risk of a possible management change at the carmaker, according to Sanford C. Bernstein analysts.

Diplomatic Skills

"For all his energy and willingness to challenge convention, does he have the judgement and diplomatic skills to carry this huge, political organization with him?" analysts led by Max Warburton wrote in a note. "Would the body reject the transplant?"

Diess said it wasn't his intention to make this expression in a way that could be misinterpreted, and he didn't consider the possibility that it could be.

“Volkswagen has undertaken many activities over the last 30 years that have made the company, myself personally and our employees fully aware of the historical responsibility Volkswagen bears in connection with the Third Reich,” Diess wrote.

Apology Welcomed

VW's powerful works council welcomed Diess's “swift clarification and unequivocal apology” for the remark, adding that remembrance and responsibility are part of the company's DNA. German government spokesman Steffen Seibert declined to comment.

“The history of the Volkswagen group and the resulting responsibility is an important part of its corporate identity,” the supervisory board said in the statement.

Since Diess, 60, took over as CEO last April, he's struggled to put the 3 1/2-year-old diesel cheating scandal in the past. In the latest twist, the SEC said Thursday it was suing the carmaker for failing to disclose to investors that its diesel vehicles violated emission standards.

“The investors did not know that VW was lying to consumers to fool them into buying its ‘clean diesel' cars and lying to government authorities in order to sell cars in the U.S. that did not comply with U.S. emission standards,” the SEC alleged.

VW said the SEC complaint is “legally and factually flawed” and the company will “contest it vigorously.” It accused the SEC of “piling on to try to extract more from the company” more than two years after settlements with the Justice Department.

--With assistance from Lena Lee.

To contact the reporter on this story: Christoph Rauwald in Frankfurt at crauwald@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Frank Connelly, Elisabeth Behrmann

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