Volkswagen Chairman Ferdinand Piech may be is losing his grip on the automaker two years before his last term as chairman ends. Piech faces resistance within the automaker's supervisory board to his criticism of CEO Martin Winterkorn, deepening a leadership crisis at a time when VW is struggling to revive profits.
Piech appears isolated after VW's powerful works council, the state of Lower Saxony and Piech's cousin, Wolfgang Porsche, rallied to Winterkorn's side.
Piech on Friday publicly withdrew his confidence in Winterkorn, telling German magazine Der Spiegel that he was keeping himself "at a distance" from the CEO. Piech told Spiegel that Winterkorn will not succeed him as chairman.
A senior labor representative said Piech had criticized Winterkorn at past board meetings, particularly with regard to the weak U.S. operations, Reuters reported. VW's $1 billion U.S. plant in Chattanooga has been underutilized for more than a year after demand dried up for the locally-built Passat sedan, a model that Winterkorn had personally lobbied for, a company source said.
Wolfgang Porsche, chairman of Porsche SE, which owns the majority of Volkswagen's common stock, described his cousin's comments as a "private opinion" that wasn't coordinated with the rest of the family. The state of Lower Saxony, where VW is based and which owns a fifth of VW's voting shares, as well as the carmaker's labor leaders, backed Winterkorn.
Piech, 77, and Winterkorn, 67, have worked closely together for decades and Winterkorn has always been seen by insiders as Piech's successor as VW chairman.
"This falling-out is destabilizing VW at a critical time," said London-based Evercore ISI analyst Arndt Ellinghorst. "The top-level succession is the biggest challenge the carmaker has been facing in the past 20-30 years."
Daniel Schwarz, a Frankfurt-based analyst at Commerzbank, said in a note that Winterkorn's position is "weaker" now, even if Piech can't muster the board votes to fire him.
The supervisory board's steering committee will meet next week to discuss the leadership crisis, a company source said, without being more specific.
Winterkorn, who has been at the helm of VW since 2007, let it be known on Saturday that he will fight for his job. The CEO feels emboldened by support from strong allies, two sources at VW told Reuters. He is determined to prove that his strategy will keep VW competitive in the long run, Bloomberg also reported, citing people familiar with his thinking
Power struggle
Exactly how the power struggle will play out is dependent upon the 20-member supervisory board, which in Germany oversees company strategy and appoints top management.
Winterkorn has a powerful ally in works council chief Bernd Osterloh, who sits on the board. The 10 employee representatives on the board historically have voted as one block to maximize their power. The backing of worker representatives was crucial to Piech's ousting of previous CEO Bernd Pischetsrieder in 2006.
"We have a clear position which remains unchanged. With Dr. Winterkorn we have one of the most successful automotive managers on board," Osterloh said in a statement Friday. "If it was up to us, we would extend his contract beyond 2016," the statement said, adding that it was in the interests of Volkswagen to focus on its core business rather than questioning the company's leadership.
The state of Lower Saxony has two board seats. State Prime Minister Stephan Weil was "unpleasantly surprised" by the Spiegel report, state government spokesman Michael Juerdens said Saturday, declining to give further details on Lower Saxony's view of the matter.
"We appreciate the work of Chief Executive Officer Martin Winterkorn very much," Olaf Lies, the state's economy minister, told Germany's Bild am Sonntag newspaper. The public shareholder is taking "a very calm view" of Piech's announcement "in view of the majority powers on the supervisory board," Lies said.
Removing Winterkorn, whose term expires next year, would be difficult for Piech because doing so requires being able to show that the CEO has steered the carmaker in a direction that has greatly harmed it, according to the company's articles of incorporation. If workers and Lower Saxony team up to support Winterkorn, Piech would in any case not have enough votes to remove him under the complex voting rules required to do so.
The holding company Porsche Automobil SE, owned by the Porsche and Piech families, controls 51 percent of VW common stock. The Porsche family has two members on VW's supervisory board. Piech's side of the family has three seats. Piech has run the board since 2002 when he stepped up from his post as VW chief executive.
The leadership dispute comes at a key moment for Winterkorn as he works to complete the last phases of a turnaround of the automaker that includes snatching the global sales crown from Toyota Motor -- a goal he may achieve as early as this year.
Reuters and Bloomberg contributed to this report
