VW chief is ousted with €15m pay-off

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Europe's two biggest car makers changed chief executives yesterday as Bernd Pischetsrieder was dramatically ousted from Volkswagen and the former head of Airbus was appointed to lead Peugeot.

Mr Pischetsrieder's surprise removal from VW will put him in line for a €15m (£10m) pay-off. It comes just six months after he was reappointed to the post for a further five years, having appeared to have won a boardroom battle with Ferdinand Piech, the chairman of the German car maker.

But it emerges that Mr Piech has won the day, having been uncomfortable with Mr Pischetsrieder's attempts to take the brand downmarket by dismantling part of the premium strategy he built up during his time as chief executive.

The appointment of Christian Streiff as successor to Jean-Martin Folz at Peugeot is less surprising. Mr Streiff had been tipped for the job after his short-lived reign at Airbus where he fell out with its German and French shareholders, failing to gain political support for sweeping job cuts at the aircraft maker.

Mr Pischetsrieder, who is 58 and a great nephew of Sir Alec Issigonis, the inventor of the Mini, will leave Volkswagen at the end of the year and is being replaced by the head of the group's Audi division, Martin Winterkorn.

This is the second time Mr Pischetsrieder has been ousted from one of Germany's leading car makers. He was chairman of BMW from 1993 to 1998 but lost his job after failing to stem losses at Rover, having persuaded the board to buy the car manufacturer.

At Volkswagen, Mr Pischetsrieder introduced a tough cost-cutting programme involving longer working hours and thousands of job losses. He also tried to move away from competing head on with upmarket brands in favour of taking on volume car makers such as Toyota.

He also sought to rationalise production by building more cars on single platforms and restructuring the group's brands into two divisions - one consisting of VW, Bentley and Skoda and the other Audi, Lamborghini and Seat.

But the cost-cutting plan resulted in tension between management and unions, and VW's recovery programme was also overshadowed by a bribery scandal involving senior managers in its purchasing department and union representatives.

Mr Streiff's appointment at Peugeot comes after a string of profits warnings from the French car maker blamed on rising raw material costs and falling sales owing to the group's ageing product line-up. Peugeot has also recently redoubled its cost-cutting efforts and is aiming to reduce its headcount by 10,000.

Mr Streiff, 52, will join Peugeot today and will spend three months familiarising himself with the business. He will formally take over in February from Mr Folz, who told the Peugeot board he wanted to retire when he reaches 60 in January.