Volkswagen power struggle deepens as Porsche weighs in

The power struggle at Volkswagen escalated over the weekend, as a rift emerged between the Porsche and Piëch families that control the carmaker and its chief executive signalled he does not intend to stand down.

A full-blown leadership crisis was triggered on Friday, when VW's chairman and patriarch Ferdinand Piëch revealed his working relationship with long- serving chief executive Martin Winterkorn was strained.

Mr Piëch’s goal in speaking out remains unclear. But in one sentence in an interview – “I am at a distance to Winterkorn” – he appeared to undermine Mr Winterkorn, casting doubt on his top lieutenant’s future and obliging key shareholders and employee representatives to pick sides.

Wolfgang Porsche, chairman of the Porsche SE holding company that controls a 50.7 per cent voting stake in VW, said on Sunday Mr Piëch's statements "represent his personal opinion, whose content and substance was not agreed with the family".

Powerful

Mr Porsche and Mr Piëch are cousins and grandsons of Porsche’s founder. They are also the two most powerful members of the VW supervisory board. Mr Porsche’s statement left the VW chairman looking unusually isolated and without sufficient votes to force out Mr Winterkorn, if he so desired.

VW's chief executive has also received support from Bernd Osterloh, VW's chief labour representative, and the state of Lower Saxony. Employee representatives control half the seats on the 20-member supervisory board that decides executive appointments. Lower Saxony has two seats, the Piëchs hold three and the Porsches have two.

Olaf Liess, Lower Saxony economy minister, told the tabloid Bild am Sonntag he was "very calm about Mr Piëch's announcement because of the majority situation on the supervisory board."

A person familiar with Mr Winterkorn’s thinking said he would “continue as CEO and won’t let himself be affected by this”. “He has a contract until the end of 2016 and he plans to fulfil that,” the source added.

Automotive behemoth

Mr Winterkorn is expected to greet chancellor Angela Merkel and Indian prime minister Narendra Modi at VW's stand at the Hannover industrial fair today, as planned.

With €15.9 million in annual pay and benefits last year, Mr Winterkorn is Germany’s highest-paid executive. He has led VW since 2007, helping build an automotive behemoth that is poised to surpass Toyota and General Motors as the world’s largest carmaker by sales.

However, problems at VW include its failure to crack the crucial US market and low margins at the core passenger vehicle brand, which forced the company to announce a €5 billion cost-cutting programme last year. – Copyright The Financial Times Limited 2015