Volkswagen’s $5bn Deal with Rivian Sparks Dismay Among Cariad Staff

Volkswagen‘s recent $5 billion partnership with US electric vehicle start-up Rivian has caused quite a stir among the staff at Cariad, VW’s software division. The deal, aimed at developing software for both companies’ cars, comes after a series of setbacks and budget overruns at Cariad that delayed the rollout of new VW, Audiet Porsche models by nearly two years. The news has left Cariad’s 6,000 employees feeling uncertain and frustrated, as reported by the Financial Times.

Unexpected Announcement

The partnership with Rivian caught many by surprise, including top executives at Cariad. Peter Bosch, who was brought in last year to turn the division around, wasn’t part of the talks leading to the deal.

Sanjay Lal, a former Rivian executive hired by Bosch as chief software officer, had to halt his work on the architecture he was developing. There’s a real possibility that Lal and his team could be absorbed into the new joint venture.

“We all learned about Rivian from the news,” said one senior Cariad engineer, highlighting the uncertainty and frustration among the division’s employees.

The deal underscores the high stakes for legacy carmakers as they adapt to an industry where software, not engines, defines modern vehicles.

Governance Issues and Job Cuts

The partnership also highlights governance issues that have slowed down VW’s attempts to future-proof its vehicles. Last week, the company announced it was considering shutting factories in Allemagne for the first time in its 87-year history, a move that would break a pledge not to cut jobs before 2029.

Daniela Cavallo, chair of VW’s powerful works council, criticized the decision to outsource critical software development.

“Can we be sure that this won’t be the next billion-euro grave?” she asked, questioning the €5 billion investment in a US start-up while German jobs are at risk.

Cariad’s Struggles

Since its launch four years ago, VW has poured almost €12 billion into Cariad to build in-house car software. However, the division has been plagued by budget overruns and delays, leading to the postponement of crucial new models like Audi’s Q6 e-tron and Porsche’s first electric SUV.

Cariad employees blame the division’s problems on the company’s bureaucratic culture and constantly changing priorities from top management. Herbert Diess, VW’s former CEO, directed engineers to focus on the 2.0 platform for futuristic software-defined vehicles. When Oliver Blume took over in 2022, he halted progress on the 2.0 platform and instructed engineers to fix the problems delaying the launch of models like the electric Porsche Macan.

Analysts’ Reactions and Future Prospects

Analysts reacted positively to the VW-Rivian partnership, with Citi noting that it promises cheaper access to working technology than could be achieved in-house. However, it remains to be seen whether the same bureaucracy that stalled VW’s in-house software efforts will hinder the joint venture with Rivian.

Rivian’s founder and CEO, RJ Scaringe, emphasized the importance of maintaining the start-up’s work culture of “velocity and speed and decisiveness and lack of bureaucracy.” He believes VW’s $5 billion investment indicates a commitment to keeping things working the way they are.

EVXL’s Take

This partnership highlights the critical role of software in the future of electric vehicles. As legacy carmakers like Volkswagen struggle to adapt, collaborations with innovative start-ups like Rivian could be the key to staying competitive. Our recent analysis of the Volkswagen-Rivian partnership reveals that this collaboration goes beyond just software development. It’s a strategic move by Volkswagen to accelerate its transition to electric vehicles and gain a foothold in the North American market.

The deal also underscores the challenges faced by traditional automakers in developing cutting-edge software for electric vehicles. As discussed in our article on Volkswagen’s software struggles, the company’s in-house efforts through Cariad have been marred by delays and cost overruns. By partnering with Rivian, Volkswagen aims to leverage the start-up’s expertise in software and electric vehicle technology, potentially leapfrogging its competitors in the rapidly evolving EV market.

What are your thoughts on Volkswagen’s partnership with Rivian? Leave your comments below!