Ferdinand Piech, a towering figure at Volkswagen for more than two decades, resigned as its chairman on Saturday after losing a showdown with Chief Executive Martin Winterkorn.
Piech, the 78-year-old grandson of the inventor of the Volkswagen Beetle, had previously seen off other executives who crossed him, including his hand-picked successor as Volkswagen CEO, Bernd Pischetsrieder.
But this time, he was unexpectedly isolated in a five-to-one vote of Volkswagen's steering committee last week as labour representatives, the state of Lower Saxony and even his own cousin Wolfgang Porsche stood firmly behind Winterkorn.
"The members of the steering committee came to a consensus that, in the light of the past weeks, the mutual trust necessary for successful cooperation was no longer there," the six-member panel said in a statement after another meeting on Saturday.
"Against this background, Professor Doctor Ferdinand K. Piech resigned from his office as chairman as well as all his supervisory board mandates within the Volkswagen group with immediate effect."
The leadership row burst into the open this month when the news weekly Der Spiegel quoted Piech, the patriarch of the family that owns 51 percent of voting rights in VW, as saying he had "distanced" himself from CEO Winterkorn.
The comment came at a time when VW is cutting billions of euros of costs and revamping structures to boost profitability, having struggled with underperformance in the United States and declining profitability at its core autos division.
A survey by the advisory firm Evercore ISI shortly after the crisis broke out found that 65 percent of institutional investors would welcome a change of CEO and 80 percent were in favour of a new chairman.
"VW cannot be managed with such ongoing uncertainty surrounding management succession," Evercore automotive analyst Arnd Ellinghorst wrote in a note on Friday.
"In the interest of shareholders, workers and customers, it might be best to accelerate change now, rather than muddling through for a couple of years and fighting similar succession battles over and over again at a later stage."
Tensions between Piech and Winterkorn appeared to have eased a week ago when senior supervisory board members backed the CEO, leaving Piech the odd man out and forcing him to agree to a joint statement supporting Winterkorn.
But sources said at the time he would have faced calls for his own resignation had he not backed the CEO, and a source close to VW said on Friday that the Piech and Porsche families had held another meeting this week, indicating that there are still ongoing differences.
Deputy Chairman Berthold Huber will assume interim leadership of the board until the election of a new chairman, Volkswagen said on Saturday, adding that Piech's wife Ursula had also resigned from the supervisory board.