Volkswagen committee meets on leadership crisis: sources

STUTTGART/BERLIN, Germany (Reuters) - A top level VOLKSWAGEN (VOW.XE)AG committee was meeting on Thursday to try to resolve a leadership crisis caused by the exposure of a rift between its chief executive and chairman, two sources familiar with the matter said.

The rift became public last week when Chairman Ferdinand Piech said in a magazine interview he had distanced himself from CEO Martin Winterkorn who has run VW since 2007.

Sources have told Reuters that Piech had aired criticism at supervisory board meetings over the past five months of the company's performance under his former protégé Winterkorn, particularly in the United States, where the VW brand has fallen far short of sales goals.

Two sources close to VW and sportscar maker Porsche said Thursday's meeting of the supervisory board steering committee, which effectively sets the agenda for the full supervisory board that has the power to appoint and dismiss executives, is taking place in Salzburg, where Piech lives and which is also the seat of the Porsche family.

Winterkorn is taking part in the gathering which started at 1400 GMT, one of the sources said.

Two people close to the labour side of VW's supervisory board said the works council still supported Winterkorn despite the intervention of Piech, who has in the past ended executives' careers with a single remark.

The works council's backing for an extension of Winterkorn's contract, due to run to Dec. 31, 2016, hasn't changed, one source said.

MARKET VALUE

The significance of the spat was shown by a survey of more than 50 predominantly VW investors by advisory firm Evercore ISI, which found an expectation VW's stock market value would increase if Winterkorn and Piech quit, on the basis it would give VW the chance of a clean break and unlock greater earnings potential at the 12-brand group.

Almost 65 percent of investors believe a change of CEO would be good for VW shares, which would equally benefit if VW had a new chairman, a view supported by almost 80 percent of respondents, according to Evercore ISI.

Half of the investors questioned believe VW will have a new CEO within the next six to 18 months, with Porsche CEO Matthias Mueller, 61, seen as most promising candidate, the survey showed.

Mueller, promoted to VW's executive board on March 1, was previously group head product strategist and, as a management board member of family-owned Porsche SE , is also palatable to the controlling Porsche-Piech clan.

"Answering who will succeed to the top position at VW is about as easy as predicting who will end up on the thrones in Westeros," Evercore ISI analyst Arndt Ellinghorst said, refering to the fantasy kingdom in the TV show "Games of Thrones".

Piech, 77, is the patriarch of Volkswagen's ruling clan. The family, which includes Piech's cousin Wolfgang Porsche, owns 50.7 percent of voting rights in the company. Strategic decisions also need support from unions occupying half of the 20 supervisory board seats.

The steering committee meeting on Thursday comprises six members: Bernd Osterloh, VW works council chief, and two other labour representatives, along with Piech, Porsche and Lower Saxony Prime Minister Stephan Weil.

The works council, the state of Lower Saxony and VW all declined comment.

(Additional reporting by Jan Schwartz; Writing by Georgina Prodhan; Editing by Maria Sheahan and David Holmes)

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