War of two plants: Volkswagen to pit world's largest car facility against Tesla

Volkswagen AG Chief Executive Officer Herbert Diess told top managers the German manufacturer will pit its largest plant against the Tesla Inc. factory that’s under construction near Berlin, according to people familiar with the matter.

Diess said during an internal video conference the storied site in Wolfsburg, Germany, will be upgraded with the latest electric-vehicle technology and software operations, said the people, who asked not to be identified as the meeting wasn’t public. It is the biggest carmaking facility worldwide, having built more than 800,000 cars annually.

The CEO’s goal is for the Wolfsburg plant to match Elon Musk’s target of reducing production time per car to 10 hours, the people said. That would be less than half the estimated time it takes to assemble a VW Golf or Tiguan, Wolfsburg’s main products. Diess also reiterated that VW must substantially reduce fixed costs in order to remain competitive as the fallout from the Covid-19 pandemic showed that some rivals are leaner.

A VW spokesman declined to comment.

Diess, 62, spoke a day after receiving a fresh vote of confidence for his strategy to make the German industrial giant more nimble. VW’s supervisory board also managed to defuse a conflict over management appointments with a range of agreements on cost savings and a decision to keep the Ducati and Lamborghini brands.

Diess said during Tuesday’s meeting of top executives that VW plans to create a management board position for information technology. The company is reviewing potential candidates and plans to make a decision next year.

The CEO said that while VW has navigated the Covid-19 crisis relatively well so far, its costs are still too high and earnings at some rivals have proven more resilient. VW announced a plan on Monday to lower fixed costs 5% by 2023.