February 24, 2017 / 10:41 AM / 7 months ago

UPDATE 1-VW's controlling clan backs brand boss despite criticism -sources

* Porsche-Piech family stands behind Diess -sources

* Diess’s dispute with labour bosses has hampered VW brand

* VW sup board to meet over 2016 results, exec pay rules (Adds detail and background)

HAMBURG, Feb 24 (Reuters) - Volkswagen’s embattled VW brand chief Herbert Diess still has the backing of the clan that controls the carmaker, despite his recurring clashes with labour leaders over cost-cutting plans, sources said.

Volkswagen’s (VW) labour bosses earlier this month had accused Diess of breaking promises made under a turnaround plan agreed in November and halted cooperation with brand management on issues including overtime work, cost savings and apprenticeships.

Europe’s largest automaker is hard pressed to cut spending to fund a costly shift to electric cars and new mobility services while grappling with billions of euros in costs for its emissions test cheating scandal.

But Diess, who was known as a cost-cutter at BMW, has repeatedly clashed with VW works council chief Bernd Osterloh since he joined VW in July 2015 over where to make those savings.

The Porsche and Piech families, which control a majority of VW common stock through the family-owned holding company Porsche SE, stand behind the 58-year-old engineer despite the quarrelling, two people familiar with the matter told Reuters on Friday.

VW declined to comment.

Analysts have said VW’s ability to overhaul its mass-market brand, the group’s largest by sales, will be key to the company’s post-Dieselgate recovery and have urged Diess to stand firm on structural changes despite resistance from unions.

The Porsche and Piech families were instrumental in choosing VW’s former finance chief Hans Dieter Poetsch to become supervisory board chairman after the emissions scandal broke in September 2015, and likewise in picking former Porsche AG boss Matthias Mueller to become VW group chief executive.

VW’s supervisory board is expected to meet from 2 pm local time (1300 GMT) on Friday to discuss the carmaker’s 2016 financial results and new compensation guidelines for top executives. (Reporting by Jan Schwartz; Writing by Andreas Cremer; Editing by Maria Sheahan)

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