VW's Piech Was Forced to Quit After Secret Plot Exposed

VW's Piech Was Forced to  Quit After Secret Plot Exposed
VW's Piech Was Forced to  Quit After Secret Plot Exposed

Ferdinand Piech, who resigned as chairman of Volkswagen over the weekend, ended his leading position after he overplayed his hand by reneging on a deal to back CEO Martin Winterkorn by secretly plotting to have him fired, Reuters reported on Monday.

When news leaked out last week that Piech had been lobbying family members behind the scenes to install Matthias Mueller, the chief executive of Porsche, at the helm of VW, the company's powerful works council and its home state of Lower Saxony - a top shareholder - decided they had had enough.

They demanded a meeting of senior board members - the second emergency VW summit in a little over a week.

"It was one of the straws that broke the camel's back," a source close to one of the VW board's labor representatives, told Reuters on Monday, referring to a doomed attempt by Piech to convince fellow family members to dump Winterkorn and install Mueller.

On Saturday, Piech was issued an ultimatum: resign or suffer the ignominy of being booted out in a vote of the board.

Neither Piech, Volkswagen nor senior board members would comment on the resignation, which was announced by VW and a committee of board leaders.

Piech's departure represents the end of an era for Volkswagen. For over two decades, the 78-year-old Austrian has ruled VW like his personal fiefdom, summarily ending the careers of executives he'd taken a dislike to and ramming through controversial strategic decisions through sheer force of will.

His shock ouster ends two weeks of public mudslinging at Volkswagen. But it also leaves a void at the top of Europe's largest carmaker and a host of questions about the future shape of the company.

Most urgent among them is who will replace Piech in the crucial role of chairman.

  Union Strength

Winterkorn has been freed from Piech's attacks but may also find himself more dependent than ever on the unions who saved his career. Berthold Huber, the former head of Germany's influential IG Metall trade union, takes over as acting chairman following Piech's departure.

"Nothing works at VW without the unions - it's a simple but sad truth. Winterkorn has won this showdown but very likely at the cost of becoming more vulnerable to the influence of labor," said analyst Juergen Pieper of Bankhaus Metzler.

Winterkorn has begun implementing a plan to eliminate 5.44 billion a year in costs by 2017 at VW's core passenger-car brand, where profit margins are far below those of top rivals like Toyota.

Only 1.5 billion of the 5 billion savings target has been identified. And last summer, Winterkorn was forced to dump consultants at McKinsey, who had been asked to advise on the implementation of cuts, when labor leaders protested.

Much depends on whether Piech maintains a backroom influence through his share of the family holding in VW or sells out, as he reportedly threatened to do at a first crisis meeting in Salzburg on April 17th.

He still owns a 13.2 percent stake in the company, worth $1.85 billion. Other family shareholders would have right of first refusal to buy his stake.


Volkswagen now has the opportunity to change its overseas operations after Piech's resignation.

Preliminary talks with China's Great Wall had been held this year to explore the possibility of joint development of low-cost vehicles to tackle VW's chronic weakness in southeast Asia and India and the Middle East. VW was also busy working on a small SUV for Brazil, where those models are selling like hotcakes, and is aiming to present a new concept car next year.

With the potential growth of external operations, Volkswagen may be able to update its portfolio of vehicles and move into new untapped markets.