Volkswagen Chief Executive Martin Winterkorn Copyright Sean Gallup, Getty Images

Volkswagen Backs Chief Executive Amid Leadership Struggle

Supervisory board chief Ferdinand Piech reportedly has become unhappy with: The car maker's inability to make substantial inroads into the U.S. market VW's over-dependence on the Chinese market Waning attractiveness of its core Volkswagen brand

FRANKFURT, Germany - German auto giant Volkswagen (IW 1000/7) attempted Friday to draw a line under a bitter power struggle between its chief executive and supervisory board chief, saying it would extend the contract of chief executive Martin Winterkorn.

The announcement was seen as a severe blow to supervisory board chief Ferdinand Piech, who has ruled the carmaker with an iron fist for more than 20 years.

"The executive committee of the supervisory board asserts that Martin Winterkorn is the best possible chief executive for Volkswagen," the carmaker said in a short statement. 

"The executive committee places great importance on the fact that Mr. Winterkorn will pursue his role as chief executive with the same vigor and success as before, and that he has the full support of the committee in doing so," the statement said.

"The executive committee will now propose to the supervisory board to extend Mr. Winterkorn's current contract in the supervisory board meeting of February 2016," it added. 

The declaration comes in the wake of media reports of a ferocious battle between the 78-year-old Piech and his 67-year-old one-time protege Winterkorn.

Piech, a member of the powerful Porsche dynasty that is a shareholder in Volkswagen, and one of the most important figures in German business, sent shockwaves around German industry last weekend by declaring in a magazine interview that he was "distancing himself" from Winterkorn. 

Until now, Winterkorn was seen as Piech's close ally and heir apparent, and the idea of a poisonous rift between the two ignited fears about the future running of Europe's biggest carmaker, whose empire spans 12 brands and annual sales of 200 billion euros ($215 billion).

Nevertheless, VW's other shareholders have since rallied behind Winterkorn, leaving Piech looking isolated. 

The big global players who want to succeed in the 21st century are run differently."

— Weekly newspaper Die Zeit editorial

The steering committee comprises six of the most influential members of VW's 20-strong supervisory board, including the head of the general works committee, the head of the mighty IG Metall metalworkers' union and the head of the regional state of Lower Saxony where the carmaker is based. 

Piech is the grandson of the inventor of the iconic Beetle, the model on which VW's fortune was built, and was himself VW's chief executive between 1993 and 2002, before becoming its supervisory board chief. 

He is also one of the representatives of the Porsche family, whose holding company Porsche SE holds nearly 51% of VW. 

It was Piech who installed Winterkorn as chief executive in 2007. 

But he appears to have become irked by his former protege's difficulties in making substantial inroads into the U.S. market, VW's over-dependence on the Chinese market and the waning attractiveness of its core Volkswagen brand. 

Nonetheless, few people appear to share Piech's ire -- after all, the carmaker chalked up nearly 11 billion euros in net profit last year and its share price has more than trebled in five years.

The weekly newspaper Die Zeit said Piech's "authoritarian style" was becoming anachronistic. 

"The big global players who want to succeed in the 21st century are run differently," it said in an editorial. 

The decision to keep Winterkorn in office "could weaken Piech's position as supervisory board chief," said DZ Bank analyst Michael Punzet. Piech's own contract runs until 2017. 

By Simon Morgan

Copyright Agence France-Presse, 2015

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