Volkswagen, which has a history of rocky management handovers, has made a decision to replace Matthias Mueller, 64, with the 59-year-old Diess, according to people familiar with the matter, who asked not to be identified speaking ahead of an official announcement.
It said the result of the talks was "currently open" and that Mueller "showed his willingness to contribute" to the changes. The surprise leadership switch is due to be finalized at a supervisory board meeting on Friday, the people said.
A Volkswagen spokesman declined to comment.
A VW logo is seen in front of the main building of the Volkswagen brand at the Volkswagen headquarters during a media tour to present Volkswagen's so called "Blaue Fabrik" (Blue Factory) environmental program, in Wolfsburg, Germany May 19, 2017.
If Mueller did such a good job under hard circumstances, why change horses in midstream? It said chairman Hans Dieter Poetsch will spearhead the transition, and that there is no certainty that personnel changes will in fact occur.
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Mueller, who formerly headed Porsche, took over as CEO unexpectedly in September 2015 when Martin Winterkorn resigned over the company's scandal over cars rigged to cheat on emissions tests. Its profit margin climbed to 7.4 per cent of sales a year ago from 6 per cent in 2015, when the crisis hit.
Volkswagen has replaced its chief executive in a sudden management overhaul aimed at making a clean break from its diesel scandal and preparing the automaker for major industry changes.
Yet, he was present in the room on the fateful day when the company's top managers were informed in detail about the depth and breadth of the cheating scandal.
Oliver Blume, head of sports vehicle brand Porsche and newly appointed to the group executive board, will oversee production at the multi-brand organisation, VW said, confirming a Reuters report.
They seek to defend 100,000 VW jobs in Lower Saxony, while management wants to raise productivity and efficiency to bring it closer to rival Toyota (7203.T). Mr 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 German Democratic Republic.
The company is considering a listing of its truck and bus.