And while he 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 corporate culture, which some critics believe discouraged employees from speaking up about the diesel scam.
The appointment of Diess comes as VW investors are demanding for increased profitability.
In addition to taking on the top job, the 59-year-old Austrian will stay on as VW brand chief and also be head of research and development.
"Diess is a man of activity, he is the most conceivable decision at VW to lead the gathering into the following period of its change", said Nord LB examiner Frank Schwope.
Sanford Bernstein analyst Max Warburton said Diess' track record of cost-cutting points to a more efficient VW under his leadership.
After-tax profit rose to 11.6 billion euros ($14.3 billion) a year ago, on sales of 230.6 billion euros. "This is what the new management structure of the Volkswagen group is focused on".
This was not the only shift in the Volkswagen: Porsche CEO Oliver bloom joined the Board of governors of the concern and the head of Audi, Rupert Stadler will now be responsible for global sales group.
As the names suggest, the brands will be divided according to product value, with the likes of Volkswagen, Skoda and SEAT found in the Volume category, while Lamborghini, Porsche and Bentley will make up the Super Premium segment of the business.
"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.
The company said it would reorganise into six business areas and the China region to help it adapt "in a phase of highly dynamic change in the company and the entire automotive industry".
The carmaker will prepare its truck and bus division for "capital market readiness" by making it a public limited company as a prelude to a potential listing, confirming a Reuters report from last month. Additionally, Porsche sports auto division head Oliver Blume is being promoted to the top management body of the entire group.