The recent $5 billion deal between Volkswagen (OTC:VWAGY) and U.S. electric vehicle start-up Rivian Automotive (NASDAQ:RIVN) has reportedly stirred up discontent among employees at the German automaker's software division Cariad.

What Happened: Cariad CEO Peter Bosch was not part of the discussions that led to the deal, Financial Times (FT) reported. The joint venture between Volkswagen and Rivian, announced in June, is aimed at developing software for both companies' future cars.

A senior Cariad engineer told FT that they learned about the deal with Rivian from the news and that it has created uncertainty and frustration among the division's 6000 employees. Another even said that the current chaos at Cariad hints at "more or less the end" of the company.

Cariad was founded in 2020 and since then, Volkswagen has invested about $12 billion into building in-house vehicle software. However, it has been plagued by budget overruns and delays which bogged down the rollout of key models including Porsche's first electric SUV, the report noted.

However, certain people who worked at Cariad told FT that the company's issues were also caused by the management's changing priorities, coupled with the differences in priorities between the engineering teams of Audi and Volkswagen who came together to form Cariad.

Cariad, Volkswagen, and Rivian did not immediately respond to Benzinga's request for comment.

Why It Matters: Volkswagen is currently faced with falling demand. Last week, it was reported that the company is considering shutting factories in Germany for the first time in its 87-year history.

The company's workers subsequently raised questions about the company's decision to invest in an American startup for software instead of fixing failures at Cariad.

Rivian, meanwhile, is banking on the JV with Volkswagen to ramp up production of its R2 SUV which will be launched in the first half of 2026.

"Assuming all criteria are met, we expect that the full $5 billion is intended to flow to the benefit of Rivian," company CFO Claire McDonough said last month at the company's second-quarter earnings call. "In addition to the $5 billion of capital to Rivian, we anticipate incremental benefits through cost savings on materials, operating expense efficiencies, and future revenue opportunities associated with the joint venture."

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This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.

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