By William Boston and Neetha Mahadevan
Volkswagen AG Chairman Ferdinand Piech may have lost the battle
to oust Chief Executive Martin Winterkorn, but the war isn't
over.
Key members of VW's supervisory board Friday proposed extending
Mr. Winterkorn's contract, one week after Mr. Piech expressed a
lack of confidence in the CEO and threw his future into doubt. The
supervisory board group, its executive committee, said Mr.
Winterkorn was the "best possible" leader for Volkswagen and had
its full support.
The committee proposed that the supervisory board extend Mr.
Winterkorn's contract in February next year. The move was welcomed
by a major Volkswagen shareholder, the state of Lower Saxony, which
holds 20% of Volkswagen's voting rights and two seats on its
supervisory board.
"The committee's conclusion provides the clarity Volkswagen
needs," state Premier Stephan Weil said. Lower Saxony has
confidence in Mr. Winterkorn and wants to continue working closely
with him, he said, praising the company's "excellent development"
in recent years.
The backing is seen as a defeat for Mr. Piech, who couldn't
convince the committee to withdraw support for Mr. Winterkorn,
according to people familiar with the matter.
Mr. Piech and five other members of the VW supervisory board's
executive committee met with Mr. Winterkorn on Thursday at Mr.
Piech's private estate in Salzburg, Austria, in an attempt to
resolve the leadership crisis.
Mr. Winterkorn, 67, had signaled his determination to serve out
his term to the end of next year. Late Thursday, he was able to
sway members of the supervisory board with his strategic plans,
according to a person familiar with the content of the meeting.
But Friday's endorsement leaves unresolved whether Mr.
Winterkorn will eventually become the head of the auto maker's
supervisory board when he finishes his term, as had been planned.
Mr. Piech is set to head the supervisory board until the spring of
2017, meaning he could have two years to push his agenda.
Few observers familiar with VW were willing to call Mr. Piech's
setback an absolute defeat.
"Mr. Piech isn't easily dissuaded from his ideas," as previous
clashes have shown, said Stefan Bratzel at the Center of Automotive
Management at Bergisch-Gladbach's University of Applied
Sciences.
It may be business as usual in the near term, said Arndt
Ellinghorst at Evercore ISI, but a debate on leadership isn't
likely to subside entirely.
"It seems (Mr.) Piech has lost the battle and an apparent desire
for change at the top of VW," Mr. Ellinghorst said. "What is not
clear, however, is whether this puts an end to the war."
Extending Mr. Winterkorn's contract would give Europe's biggest
car maker time to consider who would eventually take the top job.
Potential candidates include Herbert Diess, a former BMW AG
executive, whom Mr. Piech brought in to run the VW brand.
Others potential candidates to head Volkswagen are Andreas
Renschler, head of commercial vehicles at the company, and Rupert
Stadler, chief executive luxury car unit Audi AG.
Mr. Winterkorn became CEO in 2007, and under his leadership
Volkswagen accelerated its expansion. The company operates nine car
brands, generates EUR202 billion ($218 billion) in revenue and
sells more than 10 million vehicles a year. Rapid growth has made
managing operations more complicated, and while Mr. Winterkorn may
have convinced key shareholders of his strategy, the company faces
a number of weaknesses, including a poor showing the U.S. and
narrow margins at the VW brand.
Earlier Friday, Volkswagen said recent sales performance offers
no guarantee of a successful year, after deliveries in the first
quarter rose 1.8%. VW brand car sales declined 1.3% in the period,
and group sales were down 1.4% in the U.S.
Mr. Winterkorn faces a clear set of tasks, said Mr. Ellinghorst
at Evercore ISI, including addressing VW brand margins, turning
around business in North America, and integrating the commercial
vehicles business.
"If he cannot make progress quickly, we suspect another
leadership battle waits," Mr. Ellinghorst said.
Hendrik Varnholt contributed
Write to William Boston at william.boston@wsj.com and Neetha
Mahadevan at neetha.mahadevan@wsj.com
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