Why VW's leadership clash could spell trouble

With a leadership clash at Germany's Volkswagen surfacing this weekend, concerns over what impact it could have on business are growing, particularly as the automaker struggles amid slowing consumer demand.

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Shares of VW were down 1.66 percent Monday following remarks by the company's Chairman, Ferdinand Piech, on Friday, in which he criticized the company's Chief Executive, Martin Winterkorn.

Speaking to Der Spiegel magazine, Piech, whose family controls 51 percent of VW along with the Porsche family, appeared to publicly withdraw his confidence from Winterkorn, saying he had "distanced" himself from the CEO.


The incident raised eyebrows about the future of Winterkorn, who was tipped to be Piech's successor as chairman when his term at the head of the supervisory board expires in 2017. Winterkorn's current contract is due to expire at the end of 2016.

The remark has not gone down well among VW's top brass, however. Piech's cousin and fellow board member, Wolfgang Porsche, said Piech's remarks did not reflect the family view.

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"The comment from Dr Piech represents his personal opinion which has in substance and factually not been coordinated with the family," Porsche said Sunday, according to Reuters.

Winterkorn, who has been in the role since 2007, also found support from the German state of Lower Saxony, VW's second-largest shareholder.


Tensions rising at Volkswagen

When contacted by CNBC on Monday, VW declined to comment further, but there is speculation that the company's recent lackluster performance in the U.S. could have caused Piech's criticism of Winterkorn. Germany's Handelsblatt newspaper reported that Winterkorn and Piech could meet in the coming days.

Mike Tyndall, autos analyst at Barclays, told CNBC Monday that while it was logical for a discussion to happen over the company's leadership, doing so in the public eye highlighted difficulties within the company.

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"By their own admission they haven't quite hit the targets they wanted to hit. Their 5-billion-euro ($5.3-billion) cost-saving program points to a very high level of complexity and things needing to change, so it seem to me a healthy discussion. The unfortunate part is that it's taking place in the public domain," he told CNBC Europe's "Worldwide Exchange" Monday.

'Speedy resolution'

Tyndall warned, however, that the public dispute could distract from the carmaker's need to boost sales in the U.S. particularly, where it had lofty ambitions and sales targets. In July 2014, Winterkorn announced plans to cut 5 billion euros of costs by 2017 to address lower profit margins.

"If this fighting goes on for too long, not only will it potentially demotivate workers, but it will also perhaps interfere with strategy in terms of decision-making, so what we would hope for is that we see a speedy resolution," Tyndall added.

In March, the company revealed that global sales topped 10.2 million vehicles in 2014, driven by China, although sales slipped by 2.4 percent.