He takes over from Matthias Mueller, who was appointed in 2015 at the height of the diesel emissions scandal.
Warburton said, however, that despite fears that Volkswagen's insular culture might reject Diess's hardnosed approach, "instead of being squeezed out he has been pushed upward and made CEO", calling that "a sign of real change at VW".
Volkswagen's new chief vowed Friday to push on with reform and cultural change to steer the German auto giant out of the cloud of the "dieselgate" scandal and into a future of electric cars and sustainable mobility.
The 59-year-old Diess was named on Thursday as the German automaker's new CEO, replacing Matthias Mueller.
He will head up the management board that reports to the group's board of directors and take charge of vehicle development and research as well as vehicle-related information technology.
Chairman of the Supervisory Board Hans Dieter Petch thanked Mueller and called his work "outstanding".
The Volkswagen empire owns the Ducati motorbike brand, Scania buses and trucks, passenger vehicle brands including Skoda, SEAT and Audi (IOB: 0FG8.IL - news), as well as the Bentley, Porsche and Lamborghini luxury marques.
Diess himself will lead a "volume brands" segment which consists of VW, Spanish brand Seat, Czech division Skoda and VW commercial vehicles.
Chairman of the supervisory board Hans Dieter Potsch said: "The Volkswagen Group's goal is and remains to align the company and its brands with future needs, to safeguard its position among the leaders of the global automotive industry with innovativeness and profitability and to be instrumental in shaping tomorrow's personal mobility with the strength of our group brands".
Mr Mueller, a former boss at Porsche, took over as VW CEO unexpectedly in September 2015 after Martin Winterkorn resigned over the scandal.
"Not only did he safely navigate Volkswagen through that time, together with his team, he also fundamentally realigned the group's strategy".
The company's procurement and component divisions would also be combined as part of the revised structure, Diess said.
The repercussions of Volkswagen's admission in 2015 that it had installed "cheat software" on millions of diesel engines in an end-run around global emissions standards reverberate to this day.
Some analysts cheered the appointment of Mr Diess.
Diess brings an outsider's perspective to the job, having joined Volkswagen (VLKAF) in July 2015 after spending almost 20 years at rival German automaker BMW (BMWYY). It is not a solicitation to make any exchange in commodities, securities or other financial instruments.