Piech's grip on VW weakened by row with CEO, report says

BERLIN/HAMBURG (Reuters) -- Volkswagen Chairman Ferdinand Piech's iron grip on the German carmaker has been severely weakened following a dramatic confrontation with senior board members last week that nearly resulted in a push to oust him, sources told Reuters.

Piech, patriarch of the family that founded Volkswagen and a dominant figure at the automaker for more than two decades, triggered a leadership crisis at the Wolfsburg-based firm by criticizing CEO Martin Winterkorn in a magazine article earlier this month.

After an emergency meeting in Salzburg last Thursday to resolve the row, a group of six senior board members, including Piech, gave their full backing to Winterkorn and agreed to propose an extension of his contract beyond 2016.

But sources briefed on the meeting said on Sunday that the vote of confidence in Winterkorn came only after a full-blown confrontation between Piech and the other five board members.

Piech's office in Salzburg and VW declined to comment.

One source said the chairman himself had raised the prospect of resigning. Another said the other five members were ready to demand that Piech step aside had he not backed down belatedly on Friday morning, a day after the Salzburg meeting, and signed up to the statement giving Winterkorn "full support."

"Piech was completely isolated," said one VW supervisory board member who declined to be named because of the sensitivity of the subject. "The question of who will chair the board (when Piech retires) won't be decided until 2017 unless Mr Piech draws the consequences after this crisis which he alone provoked."

Piech's contract as chairman expires in April 2017.

At board meetings over the past five months, Piech had aired criticism of the automaker's performance under his former protege Winterkorn, particularly in the United States, where the VW brand has missed its sales goals, sources had told Reuters.

Severely weakened

Reuters reported on Friday that the five other senior board members had opposed Piech at the meeting, but the latest revelations suggest resentment over his attempt to push out Winterkorn runs far deeper than previously known.

It also suggests that Piech's influence within Volkswagen has been severely weakened by the incident, reducing the chances of him relaunching an attempt to oust Winterkorn in the future.

Bild newspaper reported on Sunday that the row could yet cost Piech his job, citing plans by labor representatives and top shareholders -- the Porsche family and state of Lower Saxony -- to topple him.

Without naming its sources, the paper also said that Piech, grandson of the creator of the iconic VW Beetle, and his wife Ursula had threatened at the Salzburg meeting to quit the board and sell their multi-billion-euro holdings in VW to weaken the pro-Winterkorn camp.

Sources who spoke with Reuters could not confirm either of these stories. VW and the works council all declined to comment.

In the run-up to VW's annual shareholder meeting on May 5, leading figures tried on Sunday to restore a semblance of calm.

"You can rest assured that all the key players are anxious to calm the situation," a spokesman for Porsche SE, VW's biggest shareholder, told Reuters.

Berthold Huber, former IG Metall boss and deputy board chairman, said in an emailed statement: "We are determined to continue the successful path of VW with (Chairman) Piech and (Chief Executive) Winterkorn also in future."

Analysts fear the simmering row could prove a distraction for the company at a time when Winterkorn is trying to solve stubborn problems at VW's U.S. operations and revive profitability in its core brand with a 5-billion-euro ($5.40 billion) cost cutting programme.

Winterkorn was scheduled to travel to the Shanghai auto show this weekend but cancelled his trip at the last minute. VW said it was because he had contracted the flu.