April 26, 2015 / 4:48 AM / 2 years ago

Newsmaker - Ruthless VW patriarch Piech overplays last hand

Ferdinand Piech, chairman of the supervisory board of German carmaker Volkswagen, arrives at the annual shareholders meeting in Hanover in this April 25, 2013 file photo.Fabian Bimmer/Files

FRANKFURT (Reuters) - Ferdinand Piech's iron-fisted rule over Volkswagen helped him build an empire spanning fuel-efficient city cars to 40-tonne trucks, but in the end he overplayed his hand and was forced out before reaching his goal of making VW the world's biggest carmaker.

A grandson of Ferdinand Porsche, the founder of the sports-car maker who developed the Beetle under a 1934 contract with the Nazis, Piech devoted his life and a 51-year career in the auto industry to making Volkswagen No. 1.

On Saturday, Volkswagen announced the resignation of the 78-year-old patriarch. The announcement ended two weeks of crisis that began when Piech said he had "distanced" himself from Chief Executive Martin Winterkorn.

The comment was seen as an attempt to squelch any chance Winterkorn had of succeeding him as chairman when his contract runs out in 2017. Piech's allies turned against him, leaving him unexpectedly isolated.

In nine years as CEO and 13 years as supervisory board chairman, the balding Austrian led VW's expansion to include 12 brands, 118 plants in 31 countries and 600,000 employees.

He became the oldest-ever chairman of a listed German company and last year was Germany's best paid supervisory board chief, with total compensation from VW of 1.47 million euros ($1.6 million).

Piech took the reins at VW's Audi in 1988 before he joined the parent company and eventually became the CEO.

At Audi, he developed the brand's pioneering Quattro all-wheel drive technology which helped Audi overcome its image as a maker of bland vehicles like the Fox coupe and 100 sedan, paving the way for the Ingolstadt-based manufacturer to rival BMW and Mercedes-Benz for the world's luxury-market crown.

When he was CEO of Volkswagen, the group bought ultra-luxury nameplates Bugatti, Bentley and Lamborghini and integrated the mass-market Seat and Skoda brands as well as pushing through the launch of the New Beetle, a re-creation of the car his grandfather developed.

But Piech also made disputed decisions such as the development of a flagship sedan, the Phaeton, at a cost of more than 1 billion euros ($1.3 billion) to take the VW brand upscale.

The Phaeton's lavish plant in Dresden, Germany, operated below capacity for years and the model was withdrawn from the United States in 2006 after failing to meet sales targets.

LIMITED DESIRE FOR HARMONY

Piech has fathered 12 children with four women, the last three with his second wife Ursula, a former nanny whom he installed on VW's supervisory board in 2012.

Being a member of the Porsche-Piech clan, which controls 51 percent of Volkswagen voting rights, allowed him to rule with an iron grip, ruthlessly hand-picking and firing executives.

Piech keeps a dagger collection and has professed a fascination with Japanese military tactics in World War Two, according to people who have worked for him.

He pushed out Winterkorn's predecessor Bernd Pischetsrieder, half a year after his contract was extended. Pischetsrieder had pulled the Phaeton from the United States and disagreed with Piech over the use of a holding in truck maker Scania.

"My desire for harmony is limited," he wrote in his book "Auto.Biographie" published in 2002.

In 2009, Piech also axed Porsche boss Wendelin Wiedeking, who had been accused of racking up debt at the sports-car maker by using share options to pile up VW stock.

"Piech is a tactician. He is someone who doesn't give up," a person who knows Piech well told Reuters after the row with Winterkorn flared up.

Piech may now, though, have sped up a development he sought to avert. Analysts say Winterkorn, who worked closely with Piech at Audi in the 1980s, stands a chance of being named to succeed Piech as chairman of the supervisory board, taking the influential job two years sooner than expected.

($1 = 0.9193 euros)

Additional reporting by Jan Schwartz; Editing by David Gregorio

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