VW chairman resigned after alienating group's key directors

The north German city of Braunschweig knows a thing or two about fallen lords. Near the cathedral a bronze statue of a lion honours the medieval duke "Henry the Lion", who sought territorial expansion and founded the city of Munich, but ultimately became isolated and was stripped of his lands and exiled.

At Braunschweig airport on Saturday, a very modern lion and corporate empire builder was unseated following a showdown with key directors.

Ferdinand Piech, 78, arrived at the airport as the chairman of Volkswagen - an automotive colossus with some 600,000 employees and €200bn in revenue, painstakingly pieced together over two decades.

But he drove home two hours later disempowered, having surrendered all his titles at the VW group. It was the end of an era that had begun in 1993, when Mr Piech became VW chief executive, and continued in 2002 after he assumed the role of chairman.

Until a leadership battle at the group erupted this month, Mr Piech, the grandson of the inventor of the VW Beetle, was accustomed to getting his own way.

He could normally count on the support of worker representatives who hold half the seats on VW's supervisory board. And although the Porsche and Piech families - who together control 51 per cent of VW's voting shares - frequently had their differences, they tended to find common ground in the end.

But in Braunschweig Mr Piech encountered a powerful alliance of company directors drawn from VW's steering committee. His cousin and Porsche chairman Wolfgang Porsche, Stephan Weil, the premier of Lower Saxony, Bernd Osterloh, the outspoken works council chief, his deputy Stephan Wolf, and Berthold Huber, the deputy chairman and trade unionist, were fed up with the chairman's machinations.

After two hours of tense discussion they told Mr Piech he faced being voted out of office when the full supervisory board met on May 4, said a person familiar with the discussions.

Unwilling to endure further humiliation, the chairman and his wife Ursula resigned from the board. Mr Piech's office declined to comment on Monday, when VW's non-voting shares closed up 5.3 per cent at €245.45.

Volkswagen officials still cannot fathom why Mr Piech - known internally as "Der Alte" - triggered the leadership crisis on Friday, April 10.

His comment to Der Spiegel that he was "at a distance" to VW chief executive Martin Winterkorn, 67 - his protege and Germany's highest paid manager - triggered alarm bells in Wolfsburg, location of the group's headquarters. A single pointed phrase from the chairman had been sufficient to unseat several VW executives over the years.

Mr Piech, a collector of ceremonial daggers, may have been angry. Der Spiegel was about to report that he was trying to position his wife to succeed him as the head of the supervisory board. He insisted this was not true and then launched the broadside against Mr Winterkorn.

But crucially, the chairman spoke out on April 10 before securing allies. Labour representatives and Lower Saxony immediately backed Mr Winterkorn and the following Sunday Wolfgang Porsche - whom Mr Piech had bested when Porsche failed in its attempt to take over VW in 2008 - said the chairman had not sought the family's approval before going public.

A frantic period of telephone diplomacy ensued, culminating in a meeting of the steering committee in Salzburg, Mr Piech's home turf, the following Thursday.

The directors left Austria without comment but Volkswagen watchers soon knew the game was up for Mr Piech. That evening an unruffled Mr Winterkorn attended a football game near the company headquarters, accompanied by Mr Osterloh, a VW director and labour chief.

The local side lost 4-1 but Mr Winterkorn's victory arrived the following day when the VW steering committee declared him to be the "best possible CEO" of the group and indicated he should receive a contract extension. On his 78th birthday Mr Piech had suffered a major reverse.

However, on Wednesday last week Mr Piech convened a fateful meeting of Porsche and Piech family members in Stuttgart.

German media reported the following day that the chairman had again tried to topple Mr Winterkorn and proposed Matthias Mueller, the Porsche chief executive, as an alternative.

Top directors were furious because the steering committee had plainly stated its support for Mr Winterkorn only a few days before. Their exasperation only increased when Mr Piech denied he was trying to oust Mr Winterkorn a few hours later.

On Saturday evening, after travelling from Braunschweig back to his office in Hanover, Mr Weil emerged to tell the press that the "necessary trust" needed to work with Mr Piech on the board was no longer there.

At his side was a grave looking Mr Huber, the trade unionist by now the interim chairman of VW. Wolfgang Porsche issued a brief statement through a spokesman backing Mr Winterkorn.

The old lion Mr Piech had just lost his biggest battle.

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation