Friday, January 20, 2006

Piëch to Step Down

Text from the Financial Times.
Ferdinand Piëch, the controversial supervisory board chairman of Volkswagen, will be replaced by a neutral third party next year as part of a compromise deal to end a bruising battle between the German carmaker's two largest shareholders.

Porsche and LowerSaxony, who together hold 36.7 per cent of VW, put months of squabbling behind them yesterday to agreethat Porsche's chief executive, Wendelin Wiedeking, should join VW's supervisory board immediately while its chief financial officer, Holger Härter, isset for election to the board at May's annual meeting.

The appointments mark a triumph for Porsche, which has spent more than €3bn ($3.6bn) amassing its 18.5 per cent stake, as it had faced fierce criticism from some VW shareholders, including Lower Saxony, over corporate governance. Mr Piëch is one of the main shareholders in Porsche and sits on its supervisory board too.

But the compromise deal was welcomed by many of the hostile shareholders. William Browne, managing director of Tweedy Browne, who had led the outcry over corporate governance, said: "It is a step in the right direction. It is clearly a compromise but it is important that Piëch, who was probably the most disruptive force, is going."

Henning Gebhardt, head of German equities at DWS, Deutsche Bank's fund manager arm, said the compromise would help VW tackle its essential restructuring: "We need to have a stable supervisory board going forward and this helps create that."

Christian Wulff, the premier of Lower Saxony, the state in which VW is based, can trumpet the fact that Mr Piëch – who he has blamed for much of VW's misfortunes – will be succeeded as chairman by a director drawn from outside Porsche and Lower Saxony. Mr Piëch's contract runs out in 2007 but Porsche officials said they assumed he would remain on VW's board as a non-executive director.

Mr Wulff's battle with Porsche began after he commissioned a report from investment bank JP Morgan, which concluded that no representative of Porsche should join VW's board.

The struggle intensified after Mr Piëch decided to back labour representatives on the board over the crucial choice of a labour director, against the wishes of most shareholder representatives and Bernd Pischetsrieder, VW's chief executive.

As part of the agreement, both sides have agreed that Mr Pischetsrieder's contract should be extended by five years, Lower Saxony said.

Mr Wiedeking will replace Lord Simon, the former British minister, on the board while Mr Härter is set to succeed Gerhard Cromme, the father of Germany's corporate governance code, who announced his intention not to stand again for election at VW because of his disgust at recent events.

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