Volkswagen replaced Mr Mueller after he failed to refocus the group's portfolio of vehicle brands and transform the company into a leader in cleaner cars after the diesel emissions scandal of 2015.
Four sources close to VW Volkswagen's (VW) supervisory board will on Friday replace personnel chief Karlheinz Blessing with Gunnar Kilian, managing director of the carmaker's works council who works directly under labour boss Bernd Osterloh.
The ousting of Volkswagen Group's head executive Matthias Müller, rumore in media ever since the beginning of the week, has been confirmed on Thursday by the German company.
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Head of purchasing Francisco Javier Garcia Sanz is leaving at his own request and his post is to be filled on an acting basis by Volkswagen brand purchasing head Ralf Brandstaetter, the company said.
"We will emphatically address the special challenges that lie ahead of us, especially in electromobility, digitisation and new mobility services", he told a press conference at the group's Wolfsburg headquarters.
VW administrator Hans Dieter Poetsch said in an announcement that Mr. Mueller had done "extraordinary work" for the organization.
Mueller, 64, has already steered the mammoth carmaker into a massive restructuring, aiming to offer electric versions of many of its models and slim down its operations over the coming decade.
While Mueller brought VW's share price and profits back up to pre-crisis levels, observers say he made little progress in shaking up the firm's famously hierarchical and insular corporate culture, which some critics believe discouraged employees from speaking up about the diesel scam.More news: Four hurricane names are being retired and here are their replacements
"Herbert Diess is the right manager to do that".
Shares in Volkswagen closed almost two percent higher to 176.60 euros ahead of the closely-watched board meeting, outperforming the Dax index of leading shares that was up almost one percent. Mueller had been tapped as CEO unexpectedly in September 2015 when Martin Winterkorn resigned over the scandal in which the company had rigged carts to cheat on United States emissions tests.
Suspicions of emissions cheating have also spread to other carmakers, shattering diesel's image as a clean engine and prompting several smog-clogged German cities to mull diesel driving bans.
Diess was regarded as a potential future CEO when he joined Volkswagen in July 2015 after serving as head of vehicle development for BMW.
Diess appeared to be on his way out at VW after a public clash with Osterloh who then accused him publicly of breaking promises and unduly pushing cost cuts.More news: Former US House Speaker To Promote Legalizing Marijuana