VW’s Piëch, defeated at last, resigns as chairman

Ferdinand Piëch, a towering figure at Volkswagen for more than two decades, resigned as its chairman on Saturday after losing a showdown with Chief Executive Martin Winterkorn, ending an era at the iconic German carmaker.

Piëch, the 78-year-old grandson of the inventor of the Volkswagen Beetle, 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 labour 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 Piëch had resigned without forcing a vote of the committee at its second crisis gathering in 10 days.

The leadership row burst into the open this month when news weekly Der Spiegel quoted Piëch, the patriarch of the family that owns 51 percent of voting rights in VW, 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.

Increased scrutiny

While he may have failed to unseat the chief executive, Piëch’s departure is unlikely to end the increased scrutiny their public duel has drawn to the group’s strategic shortcomings.

The remainder of Winterkorn’s tenure may be spent addressing the criticisms Piëch raised, which include the failure to engineer a low-cost car.

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.

A survey by advisory firm Evercore ISI shortly after the crisis broke out found that 65 per cent of institutional investors would welcome a change of chief executive and 80 per cent were in favour of a new chairman.

Analyst Stuart Pearson at Exane BNP Paribas said Piëch's resignation would come as a shock to investors despite the drama of the past fortnight.

“Although VW’s boardroom dispute has played out noisily in the press in recent weeks, few expected Piëch to step down, and certainly not so quickly,” he wrote in a note.

“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 Piëch and Winterkorn’s discord.”

- (Reuters)