In an unexpected development, the policy-setting board of Volkswagen, Europe’s largest automaker, said Friday it was siding with the company’s embattled chief executive, Martin Winterkorn, in his dispute with the company’s patriarch.
In a statement, the automaker said it would move to extend the contract of Mr. Winterkorn, the 67-year-old German engineer who since 2007 has built VW into the world’s No. 2 automaker, second only in sales and profit to Toyota.
Mr. Winterkorn’s contract had been set to expire in 2016. The board said it would recommend extending his employment, without providing details.
Mr. Winterkorn had become a public target of Ferdinand Piëch, the VW patriarch and controlling shareholder who has single-handedly ruled the German automaker for much of the last two decades.
But in a statement, the board, which Mr. Piëch chairs, gave a full-throated endorsement to Mr. Winterkorn.
“The Executive Committee of the Supervisory Board of Volkswagen AG states that Prof. Dr. Martin Winterkorn is the best possible Chairman of the Board of Management for Volkswagen,” the company said. “The Executive Committee places great importance on the fact that Prof. Dr. Winterkorn will pursue his role as Chairman of the Board of Management with the same vigor and success as before, and that he has the full support of the Committee in doing so.”
The committee said it would propose to extend Mr. Winterkorn’s contract at a meeting next February.
One expert, Stefan Bratzel, the managing director of the Center for Automotive Management in Bergisch Gladbach, said despite appearances, Mr. Piëch, the largest single shareholder, had only suffered a temporary setback.
“Piëch has suffered a small defeat, but he has not yet lost the war. It is to be seen whether Piëch will not refrain from further attempts to assert his will,” Mr. Bratzel said.
Last week, Mr. Piëch called German magazine Der Spiegel to say he no longer supported and was “distancing” himself from Mr. Winterkorn. The dispute apparently centers around the successor to Mr. Piëch as chairman of VW’s supervisory board, which sets major policy and hires the top managers.
Mr. Piëch, together with the family of his cousins, the Porsches, control 50.7 percent of VW shares. But the board’s statement today suggest the Porsches split with their cousin, siding with unions and the state of Lower Saxony, which had backed Mr. Winterkorn in the public dispute.
Mr. Piëch had used similar heavy-handed tactics in the past to remove or pave the way for the departure of other CEOs who had fallen out of his favor. The apparent palace revolt at the top of Volkswagen was welcomed by investors.
VW shares rose 3.7 percent in Frankfurt trading after the automaker announced the contract extension at noon in Germany.
One of Germany’s leading auto experts, Ferdinand Dudenhöffer, said Mr. Piëch’s position had not been significantly weakened by the dispute.
Mr. Winterkorn remains in a weakened position but the company will try to disguise it, Mr. Dudenhöffer, a business and economics professor at the University of Dusiburg-Essen, said in an interview.
The victory by Mr. Winterkorn is likely temporary, Mr. Dudenhöffer said, and Mr. Piëch, whose family is VW’s largest single shareholder, will ultimately have the final say in the matter.
Mr. Piëch has been instrumental in elevating key managers to top positions in the company, and that will not change, Mr. Dudenhöffer said.
Matthias Müller is chief executive of VW sports car maker Porsche, while Herbert Diess, a former BMW top executive until last December, will lead the Volkswagen brand starting on July 1. Both moves were made with Mr. Piëch’s blessing.
“Mr. Piëch will make the next move and defend his position. He is the biggest shareholder and someone who plans and executes very strategically. Everyone in the supervisory board knows this. His position has rather strengthened,” Mr. Dudenhöffer said.
Volkswagen operations should not suffer, Mr. Dudenhöffer said.
“It can continue its strategy. The most important thing is to position its brands and improve margins. The supervisory and executive boards will continue to do what they have to do,” Mr. Dudenhöffer said.
Mr. Piëch had never publicly explained the reason for his displeasure with Mr. Winterkorn, who he’s known for 35 years.
But sources told Handelsblatt Mr. Piëch might still be smarting from Mr. Winterkorn’s ambitions made public last year to replace him as supervisory board chairman.
Mr. Piëch’s unprompted vote of no confidence in the man he hired eight years ago went off like a bomb at VW headquarters in Wolfsburg, a factory town in north central Germany.
Mr. Piëch, who turned 78 today, had used similarly blunt judgements to run off two of Mr. Winterkorn’s predecessors, Bernd Pischetsrieder and Wendelin Wiedeking, the former chief executive of VW luxury car maker Porsche.