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 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 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,
referring to a doomed attempt by Piech to convince fellow family
members to dump Winterkorn and install Mueller.
On Saturday, at an airport in Braunschweig, a half hour down the
road from VW's imposing Wolfsburg headquarters, 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.
Winterkorn had long been seen as the natural successor, but can he
slide into the post now, in the wake of his damaging row with Piech?
UNION POWER
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 billion
euros ($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 <7203.T>.
He is doing so with the cooperation of the unions, adhering to the
cumbersome consensual way of doing business that is core to
Volkswagen's culture - but at a cost.
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.
Other failings for which Piech criticized Winterkorn include the
group's chronic underperformance in the United States - where its
inability to understand customer needs were underscored by its use
of drink holders that were too small for jumbo-sized U.S. cups.
Under Winterkorn, VW has also struggled to engineer a low-cost car
or make significant inroads in southeast Asia and Latin America.
Some analysts fear that Winterkorn may now have a mandate to carry
on just as before.
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"All of this Winterkorn could not solve. All of this will now
therefore continue with Winterkorn. All of this is a high risk for
the VW group's economic strength," wrote Ferdinand Dudenhoeffer,
head of the Center of Automotive Research at the University of
Duisburg-Essen.
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 owns a 13.2 percent stake, worth 1.7 billion euros ($1.85
billion). Other family shareholders would have right of first
refusal to buy his stake.
Dudenhoeffer believes Piech would be well advised to sell given that
VW shares are trading at 10-year highs and due to the new
uncertainty over the company's future.
OPPORTUNITY
Insiders say VW is already starting to adjust its strategy to
respond to Piech's criticisms.
Two company sources familiar with VW's product strategy told Reuters
preliminary talks with China's Great Wall <601633.SS> 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.
Another company source said VW was 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.
Some analysts see a rare opportunity for change at Volkswagen.
Advisory firm Evercore ISI upgraded the stock to "buy" from "hold"
on Sunday, saying Piech's departure reduced the risk of more "empire
building M&A".
Max Warburton, an automotive analyst at Bernstein, said VW had
"considerable untapped potential" but that much would depend on who
came into the CEO role, should Winterkorn be anointed chairman.
Other scenarios include a new member of the Porsche-Piech family,
such as Wolfgang Porsche, taking over as chairman, leaving
Winterkorn as CEO. VW could also opt to hire an outsider as
chairman.
"Will the opportunity be seized? History suggests these situations
require some very detailed post-conflict reconstruction - and it's
not clear there's yet a plan in place at VW," said Warburton. "It's
going to be fascinating to watch."
(Additional reporting by Jan Schwartz, Ilona Wissenbach and Laurence
Frost; Editing by Noah Barkin)
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