Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Ferdinand Piech resigns, ending an era at Volkswagen

Published 04/25/2015, 06:56 PM
Updated 04/25/2015, 06:56 PM
© Reuters. Piech, chairman of the supervisory board of Volkswagen, is pictured during a welcoming ceremony at the plant of German carmaker Volkswagen in Wolfsburg

© Reuters. Piech, chairman of the supervisory board of Volkswagen, is pictured during a welcoming ceremony at the plant of German carmaker Volkswagen in Wolfsburg

By Jan Schwartz and Georgina Prodhan

HAMBURG/FRANKFURT (Reuters) - Ferdinand Piech, a towering figure at Volkswagen (DE:VOWG_p) for more than two decades, resigned as its chairman on Saturday after losing a showdown he had provoked with Chief Executive Martin Winterkorn, ending an era at the iconic German carmaker.

Piech, the 78-year-old grandson of the inventor of the Volkswagen Beetle Ferdinand Porsche, had previously seen off other executives who crossed him, including his own hand-picked successor as CEO, Bernd Pischetsrieder.

But this time he was unexpectedly isolated in a five-to-one vote of Volkswagen's steering committee last week, as labor representatives, the state of Lower Saxony and even his own cousin Wolfgang Porsche stood firmly behind Winterkorn.

"The members of the steering committee came to a consensus that, in the light of the past weeks, the mutual trust necessary for successful cooperation was no longer there," the six-member panel said in a statement after another meeting on Saturday.

Berthold Huber, the senior trade unionist who will take over until a new chairman is elected, said: "The uncertainty had to be ended today. The steering committee was and is conscious of its responsibility to Volkswagen and its many thousand staff."

Two sources with knowledge of the matter said Piech had resigned without forcing a vote of the committee at its second crisis gathering in 10 days.

Piech resigned with immediate effect from all his roles at Volkswagen including as an ordinary supervisory board member, as did his second wife Ursula, a former nanny who joined the supervisory board in 2012.

"Piech's departure represents a seismic shift in Volkswagen's power structure, and could foretell drastic changes in how one of the world's largest automakers operates," wrote Karl Brauer, senior analyst at analysis firm Kelley Blue Book.

"VW has kept pace with General Motors (N:GM) and Toyota's (T:7203) growth in recent years, making it a very tight three-way race for the title of largest global automaker, but VW's struggles in markets like the U.S. and Brazil, along with lower profit margins versus GM and Toyota, shows there's still much work to be done."

The leadership row burst into the open this month when news weekly Der Spiegel quoted family patriarch Piech as saying he had "distanced" himself from CEO Winterkorn.

The comment came at a time when VW is cutting billions of euros of costs and revamping structures, having struggled with chronic underperformance in the United States and declining profitability at its core autos division.

WINTERKORN'S CHANCES

Winterkorn's current contract expires at the end of 2016, but last week's agreement to back him included a commitment to discuss an extension.

Piech's departure increases the chances of Winterkorn succeeding him as chairman - something that Piech wanted to prevent at all costs, Volkswagen insiders believe. That would leave the way open for Porsche CEO and VW management board member Matthias Mueller, already seen as a favorite to succeed Winterkorn, to take over.

"What changes will we see to fill the void left by Piech? Do we have Winterkorn stepping up to chairman and Matthias Mueller as CEO? That could happen," said analyst Stuart Pearson (LONDON:PSON) of Exane BNP Paribas (PARIS:BNPP).

But Piech's influence may still make itself felt through the 51-percent voting rights the Piech-Porsche clan owns in Volkswagen, now represented on the supervisory board by Wolfgang Porsche, if family ties withstand the recent turmoil.

While he may have failed to unseat the CEO, Piech's departure is unlikely to end the increased scrutiny the public duel has drawn to the group's strategic shortcomings.

Volkswagen's management may still have to address the criticisms Piech raised, which include the failure to engineer a low-cost car.

When Piech became CEO of VW in 1993, the company was losing money, prompting him to cut pay and working hours at German plants and streamline production

During his nine-year tenure, he turned a loss equivalent to 1 billion euros ($1.09 billion) into a 2.6 billion euro profit while spearheading VW's expansion to a 12-brand entity that makes everything from fuel-efficient city cars to 40-tonne trucks.

Exane BNP Paribas' Pearson said Piech's abrupt resignation would come as a shock to investors despite the recent drama.

© Reuters. Piech, chairman of the supervisory board of Volkswagen, is pictured during a welcoming ceremony at the plant of German carmaker Volkswagen in Wolfsburg

"Those seeing the glass half full may view this as an opportunity to improve corporate governance at VW," he said. "However, first VW will need to demonstrate that its operating performance is on track and not the cause of Piech and Winterkorn's discord."

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.