VW chairman Ferdinand Piech resigns after failing to oust chief

Volkswagen's storied patriarch and chairman Ferdinand Piech has resigned after losing a power struggle with key directors, marking the end of a proud era at the world's second-largest carmaker by sales. 

Mr Piech, the 78-year old grandson of the inventor behind the VW Beetle, resigned on Saturday evening with immediate effect. 

Earlier VW's steering committee of top directors had met in Braunschweig and concluded that "in view of the background of the last weeks, the necessary mutual trust necessary for successful co-operation no longer exists". 

Mr Piech also quit his other directorships within the VW Group and his wife Ursula also resigned from the VW board. 

Berthold Huber, the former head of the IG Metall union and deputy chairman of VW's supervisory board, will take over as chairman on an interim basis at the request of key shareholders. 

The announcement marks an extraordinary denouement to a leadership crisis that Mr Piech triggered two weeks ago when he indicated he no longer supported chief executive Martin Winterkorn. 

Key shareholders, including the State of Lower Saxony and Mr Piech's cousin Wolfgang Porsche, rallied to the chief's side. Employee representatives, who hold half the seats on the supervisory board, also backed the chief, leaving Mr Piech unusually isolated. 

Top directors met a week ago and declared Mr Winterkorn "the best possible" CEO of VW - an unprecedented defeat for the chairman.

However, Porsche and Piech family representatives met again on Wednesday, and German media reported that the chairman had tried again to topple Mr Winterkorn. Together the two families control 51 per cent of the voting shares in VW.

The following day the Mr Piech denied trying to oust the chief but by then boardroom trust was shattered.

Mr Porsche, the chairman of Porsche SE, the holding company for the two families' VW stock, said on Saturday that he had "complete trust" in VW's management.

He thanked Mr Piech for his "extraordinary and highly successful" work for VW over the decades and said Porsche SE would continue to discharge its responsibility as anchor investor of VW "with great loyalty". 

Mr Piech remains a board member at Porsche SE and so far there is no indication he plans to sell his VW stock.

Stephan Weil, prime minister of the State of Lower Saxony, which holds 20 per cent of VW voting shares, said Mr Piech's resignation had become "unavoidable" and it was necessary to end the speculation and have clarity at the top of VW.

Nevertheless, he said he regretted Mr Piech's departure: "It's no exaggeration that he is one of the most important personalities in German economic history."  

Mr Piech's huge drive and ambition as CEO and, later, as chairman of VW helped propel the German group to within touching distance of the crown of world's largest carmaker by sales.  

In his early career as an engineer he was responsible for countless innovations and as chief of VW from 1993 to 2002 he transformed its fortunes and began assembling a stable of brands that now spans Bugatti, Lamborghini and motorcycle maker Ducati. 

But investors were often frustrated by Mr Piech's costly dealmaking and his trophy engineering projects such as the VW Phaeton saloon. 

His corporate governance was also criticised, most famously for his decision to appoint his wife, a former nanny, to the board. 

A survey of institutional investors conducted by Evercore ISI the advisory and research firm, this month found that 80 per cent would welcome a change of chairman and 65 per cent a change in the CEO. 

Mr Piech's resignation comes at a difficult time for VW which is trying to slash €5bn in costs at the core VW brand in order to boost margins. It is also facing tumbling sales in Russia, South America and the US and the key China market - VW's largest - has started to slow. 

"The disruption at such a senior level at a critical time for VW will no doubt unnerve many shareholders in the weeks to come," Stuart Pearson, an analyst at Exane BNP Paribas, told clients.

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