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VW's CEO Resigns

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LOS ANGELES German automaker Volkswagen said CEO Bernd Pischetsrieder—who had been given a contract extension through 2012 only last May—would instead step down Dec. 31.

Martin Winterkorn, the head of VW's luxury car unit Audi, will replace Pischetsrieder.

The decision comes amid layoffs of up to 20,000 workers, along with extended work hours at VW's German plants and other cost-cutting measures, in an effort to compete with Asian automakers and to boost U.S. market share.

The resignation of Pischetsrieder and his replacement by Winterkorn is "a shock wave that will take awhile to travel through the industry," said Todd Turner, principal analyst at Car Concepts in Thousand Oaks, Calif.

"It goes to show how shortsighted VW planning has become," Turner said. "If you are projecting that kind of unhappiness with the management, why extend his contract?"

VW's lead agency, MDC Partners' Crispin Porter + Bogusky in Miami, declined comment.

According to Car Concepts, VW is up 10 percent on the year to 198,000 units, based largely on sales of its Rabbit and Passat models.

"That's very far from VW's high-water mark, but it's the right direction," said Turner. "Their problem in recent years is they have a couple of good years, then a couple of bad years. They've been inconsistent in their strategy."

One source said Pischetsrieder's departure stemmed from an internal high-level power struggle at the company. "Apparently, the ax fell on the losing team," the source said. "Marketing and sales are turning around, certainly in Europe, and now in the U.S. VW is a brand with a lot of potential, but it's so chaotic politically, with the management politics and the labor unions, it's really German high drama."

"The business environment for the auto industry is so difficult that layering politics on top of that makes it impossible for these companies to thrive," said Dan Gorrell, president of automotive consultancy Gorrell Group in Tustin, Calif. "They need to focus on business, not palace politics."

Speaking of Winterkorn, Gorrell said, "Audi was certainly doing a lot of the right things."

Based on his accomplishments at Audi, Turner projected that Winterkorn "will be fantastic. He's a hard driver who simply will not accept status quo."

VW spent $335 million on domestic advertising in 2005 and $205 million through August 2006, according to Nielsen Monitor-Plus.

Audi spends about $100 million on ads via Havas' McKinney in Durham, N.C., which is defending the business against three other shops in an ongoing review [Adweek Online, Sept. 29].