Why has the Volkswagen boss turned his back on heir apparent?

Ferdinand Piëch, the powerful chair of VW, has fallen out with his chief executive and protégé Martin Winterkorn. Tony Paterson lifts the bonnet and examines what’s going on at the German automobile giant

Ferdinand Piech, the chairman, at the Volkswagen plant in Wolfsburg, Germany (Reuters)

Martin Winterkorn had taken his future brilliant career at Europe’s biggest carmaker for granted. The 67-year-old Volkswagen chief executive had planned to stay on until the end of 2016. At that point, it was agreed, he would be awarded the cherished prize of VW board chairman for his outstanding services to the 12- marque company.

But last Friday, Mr Winterkorn suddenly received what Germany’s media has described as “notice of his forthcoming execution” from the man into whose shoes he had assumed he would be stepping – VW’s board chairman, Ferdinand Piëch, who is scheduled to retire in 2017.

Mr Piëch is the 77- year-old grandson of the VW Beetle inventor Ferdinand Porsche. He and his cousin, Wolfgang Porsche, are the leading members of the “Porsche family clan” which holds a 51 per cent stake in Volkswagen and maintains a controlling influence on all management decisions. Nothing major happens at VW without Mr Piëch’s approval.

On Friday, Der Spiegel magazine quoted Mr Piëch as saying that he was “ distancing himself” from Mr Winterkorn. The remark may seem innocuous. But in Germany it has been taken as proof that a major row is brewing at VW and that Mr Winterkorn’s future at the company is now in question.

Mr Piëch is the 77- year-old grandson of the VW Beetle inventor Ferdinand Porsche.

“Piëch wants to kill him but Winterkorn is fighting back,” is how the Bild newspaper depicted the conflict at the weekend. “I will not allow myself to be kicked out of court,” Mr Winterkorn was quoted as saying. Mr Piëch insists that he is simply “striving to get the right people”.

The dispute has shocked seasoned German car industry observers. Mr Winterkorn’s record has enabled VW to record profits of €12.7bn (£9.2bn) and a production output of nearly 10 million vehicles in 2014.

Mr Piëch and Mr Winterkorn are part of German car-manufacturing folklore. They are seen as the dynamic duo of the industry. Mr Piëch turned Audi into a runaway success after taking it over in 1988. He personally selected Mr Winterkorn and put him in charge of quality control at Audi. When Mr Piëch moved on and became Volkswagen chief in 1993, he rewarded Mr Winterkorn by taking him along and subsequently gave him the job of Audi chief executive. When Mr Piëch stepped down as VW boss in 2002, he handed his job initially to the former BMW boss Bernd Pischetsrieder. But Mr Pischetsrieder was soon replaced by Piëch’s old protégé, Martin Winterkorn.

What went wrong in their relationship? German media speculation that Mr Piëch’s criticism was motivated by his secret desire to install his wife Ursula as his successor appeared to have been scotched yesterday, after Mr Piëch insisted that his wife had nothing to do with it. Instead the problem appears to be Volkswagen itself.

It is currently Europe’s biggest carmaker. In 2009, VW merged with Porsche. Today VW is a giant with overall responsibility for the manufacture of legendary marques ranging from Bentley and Lamborghini to Skoda and VW. The concern employs a workforce of 592,000 at 118 plants world-wide.

Toyota remains market leader because it manufactures its vehicles much more cheaply and earns the equivalent of €38,000 more per head of workforce (Reuters)

However the company’s attempts to compete with firms such as Toyota have not worked. Toyota remains market leader because it manufactures its vehicles much more cheaply and earns the equivalent of €38,000 more per head of workforce than its German rival. Despite record profits last year, Volkswagen continues to struggle with its core vehicles such as the VW Golf and Passat, and it has failed to make any serious progress in budget car development. Its two lorry marques, MAN and Scania, face sales difficulties. The company also has serious problems in gaining a proper foothold in the world’s second largest car market – the United States.

The company’s failure to make inroads in the US recently prompted Mr Piëch to remark: “We have so far only managed a limited understanding of the United States.” The comment was taken as a direct, if veiled, attack on Mr Winterkorn. Asked last year whether he was satisfied with VW’s progress, Mr Piech’s response was: “Not really”.

Since Mr Piëch’s bombshell last Friday, several influential figures in the VW arena have spoken out against his condemnation of Mr Winterkorn. Even Mr Porsche objected, saying that his cousin was giving a “private opinion which is not aligned with that of the family”. His position has been echoed by the VW staff council, which holds 20 seats on the company’s board, and Stephan Weil, the prime minister of the state of Lower Saxony where Volkswagen maintains its company headquarters.

Mr Piëch has a record of preparing the dismissal of senior staff via leaked comments to the press. In 2006 he dispensed with Mr Pischetsrieder after making similar negative remarks to The Wall Street Journal.

Der Spiegel admitted that the VW board chairman now faced the possibility of a row with the rest of the Porsche clan. But it concluded: “In the past the result has always been the same – Ferdinand Piëch won.”