Volkswagen Chairman Bows Out

Ferdinand Piech‚ who resigned as chairman of Volkswagen (VW) at the weekend‚ sowed the seeds of his own demise by reneging on a deal to support CEO Martin Winterkorn and secretly plotting to oust him instead‚ sources close to the VW board said.

When news leaked last week that Mr Piech had been lobbying family members behind the scenes to install Matthias Mueller‚ the CE of Porsche‚ at the helm of VW‚ the company’s powerful works council and its home state of Lower Saxony — a top shareholder — decided they had had enough.

They demanded a meeting of senior board members — the second emergency VW summit in a little over a week. “It was one of the straws that broke the camel’s back‚” a source close to one of the VW board’s labour representatives‚ said‚ referring to a doomed attempt by Mr Piech to convince fellow family members to dump Mr Winterkorn for Mr Mueller. On Saturday‚ at an airport in Braunschweig‚ a half hour down the road from VW’s imposing Wolfsburg headquarters‚ Mr Piech was issued an ultimatum — resign or suffer the ignominy of being booted out in a vote of the board.

Mr Piech’s departure represents the end of an era for VW. For more than two decades‚ the 78-year-old Austrian ruled the company like his personal fiefdom‚ summarily ending the careers of executives he had taken a dislike to and ramming through controversial strategic decisions through sheer force of will.

His shock expulsion ends two weeks of public mudslinging at VW. But it also leaves a void at the top of Europe’s largest car maker and a host of questions about the future shape of the company. Most urgent among them is who will replace Mr Piech in the crucial role of chairman. Mr Winterkorn had long been seen as the natural successor but can he slide into the post now‚ in the wake of his damaging row with Mr Piech? Mr Winterkorn has been freed from Mr Piech’s attacks but might also find himself more dependent than ever on the unions who saved his career.

Berthold Huber‚ the former head of Germany’s influential IG Metall trade union‚ takes over as acting chairman following Mr Piech’s departure. “Winterkorn has won this showdown but very likely at the cost of becoming more vulnerable to the influence of labour‚” said analyst Juergen Pieper of Bankhaus Metzler.

Mr Winterkorn has begun implementing a plan to eliminate 5bn a year in costs by 2017 at VW’s core passenger car brand‚ where profit margins are far below those of top rivals such as Toyota. Other failings for which Mr Piech criticised Mr Winterkorn included the group’s chronic underperformance in the US‚ where its inability to understand customer needs were underscored by its use of drink holders that were too small for jumbo-sized cups.

Under Mr Winterkorn‚ VW has also struggled to engineer a low-cost car or make inroads in southeast Asia and Latin America. Much depends on whether Mr Piech maintains a backroom influence through his share of the family holding in VW or sells out‚ as he reportedly threatened to do at a first crisis meeting on April 17. He owns a 13.2% stake‚ worth 1.7bn. Ferdinand Dudenhoeffer of the University of Duisburg-Essen‚ believes Mr Piech would be well advised to sell given VW shares are trading at 10-year highs and due to the uncertainty over the future. Some analysts see a rare opportunity for change at VW. Max Warburton‚ an automotive analyst at Bernstein‚ said VW had “considerable untapped potential” but much would depend on who came into the CEO role‚ should Mr Winterkorn become chairman.

Other scenarios include a new member of the Porsche-Piech family‚ such as Wolfgang Porsche‚ becoming chairman‚ leaving Mr Winterkorn as CEO. VW could also hire an outsider as chairman.

-Reuters/Andreas Cremer and Georgina Prodhan